ESG Investor’s weekly round-up of news on technology and tools in the sustainable investing sector, including FTSE Russell, MSCI, UBS AM, Apex Group, Schroders, Natural Capital Research, Blackstone.
Global index, data and analytics provider FTSE Russell has launched a suite of equity indexes aligned to the Paris Agreement objective of keeping global warming below two degrees Celsius by 2050. The FTSE EU Climate Benchmarks Index Series covers a range of developed and emerging equity markets, including FTSE All-World, FTSE Developed, FTSE Emerging, Russell 1000, FTSE All-Share and FTSE Australia 200. The series includes FTSE Paris-aligned Benchmark (PAB) Indexes, one of which has been licenced by £35 billion AUM UK public-sector pension provider Brunel Pension Partnership for use in a passively-managed fund from September. Brunel will also move its performance benchmarks for its active equity funds to FTSE Russell’s Paris-aligned benchmarks. All indexes in the series use the FTSE Target Exposure Framework to apply a transparent tilt exposure towards and away from index constituents according to exposure objectives such as fossil fuel reserves, carbon reserves and green revenues to achieve Paris-alignment. The PAB index methodology meets the minimum requirements of the EU’s Paris-aligned Benchmark Regulation by achieving a 50% reduction in carbon emissions over a ten-year period, while also including Transition Pathway Initiative’s (TPI) analysis of how large, carbon-exposed companies are managing the climate transition. The indexes are classified under article 9 of the EU’s SFDR legislation as financial products with ‘sustainable investment’ as the core objective. FTSE Russell also plans to launch a suite of equity indexes aligned to the EU Climate Transition Benchmark (CTB) criteria later in the year. Brunel Pension Partnership was consulted on the construction of the index series, leading to an aligning of both the PAB and CTB approaches to the IIGCC Net Zero Investment Framework, which recommends investors to limit exposure to thermal coal and oil sands. As a result, the PAB and CTB indexes apply index exclusions to companies that generate over 50% of revenues from these activities.
Data, analytics and research services provider MSCI is expanding its toolkit of climate data and reporting capabilities to help investors meet the requirements of the European Sustainable Finance Disclosure Regulation (SFDR). Launched in February, the upgraded MSCI EU Sustainable Finance Module will provide comprehensive issuer-level data, regulatory reporting and portfolio analytics solutions, multi-asset class coverage, index-level metrics and ESG fund-level metrics. The module will offer investors “full transparency” into issuers’ SFDR metrics for over 10,000 companies and 175+ sovereign issuers, also enabling access to SFDR metrics for 6,000+ MSCI indexes, including equity and issuance-weighted fixed income indexes as well as Market Cap, ESG, Climate, Factor and custom indexes, for reporting purposes. “SFDR will have a profound impact on global market participants, including asset managers, not just those in the EU. The regulation requires all financial market participants serving EU investors to consider sustainability risks and make sustainability impact disclosures at the organisation and financial product level,” said Remy Briand, Head of ESG at MSCI.
UBS Asset Management has developed a Decarbonization Framework to quantify the economic value of corporate emission reductions in ‘hard to abate’ sectors such aluminium, cement, chemicals and steel. According to the firm, the framework can “form a foundation” for company-specific climate engagements, to identify gaps where emission reduction targets are not aggressive enough and to urge companies to be more ambitious in their climate efforts. “Results suggests that companies abating their emissions not only limit downside risk, but in many cases capture an upside potential,” said UBS AM. The framework is based on a traditional discounted cash flow method, but also accounts for the price of future emissions, and uses a systematic approach to emission abatements, realised at the cost of green capital expenditures and green operating expenses. “Substantial emission reductions are not only possible, but we believe have the potential to be value accretive. It is our view that this is one of the most misunderstood opportunities in today’s markets, both from an investor and climate point of view,” said Barry Gill, Head of Investments.
Financial services provider Apex Group is to provide New York-based investment firm i80 Group with loan administration and ESG Ratings & Advisory services, in addition to existing fund administration services. Apex’s loan administration services will provide set-up to maturity support for i80 Group’s bespoke financing solutions, designed to scale with a company’s accelerating growth plans while minimising dilution. As part of an integrated offering, Apex’s ESG Ratings, Reporting & Advisory team will monitor and report on ESG matters to the i80’s key stakeholders and investors. The service is underpinned by Apex’s proprietary software platform which will enable i80 Group to collect ESG data from its portfolios in an efficient and usable format which can be benchmarked against best-in-class international regulations and standards.
UK-listed asset manager Schroders and Oxford Sciences Innovation have invested in Natural Capital Research to accelerate development of the firm’s online platform to map natural capital assets globally. Natural Capital Research uses modelling and data techniques to enable landowners and corporates to map the natural capital provided by their landholdings. These include assets important for carbon storage, carbon sequestration, soil erosion protection, flood risk management, biodiversity, water quality and recreation. It also specialises in advising asset owners on how to enhance their natural capital value and providing the tools to report and validate increases in value over time. “Viewing nature as an asset and putting it on the same balance sheet as a company’s other resources is no longer seen as an oddity. Governments, corporations, and individuals across the world are starting to understand the critical importance and value of the ecosystem services provided by their natural capital assets, not least in carbon storage and sequestration,” said Professor Kathy Willis, Director, NCR.
Alternative investment management company Blackstone is to acquire Sphera, a provider of ESG software, data, and consulting services, from Genstar Capital, in a deal valuing the firm at approximately US$1.4 billion. Sphera uses SaaS software, proprietary data and consulting services to help clients identify, manage and mitigate ESG risk in the areas of environment, health, safety and sustainability, operational risk management and product stewardship. The firm has more than 3,000 customers in more than 100 countries. “We are excited to partner with Blackstone as we drive our vision of integrated ESG cloud-based software, data and services. With this significant investment of new capital, Sphera will expand the ESG digital solutions on its SaaS platform with unique data sets and differentiated consultative services throughout the world,” said Paul Marushka, President and CEO of Sphera.