This Week’s Tech and Tools News: ISS ESG Offers Collaborative Engagement Tool

ESG Investor’s weekly round-up of news on technology and tools in the sustainable investing sector, including ISS ESG, Moody’s, TF International, ChinaBond Pricing Centre, Jesus College, Irish Life IM, ICE, Sustainalytics, Square and Climeworks.

ISS ESG, the responsible investment arm of Institutional Shareholder Services (ISS), has launched Collaborative Engagement Services to enable cost-effective investor participation in engagement with companies on material sustainability-related themes to support compliance and reporting requirements. “ISS ESG’s Collaborative Engagement Services facilitates cost-effective investor stewardship compliance and reporting, by leveraging ISS ESG’s expertise, research and data to facilitate the identification of key performance indicators for corporate ESG improvement and momentum, aligned with recognised standards,” said Dr Maximilian Horster, Head of ISS ESG. The Collaborative Engagement Services consists of two elements: the ISS ESG Norm-Based Engagement Solution, which is based on outreach to 100 public companies annually involved in alleged ESG-related violations, and the ISS ESG Thematic Engagement Solution, which will go live in January 2022 and prioritise outreach to a select universe of 30 public companies underperforming according to a selection of the UN Sustainable Development Goals. “The structured dialogue process encourages broader corporate disclosure on ESG issues, metrics and the link to corporate strategy, to enable enhanced sustainable investment decision-making by investors and improved market efficiency,” said Edouard Dubois, Global Head of Stewardship and Engagement at ISS ESG.

Moody’s Japan K.K. has published its ESG Issuer Profile and Credit Impact Scores for international, regional and local governments (RLGs). Both using a five-point scale, the Issuer Profile Scores rate debt issuers’ exposure to material ESG credit considerations, and the Credit Impact Scores highlight the impact of ESG factors on issuers’ credit ratings. ESG credit impact is mostly neutral-to-low for RLGs in advanced economies of moderately negative for those in emerging markets. “Physical climate risks are the main source of environmental risk for international RLGs, while demographics, and labour and income are the key social challenges. Meanwhile, governance is a limited risk or a strength for most RLGs,” said Hiroe Yamamoto, a Moody’s Analyst.

TF International Securities Group, a wholly-owned subsidiary of Tianfeng Securities, and the ChinaBond Pricing Centre, have jointly launched the ChinaBond TFISEC ESG Selected Chinese Offshore USD Bond Index. Screening the entire Chinese USD bond market, which includes over 2,213 bonds potentially eligible for inclusion, the international ESG themed index aims to facilitate both onshore and offshore investments towards serving the green and sustainable sectors to achieve a CO2 emissions peak and neutralisation. The index covers 12 traditional industries, including finance, construction and real estate. “The launch of ChinaBond TFISEC ESG Selected Chinese Offshore USD Bond Index aims at facilitating the participation of high-quality onshore companies in the internationalisation of China’s capital market while further improving the offshore financing efficiency of Chinese enterprises so as to bring more high-quality capital into China and support the development of the real economy,” said Yong Wang, Chairman and President of TF International.

Cambridge University’s Jesus College has been awarded a £200,000 research grant to develop a fossil-free bond index. The index will be supported by a new methodology for assessing corporate alignment with 1.5°C of global warming, also aiming to prevent additional financing of fossil fuel expansion. It is funded by philanthropic fund Partners for a New Economy. “From our research, we know that responsible investors can have a greater impact in the bond market as opposed to in public equity,” said Dr Ellen Quigley, Senior Research Associate at the Cambridge Centre for the Study of Existentional Risk (CSER). “The current options available to fossil-free bond investors, however, are few and expensive. This project aims to bring academic rigour to the evaluation of companies’ transition plans while creating a low-cost option for investors who wish to contribute directly to the mitigation of climate change,” Quigley added.

Irish Life Investment Managers (ILIM) has licensed an ICE ESG Fixed Income index, the ICE ILIM Sustainable Euro Corporate Bond Index, for its Irish Life Euro Sustainable Corporate Bond Fund. The ICE ILIM Sustainable Euro Corporate Bond Index seeks to limit the inclusion of companies involved in controversial weapons, tobacco, thermal coal, artic oil and oil sands, excludes the bottom 7% issuers according to ESG and carbon emissions criteria, and tilts index weights, taking into account company green and fossil fuel revenue. The selected index is derived from the ICE BofA Euro Large Cap Corporate Index, which tracks the performance of large capitalisation €-denominated investment-grade corporate debt, publicly issued in the Eurobond or Euro member domestic markets. The index was created to meet the specific needs of ILIM and to provide its clients with broader exposure to environmental, social and governance (ESG), and sustainability factors. ICE’s comprehensive customization solution offers a team of index analysts who develop and back test the index specifications, publish the full set of performance and statistical measures, and distribute the index across a wide range of platforms and redistributors. “Irish Life Investment Managers has worked to deliver clients with high-quality and innovative investment strategies and this new fund continues that legacy,” said Aram Flores, VP, Head of Index and Analytics at ICE, a unit of global data, technology and market infrastructure provider Intercontinental Exchange.

Sustainalytics, a global provider of ESG research, ratings and data owned by Morningstar, has launched its Corporate Supply Chain ESG Solutions. Companies will be able to: assess suppliers’ ESG issues to understand exposure to material ESG risks; measure their economic and social impact, including the activities of partners and suppliers; and reviewing potential vendors and partners before entering into new partnership agreements. “Corporate executives are asking their procurement leaders to assess the ESG risks of their suppliers and partners to limit risk exposure and comply with increasing regulation in supply chain operations,” said Francesca Placa, Manager of Corporate Solutions at Sustainalytics. “By providing a high-quality, standardised approach to assess company-level material ESG risks, Sustainalytics is well-positioned to help companies determine which suppliers may require the most in-depth evaluation on ESG issues.”

Financial services company Square has partnered with direct air capture company Climeworks to remove 2,000 tonnes of CO2 produced by its operations. The nine-year carbon removal agreement will aid Square’s efforts to become net zero for operations. Watershed has also partnered with the firm to help it measure its carbon footprint and build a strategy to reduce emissions. Climeworks’ direct air capture and storage technology is solely powered by renewable energy. “Climeworks is an important long-term ally in our path to net zero,” said Neil Jorgensen, Global ESG Lead of Square. “Early and long-term adoption of this technology is investing in a future of affordable and large-scale removal which is an essential component to helping mitigate the future negative externalities of climate change.”

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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