19th April 2024

SBTN Launches Ocean Corporate Pilot


The Science Based Targets Network (SBTN) Ocean Hub, led by the World Wide Fund for Nature (WWF) and Conversation International, has launched a corporate pilot with four companies. Over the next few months, the new initiative will see Carrefour, Mars Petcare, Bolton Foods and Musholm piloting draft guidance for the first science-based targets covering seafood value chains. Outcomes will be shared at the end of the pilot. Pressures on the ocean’s health pose great risks to economies, societies and the environment, SBTN said. To halt and reverse the damage, companies with widespread environmental footprints across marine ecosystems and fisheries have a key role to play. “By directly engaging industries such as the seafood sector in setting science-based targets for nature, SBTN provides these companies with an opportunity to reduce their pressures from ocean-related activities and implement sustainable practices with far-reaching environmental benefits,” the statement read. Future work for the ocean hub will expand into other sectors exerting key pressures, such as habitat damage, pollution, endangered, threatened, protected and vulnerable species impacts.

LGIM Expands Commodities, Sustainable ETF Range


Legal and General Investment Management (LGIM) has launched the L&G Energy Transition Commodities UCITS ETF to provide exposure to the energy transition through commodity futures. The fund will target a combination of commodities deemed central to the energy transition, including critical metals, natural gas and ethanol. It will also allocate capital to support carbon markets. “Like the industrial revolution, the energy transition is a commodity story, but with a new cast of characters,” said Aanand Venkatramanan, EMEA Head of Exchange-traded Funds (ETF) at LGIM. “Compared with today’s energy mix, we believe the energy transition is built on new inputs, which in our view are underrepresented in current commodity portfolios – this is why we built the ETF around transition metals, transition energy and carbon pricing; capturing the next phase of demand and opportunity in the story.” The fund will be available to both wholesale and institutional investors registered in the UK, France, Germany, Italy, the Netherlands, Denmark, Sweden, Finland, Austria, Luxembourg, Switzerland and Spain. Institutional investors in Singapore will also have access to the fund. 

Scottish Widows Selects Head of Responsible Investment


 UK-based pensions provider Scottish Widows has named Eva Cairns as its new Head of Responsible Investment and Stewardship. Cairns has almost two decades of experience in responsible investing and climate strategy, as well as leading large-scale change projects and undertaking economic analysis. She joins from asset manager abdrn, where she spent almost 14 years. This included more than two years as head of sustainability insights and climate strategy, as part of which she was responsible for leading the firm’s sustainability research team and climate strategy for investments. Cairns has also co-authored a number of climate-related papers including on net-zero investing, climate scenario analysis and the credibility of net zero targets. “We’re aiming to halve the carbon intensity of all our investments by 2030 on our path to net zero by 2050 or sooner, and we’ve already beaten our 2025 target – investing over £1.3 billion (US$1.62 billion) in climate solution,” said Kevin Doran, Chief Investment Officer at Scottish Widows. “Eva’s expertise and knowledge of the sector will be extremely valuable in helping us achieve on our ambitious strategy, and we are look forward to working together on making ESG central to our future success.”

18th April 2024

Say-on-climate Support Exceeds 90%


Shareholder support resolutions on firms’ climate plans reached an average of 89% between 2021 and 2023, according to a new report from Morningstar. The mean support for the 83 say-on-climate resolutions filed over the period had dipped from 93% in 2021 to 87% in 2022, while the number of resolutions more than doubled, with support rebounding to 91% in 2023. According to Morningstar, European companies accounted for 83% of the say-on-climate proposals. The research also noted votes had become a regular feature in the energy and materials sectors in Australia, representing nine of the resolutions included in the analysis. However, support for say-on-climate resolutions by the 25 asset managers reviewed by Morningstar declined significantly, with average backing having fallen from 92% in 2021 to around 70% in both 2022 and 2023. The managers included Abrdn, Allianz GI, BlackRock and State Street. Four managers – BNP Paribas, Dimensional, Legal & General Investment Management, and Robeco – supported less than half of resolutions between 2021 and 2023, while Royal London Asset Management backed just 51%.

IETA Publishes Carbon Credit, Geostorage Handbook


The International Emissions Trading Association (IETA) has published a handbook providing a synthesis of methods and safeguards on the crediting of reductions and removals involving the geological storage of carbon dioxide. The document reviews the unique risks associated with crediting carbon storage activities compared to other types of mitigation activities. It also describes the principles, precedents, and practices that have evolved over many years of international negotiations to safeguard against such risks. “This first-of-its-kind, comprehensive compendium of geological storage methodologies and safeguarding standards offers a valuable resource for policymakers and practitioners in this field,” said Paul Zakkour, Co-founder of Carbon Counts, which was involved in drafting the handbook. The first part of the document reviews key methodological building blocks of crediting mechanisms as they apply to geological CO2 storage technologies. Meanwhile, the second part explores the safeguarding principles and precedents needed to underpin the safe and secure deployment of geological CO2 storage – such as direct air capture, bioenergy capture and removal, and capture and storage from industrial sources. The range of safeguards collectively supports robust crediting of these climate-critical solutions, the handbook mentioned. Based on these collective best practices, a set of high-level criteria to guide the future development of geological CO2 storage within carbon markets is then presented. “Mindful of the existing wealth of knowledge on the topic, the IETA used its convening power to bring together a broad range of stakeholders to help shape the way in which geological storage can be incentivised and regulated,” said Katie Sullivan, Managing Director at the IETA. “Using this technology is essential if net zero targets are to be met.”

Dogniez Succeeds Oulton at Eurosif


Nathalie Dogniez has been elected as the new Chair of Eurosif, a pan-European sustainable investment organisation. Originally appointed as an independent director at the beginning of this year, Dogniez was elected to her new position following Will Oulton’s decision to step down after more than eight years. “I feel privileged and honured to have been appointed as Eurosif Chair and I am looking forward to working with the rest of the board, as well as the organisation’s dynamic team and membership to advocate for the continued development and advancement of the sustainable finance landscape in Europe,” said Dogniez. In her new role, she will contribute to Eurosif’s efforts to amplify its advocacy and influence, as well as expand its membership across Europe. “In this crucial next stage for the sustainable finance landscape, I am delighted that Eurosif will benefit from having Nathalie as its Chair,” said Aleksandra Palinska, Eurosif’s Executive Director.

17th April 2024

Policy, Innovation to Disrupt Carbon-intensive Sectors


Business models and investment dynamics in hard-to-abate industries will likely be reshaped by net zero-focused policies and innovations, according to Moody’s latest report on the low-carbon transition. Policy support is increasing for clean energy technologies not yet available at scale, the report mentioned – including green hydrogen, carbon capture utilisation and storage (CCUS), biofuels, and nuclear small modular reactors. While this may accelerate innovation and make low-carbon solutions more affordable, high execution risks and uncertain returns on investment will persist in the short term, Moody’s suggested, limiting potential credit benefits. As such, carbon transition risk is likely to remain elevated in many sectors. Governments have been looking to stimulate private investment in emerging clean technology projects and related infrastructure through a mix of financial incentives, including regulations and measures that deliver predictable demand for low-carbon products. Sectors likely to benefit from initiatives such as the US Inflation Reduction Act and the EU’s Net Zero Industry Act, for instance, include steel, cement, chemicals, airlines and shipping. In a separate research, Moody’s said CCUS adoption would depend on policy impetus and the development of supportive ecosystems, such as transport infrastructure and carbon pricing regimes. “Deployment is constrained by a lack of profitability, limiting the near-term potential for CCUS to materially reduce exposure to carbon transition risks,” the report read. “Some applications, such as enhanced oil recovery or use of captured carbon to produce ethanol, are economical today, in part because of the revenue generated by CO2 use… While CCUS will play some role in the energy transition, it is likely to supply only a fraction of the expected emissions reductions for hard-to-abate sectors.”

CalPERS to Lead CA100+ Committee


California Public Employees’ Retirement System (CalPERS) Chief Operating Investment Officer Michael Cohen has been named Steering Committee Chair of the Climate Action 100+ (CA100+) investor initiative. Cohen will be taking over from incumbent Chair François Humbert, Engagement Lead Manager at Generali Asset Management. The role rotates every 12 months between different regional representatives on the committee. CalPERS co-founded CA100+ in 2017 and served as its inaugural chair. The pension fund’s actions on climate include supporting the US Securities and Exchange Commission’s climate disclosure ruleholding companies accountable for climate-related risk, and developing the Sustainable Investing 2030 Plan to move its portfolio to net zero emissions. “Our organisation played a pivotal role in creating CA100+,” said CalPERS CEO Marcie Frost. “Michael will be a steady hand for the steering committee at a crucial moment – one where our fiduciary duty requires swift and substantive action on climate change to ensure long-term value for our members, their families, and their retirement security.” CA100+ currently represents more than 700 institutional investors and has engaged 170 companies since launch on improving climate change governance, cutting emissions, and strengthening climate-related financial disclosures. Those efforts have led three-quarters of the companies to commit to net zero emissions by 2050 or sooner for Scope 1 and Scope 2 emissions. Almost all of them also have board committee oversight of climate change risks and opportunities. “CA100+ was founded to ensure companies take meaningful steps to address the existential financial threats from climate change,” said Cohen. “There is still more to do to constructively engage with our corporate partners and build upon early successes.”

Investors, Public Back UK Due Diligence Law


More than 150 investors and businesses have signed a statement calling on the UK government to create the country’s first environmental and human rights due diligence law. The statement suggested the legislation should be applied to all businesses – regardless of size, sector, operational context, ownership and structure. It also asked for businesses to be legally liable for harm, loss and damage arising from their failure to prevent adverse human rights and environmental impacts within their operations and throughout their global value chains, and for them to adequately compensate victims of abuse. A YouGov poll conducted for the Corporate Justice Coalition – a civil society and trade unions grouping – and environmental justice organisation Friends of the Earth found that four in five UK adults supported the creation of such a law. It also found that 73% of 2,124 surveyed adults thought UK companies should do more to reduce their contribution to global warming, while 60% believed overseas persons subject to human rights abuses and environmental damage arising from their supply chains should be able to seek justice in UK courts. “Climate and ecosystem breakdown are a major threat to human rights, disproportionately impacting the most marginalised and vulnerable communities around the world,” said Clare Oxborrow, Corporate Accountability Campaigner at Friends of the Earth. “A new UK environmental and human rights due diligence law would help tackle these interconnected crises and redress the imbalance between powerful corporations and affected people – wherever they operate.”

16th April 2024

China Issues Sustainability Reporting Guidelines


China’s Shanghai, Shenzhen and Beijing stock exchanges have released the finalised version of their new sustainability reporting guidelines. Following the update, companies listed in key indices will have to report in line with the new guidelines by 30 April 2026. The guidelines use the double materiality principle, which means listed companies will have to identify whether certain topics have a significant impact on their value, and conversely – whether their performance has a significant impact on the economy, society, and the environment. The guidelines were open for consultation in February as part of efforts to standardise governance mechanisms, promote higher-quality disclosures, and ensure investors are informed of the actions being taken by listed companies to address and manage impacts, risks, and opportunities related to sustainable development. The guidelines also encourage Scope 3 greenhouse gas emission disclosures, the use of scenario analysis, third-party verification, and additional disclosures on social initiatives that companies participate in.

Europe’s Energy Supply Remains Exposed


The 15th annual World Energy Trilemma Framework has highlighted that Europe is struggling to recover its energy security following Russia’s invasion of Ukraine over two years ago. The framework, which was created by the World Energy Council, tracks national energy performance against three key themes: energy security, equity, and environmental sustainability. The latest report evidenced significant demand-driven changes in global energy systems triggered by the war in Ukraine, and the need to evolve energy leadership to accelerate global energy transitions in all European regions. The bombing of the Nord Stream pipelines and heightened geopolitical tensions have starkly exposed Europe’s energy vulnerability, the report noted, with the continent being heavily reliant on Russian gas. This has prompted a critical reassessment of its energy strategy, with a new focus on security in relation to affordability and sustainability. At stake are the need to balance renewable integration, grid variability, and technological independence amidst geopolitical and energy sovereignty concerns – while steering towards resilient, self-reliant, and equitable energy systems. 

IETA issues carbon credit guidelines


The International Emissions Trading Association (IETA) has published guidelines for the “high-integrity use” of carbon credits, aiming to guide corporate buyers through their progress towards Paris Agreement goals. Unveiled during the sixth European Climate Summit, taking place in Florence this week, the paper sets out unambiguous and robust guidance, providing a clearer definition of carbon credit use cases for companies. “Such use must always occur in parallel with internal abatement activities to reduce absolute emissions across all scopes, in line with ambitious near- and long-term targets,” the IETA noted. Although the guidelines address these issues, they stop short of defining how to set net zero pathways. “New modelling by Allied Offsets shows that 81% of the world’s largest companies have not set net zero targets,” said Andrea Abrahams, IETA Managing Director for Voluntary Carbon Markets. “The IETA Guidelines serve as a strategic framework for companies to mobilise finance and incorporate carbon credits into their climate strategies. The private sector has a critical role to play and we need to act now.” Evidence from the modelling also indicates a strong likelihood that companies may miss near- and long-term net zero targets, risking an overshoot of Paris Agreement objectives.

Investors Still Face Data Challenges


Obtaining comprehensive, reliable and comparable climate-related data continues to be difficult for investors, according to a new report published by the CFA Institute Research and Policy Center. The report assessed current usage of climate data in the investment process and subsequent challenges, recent developments in disclosure regulation and standards, and how investors can better navigate data imperfection. Many jurisdictions still lack measures requiring firms to disclose climate-related information, the report found. In instances where disclosure standards existed, the requirements varied from one place to another, making data consistency and comparability difficult for global investors. “Investors should not let the current shortcomings in climate-related data prevent them from evaluating the investment risks and opportunities associated with climate change,” said Chris Fidler, Head of Global Industry Standards at the CFA Institute. “Instead, [they] should use their judgement to make effective use of the data available to them and be conscious of [its] limitations.”

15th April 2024

IDF, BlackRock Partner on Insurance Sustainability


The Insurance Development Forum (IDF) has issued a call to action for the sector to invest in resilient and sustainable infrastructure in climate-vulnerable emerging and developing economies. The group has designed a blueprint to facilitate insurance sector investments into small to mid-size commercial infrastructure projects in communities most at risk from climate change and other natural disasters, working alongside BlackRock to put it into action. The IDF’s aim is to provide a replicable, scalable solution that can help fill an estimated US$1.3 trillion funding gap. Investments will be made through senior and mezzanine secured debt with a credit profile compatible with the requirements of the global insurance industry. The initiative highlights the need for insurers to partner with multilateral development finance institutions and other credit enhancement providers to create investment structures that meet their credit quality requirements, IDF said. “With developing nations facing a significant shortfall in the capital they need to build resiliency and to support a low-carbon transition in their economies, we see innovative solutions – such as public-private partnerships and blended finance structures – as important tools for mobilising greater private capital into these markets,” said Charles Hatami, Global Head of BlackRock’s Financial and Strategic Investor Group.

Robeco Rebrands Sustainability Funds


UK-based investment manager Robeco has renamed its multi-asset funds to better reflect its increased sustainability focus, ensuring better transparency for clients. As such, its Multi-Asset Income fund has now become Sustainable Income Allocation, Multi-Asset Sustainable is now Sustainable Diversified Allocation, and Multi-Asset Growth has been rebranded as Sustainable Dynamic Allocation. The three funds have been grouped under a capital growth category, making the multi-asset offering easier to access for those already invested in Robeco’s equity and fixed income strategies. The funds’ flexibility has also been increased, with the investment approach shifting from a ‘fund-of-funds’ to a ‘line-by-line’ model, allowing for more efficient risk management and tactical trades implementation – in line with industry trends. Robeco said this would enable more efficient active risk management of regional biases, factor exposures and liquidity, while reducing the need for extensive completion portfolios. “We’ve made these strategic changes to offer investors the best mix of Robeco’s strategies across quant, fundamental, and thematic approaches,” said Remmert Koekkoek, Head of Multi-Asset Solutions at Robeco. “The sustainability focus has been intensified, aiming for the optimal balance between risk, return, and sustainability.” Robeco’s multi-asset funds have exhibited strong long-term performance, having been assigned the Gold Morningstar Medallist Rating last month. They will continue to be benchmarked within the same peer group, enabling the utilisation of their existing track record. “We’re committed to sustainable investing without compromising performance, hence the benchmarks for performance measurement remain unchanged,” said Colin Graham, Portfolio Manager for Multi-Asset Solutions at Robeco. “The new set-up provides transparency for clients to assess sustainability credentials and verify labels. [Our] ‘5-year Expected Returns’ is a key input for the strategic asset allocation of the funds, explicitly considering the impact of climate change on individual asset classes in return forecasts.”

Invesco Launches Corporate Bond ESG Fund


Investment manager Invesco has introduced the Global Corporate Bond ESG UCITS ETF to increase exposure to investment-grade issuers demonstrating a robust ESG profile. The exchange-traded fund (ETF) will target the securities of corporate issuers across developed markets, with weightings adjusted in accordance with ESG-focused metrics. Issuers will be removed from the index if they have an MSCI ESG rating below ‘BBB’ – which designates companies with moderate management measures relative to their aggregate ESG risks and opportunities in comparison to industry peers – or have faced ESG-related controversies within the past three years. The fund will track the Bloomberg MSCI Global Liquid Corporate ESG Weighted Socially Responsible Investment (SRI) Sustainable Bond Index. “Investors have been using ETFs to gain exposure to fixed income markets increasingly over the past five years,” said Gary Buxton, Head of EMEA ETFs and Indexed Strategies at Invesco. “One of the main drivers of this acceleration in demand has been the launch of fixed income ETFs targeting specific ESG-related objectives, particularly those aiming to provide an uplift in ESG characteristics while maintaining a similar risk and return profile to a non-ESG benchmark.” 

EU Boosts Energy Building Performance


The European Commission has confirmed final adoption of the Energy Performance of Buildings Directive (EPBD), setting a framework for member states to reduce emissions and energy use in buildings across the EU. First introduced as part of the European Commission’s Fit for 55 (Ff55) raft of decarbonisation measures in 2021, the EPBD requires each member state to adopt its own national trajectory to reduce average primary energy use in residential buildings by 16% by 2030, and by 20-22% by 2035. In addition, each country will need to renovate its 16% worst-performing non-residential buildings by 2030, and 26% by 2033. Buildings are responsible for approximately 40% of the EU’s energy consumption – more than half of the EU’s gas consumption, and 35% of its energy-related greenhouse gas emissions. The commission said it hoped the directive would boost demand for clean technologies made in Europe, as well as create jobs, investment and growth. “We want to help people make their homes more energy-efficient, more comfortable and healthier,” said Maroš Šefčovič, EU Commission Executive Vice-president for the European Green Deal. “This revised directive is a win-win for citizens: improving the energy performance of buildings will result in both lower energy bills and lower greenhouse gas emissions.”

The practical information hub for asset owners looking to invest successfully and sustainably for the long term. As best practice evolves, we will share the news, insights and data to guide asset owners on their individual journey to ESG integration.

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