ESG Investor’s weekly round-up of news on technology and tools in the sustainable investing sector, including LSEG, ISS ESG, Mercer, ICE, Euroclear, Scoot Science, Tumelo, GoldenSource and more.
The London Stock Exchange has published a public consultation on the market rules for its planned voluntary carbon market, first announced at COP26 last November, which will provide access to publicly traded carbon funds focused on investing in climate mitigation projects. The consultation will gather feedback from corporates, investors and others on admission requirements, ongoing obligations, as well as carbon credit standards for the listing of carbon funds. The proposed market solution will operate under the UK’s regulatory framework, using existing market infrastructure, supplemented by specific requirements relevant to carbon credit projects. The market will be a designation for closed-ended investment funds that are listed or admitted to the exchange’s markets, enabling investors and market participants to identify funds committed to investing in carbon credit projects meeting internationally recognised standards. According to the consultation document, “The requirements for the Voluntary Carbon Market designation, and the enhanced disclosure proposed in this consultation, are designed to inform investors of specific information relating to a Fund’s carbon reduction and/or removal projects.” Writing in a separate blog, London Stock Exchange CEO Julia Hoggett wrote: “Voluntary carbon markets are not a substitute for individual organisations undertaking the ‘hard yards’ of directly decarbonising their production processes and supply chains, but a valuable way of augmenting all of our efforts and speeding our path to the transition to a low carbon economy.”
ISS ESG, the responsible investment arm of Institutional Shareholder Services, has launched its Regulatory Sustainable Investment Solution, which can be used to define, quantify and manage sustainable investment strategies on a customised basis, while meeting regulatory reporting requirements. For investments within the EU, the solution helps fulfil SFDR obligations related to Article 8 & 9 disclosures, as well as assessing and quantifying the sustainability of funds and investment products outside the scope of the EU Taxonomy. It also supports adherence to principles-based requirements of disclosure regimes in other jurisdictions, such as the US, Canada, Hong Kong, Singapore, Taiwan, India and the Philippines, providing disclosure and transparency on sustainable investment strategies, criteria and implementation.
Investment consultancy Mercer has announced a collaboration aimed at helping institutional investors to identify and benchmark the climate-related risks and opportunities in their portfolios. Mercer will partner with Ortec Finance to enable institutional investors to model current allocations against alternatives in other sectors and asset classes, including private equity where many tech-led climate transition solutions are being developed. Ortec Finance, a provider of risk and return management technology and solutions, develops a broad range of scenarios and long-range projections on how the climate crisis could impact investments. The scenario analysis, covering both assets and liabilities, is in line with the recommendations of the Task Force on Climate-related Financial Disclosures. The collaboration will provide clients with “a deeper level of granularity, allowing them to consider whether climate impacts are fully priced into every asset class and economic sector before making reallocation decisions”, said Steven Sowden, Principal at Mercer.
Data, technology and market infrastructure provider Intercontinental Exchange (ICE) has launched a Nature-Based Solutions carbon credit futures contract. The NBS future physically delivers Verified Carbon Unit (VCU) credits certified under Verra’s Verified Carbon Standard (VCS) Agriculture, Forestry and Other Land Use (AFOLU) Projects with Climate, Community and Biodiversity (CCB) Certification, with vintages between January 1, 2016, to December 31, 2020. Each NBS futures contract is equal to 1,000 carbon credits, where each credit is equal to the removal or reduction of one metric ton of greenhouse gas emissions achieved by projects that preserve and maintain natural ecosystems. “The launch of ICE’s Nature-Based Carbon Futures contract is a significant foundational development in the architecture of global carbon markets, helping to deliver transparency and liquidity for quality nature-based solutions,” said Hannah Hauman, Global Head of Carbon Trading for Trafigura. “The new contract in particular delivers a direct link to Paris-aligned compliance periods, preparing for the next stage of market development as countries operationalise Article 6 [of the Paris rulebook].”
Digital fund distribution platform MFEX by Euroclear now offers an ESG reporting solution to asset managers which adheres to the European ESG Template (EET). The EET provides a standardised template complying with upcoming regulatory requirements from the Regulatory Technical Standards (RTS) under Level 1 of the Sustainable Finance Disclosure Regulation, applied in Europe from January 2023. The EET enables asset managers to gather all reporting on the EU taxonomy, SFDR, MiFID and Insurance Distribution Directive requirements. MFEX said clients will benefit from simplified EET reporting via a “seamless and user-friendly portal” provided by Greenomy, in which Euroclear has as stake, allowing managers to upload their holdings per investment strategy; create EET reports on an ISIN level; comply with reporting requirements and enable the dissemination of EETs to stakeholders and investors.
GoldenSource, a provider of enterprise data management solutions, is adding new capabilities and data sources to its GoldenSource ESG Impact solution. The firm said the upgrade will provide users with greater access to raw ESG data, more nuanced portfolio screening and tuning, advanced analytics features including greenhouse gas scenarios, and further support for the European ESG Template (EET). The new capabilities include the addition of ‘what if’ analytics, meaning that users will be able to analyse specific outcomes of potential investment shifts, such as swapping out or adding investments and the implications for the overall portfolio ESG score. Topic tagging and template tagging simplify the generation of the EET for a firm’s products and the selection of products that fit a specific EET preference. Based on tagging, GoldenSource also mimics the SFDR Principal Adverse Impacts template, accelerating compliance with disclosure requirements.
Scoot Science, a specialist developer of ocean analytics and related risk and finance tools, has closed a US$4.1 million round of seed funding, bringing its total funding to US$6.4 million. Third Kind Venture Capital led the seed round, while First Star Ventures led the pre-seed round. Rackhouse, Climate Capital, My Climate Journey, Hawktail, Liquid 2 Ventures, Impact Assets, and Box Group also participated in the seed round. “Our aim is to enable any ocean-based business to understand how their business outcomes couple to ocean variability and a changing climate. These are the tools needed to identify clear pathways for navigating the challenges of ocean change,” said CEO Jonathan LaRiviere. Founded in 2017, Scoot Science’s team of oceanographers and data scientists are creating a series of data-driven tools to measure the impact and risk of ocean conditions on salmon farms, with the intention that its modeling will encourage more impact investors to bring capital to sustainable ocean operations.
impact-focused fintech Tumelo has completed a US$19 million Series A funding round, led by Treasury, the US-based Fintech venture fund run by the co-founders of Betterment, Acorns, and Say Technologies. Further investors include Legal & General, Fidelity International Strategic Ventures, Nucleus Adventure Capital, IHS Markit ex-CEO Lance Uggla, and Jim Wiandt, founder of ETF.com. Tumelo develops software to provide greater transparency to institutional and retail investors on holdings and voting. The new investment will help Tumelo to expand in its home UK market as well as pursue opportunities in the US, Australia and additional market segments.
Professional and audit services group PwC has entered a partnership to scale implementation of Sphera’s ESG management platform and solutions. Acquired by alternative investments house Blackrock in 2021, Sphera helps corporates to manage and mitigate ESG risks through its software as a service solution, consulting services, and science-based environmental data. “With increasing complexity surrounding regulatory requirements, such as SEC climate disclosures and the EU taxonomy, there’s a clear need to supply verifiable data to the market,” said Neil Dhar, Co-leader of PwC’s Consulting business. “Sphera’s vision is for all businesses to view ESG and sustainability strategies not just as a compliance exercise but as a tool for innovation,” said Paul Marushka, Sphera’s CEO and President. Separately, Sphera launched its Life Cycle Assessment (LCA) Automation software, designed to provide users with “holistic, real-time analysis and insights” into the environmental footprint of their product portfolios. It also features extensive managed content that enables customers to instantaneously calculate their carbon footprint at scale and model how adjustments to specific variables may affect emissions outputs.