Aaron Puthan, Business
Leave a Comment

7 Things To Know About Sustainable Investing (9/28-10/2)

  1. Five Firms removed from UN PRI
  2. What a Task Force on Nature-related Financial Disclosures will achieve
  3. Big Four accounting firms reveal new ESG standards
  4. Academics launch new guidelines for carbon offsetting
  5. Top European automakers linked to deforestation
  6. Danish pension fund backlists China, dumping 54m equities, bonds
  7. South Korea national assembly declares ‘climate emergency

By Aaron Putham

The European Central Bank announced it would accept sustainability-linked bonds (SLBs) as collateral and that it could start buying them under its asset purchase programs provided they comply with program-specific eligibility criteria starting on September 22nd. SLBs are bonds with coupons linked to sustainability performance targets and, in contrast with use-of-proceed bonds such as green bonds, raise money for general corporate purposes rather than for defined projects or categories of activity.

This decision by the European Central Bank echoes the emerging new trend in integrating ESG consideration in bond covenants, and will allow bond investors to also take part in low carbon transition which has been more of an equity play.

1. Five Firms removed from UN PRI

Five investment firms (BPE, the private banking arm of La Banque Postale, Stichting Gemeenschappelijk Beleggingsfonds FNV, Corfina Capital, Primary Wave IP Investment Management, and Delta Alternative Management) have been removed from the United Nations Principles for Responsible Investment for failing to meet its minimum requirements. The first round of exclusions may not satisfy all its critics given it affects mainly small firms, while some much larger signatories are being challenged for perceiving inaction when engaging with companies on climate change. The PRI said it now plans to toughen membership requirements further and will launch a consultation at a meeting this month. Proposed changes include requiring firms’ responsible investment policies to cover 90% of assets and making that policy public.

2. What a Task Force on Nature-related Financial Disclosures will achieve

After gathering momentum for months, the initiative to bring together a Task Force on Nature-related Financial Disclosures (TNFD) launched on Friday, September 25th. 34 financial institutions across five continents have joined forces with governments of the UK, France, Peru, and Switzerland, as well as financial regulators from Argentina and Mexico in an informal working group. The group, which has 62 members in total, including the World Bank, the OECD, and a number of multinational companies, will bring together a TTNFD next year. The TNFD aims to tackle nature-related financial risks whilst addressing the climate crisis in tandem. The initiative will also improve reporting, metrics, and data which are essential for financial institutions and regulators to make real and measurable change.

3. Big Four accounting firms reveal new ESG standards

Leaders of the Big Four accounting firms have joined forces to reveal a reporting framework for environmental, social and governance (ESG) standards. PwC, KPMG, EY, and Deloitte have all backed the framework, which has been headed up by the International Business School (IBS) run by Bank of America chief executive Brian Moynihan. The Big Four and the World Economic Forum were tasked to identify a set of universal ESG metrics and recommended disclosures that could be reflected in annual reports of companies. The result of this process is 21 core metrics and 34 expanded metrics which IBS members are encouraged to adopt.

Meanwhile, The International Financial Reporting Standards (IFRS) Foundation has taken an official first step in playing a role in global ESG standard-setting, with the launch of a consultation paper which aims to assess demand for global sustainability standards and assess whether and to what extend the Foundation might contribute to the development of such standards.

4. Academics launch new guidelines for carbon offsetting

Academics from the University of Oxford have launched a new standard for carbon offsetting, which seeks to ensure the growing number of net zero strategies adopted by state and corporate actors are effective in their stated goal of halting increases in the atmospheric concentrations of greenhouse gases. The research says that offsetting can be useful, in hard-to-decarbonise sectors such as aviation and agriculture, but can also result in greenwashing and creating negative unintended impacts for people and the environment. The report provided 4 key principles. First prioritize reducing in-house emissions, ensure the environmental integrity of offsets and disclose how they are used.Second, shift offsetting towards carbon removal, where offsets directly remove carbon from the atmosphere. Third, shift offsetting towards long-lived storage, which removes carbon from the atmosphere permanently or almost permanently. And finally, to support the development of a market for net zero aligned offsets.

5. Top European automakers linked to deforestation

This week, Environmental group Earthsight have linked some of Europe’s largest carmakers to deforestation of the Chaco, a dry forest region of Paraguay home to jaguars and one of the largest uncontacted indigenous groups in the world. The group said in a report that livestock companies have illegally logged lands of the Ayoreo Totobiegosode indigenous ethnic group, some of whose members live in voluntary isolation. The group alleges the livestock skin is used in leather upholstery of luxury vehicles sold by high-end European auto brands including BMW, Jaguar, and Land Rover. Paraguay exports about 50,000 tons of wet-blue leather a year and almost two-thirds of those shipments are bound for Europe, according to the report. Automakers say that leather is a byproduct of the far larger meat industry and high-end cars constitute a comparatively small market niche. However,  indigenous leaders say deforestation driven by growth in beef and leather exports is encroaching on their territory and destroying their way of life.

6. Danish pension fund backlists China, dumping 54m equities, bonds

Danish Denmark’s AkademikerPension has announced it is excluding all Chinese investments from its portfolio, dropping a total of 54m of government bonds and shares, due to systematic human rights violations in the issuing country. The fund has a history of taking decisive action to live up to its motto of ‘return and responsibility’. AkademikerPension said it had previously blacklisted a number of other countries including Saudi Arabia, Thailand, and Iran. Last week, the pension fund even announced it was placing scandal-hit Australian bank Macquarie back into investment ‘quarantine’ for six months, following new revelations about historical dividend practices at the bank.

7. South Korea national assembly declares ‘climate emergency’

South Korea has declared a climate emergency on September 28th; this move makes South Korea the first country in the region to declare a ‘climate emergency’. They have established a non-binding goal of reaching net-zero emission by 2050 – this decision comes after China has pledged to become carbon neutral by 2060. The ‘climate emergency’ resolution was passed by the country’s national assembly and will see South Korea put together a special committee, the task force will guide South Korea’s Climate action spending, review policies, and retool the country’s workforce.

Also this week, KB FInancial Group has become the first South Korean bank to commit to stop financing construction of coal-fired power plants, as part of a new climate roadmap. The parent group of Kookmin Bank and KB Investment & Securities agreed not to provide underwriting or financing for new coal-fired power plants at its ESG committee meeting. □

Work Cited

  1. Image source
  2. Chambers, N. (2020, September 29). What a Task Force on Nature-related Financial Disclosures will achieve. Retrieved October 02, 2020, from https://www.responsible-investor.com/articles/what-a-task-force-on-nature-related-financial-disclosures-will-achieve
  3. European Central Bank. (2020, September 22). ECB to accept sustainability-linked bonds as collateral. Retrieved October 02, 2020, from https://www.ecb.europa.eu/press/pr/date/2020/html/ecb.pr200922~482e4a5a90.en.html
  4. Grand Theft Chaco. (2020, September 20). Retrieved October 02, 2020, from https://www.earthsight.org.uk/grandtheftchaco-en
  5. Hicks, R. (2020, September 28). KB Financial is the first Korean bank to stop funding coal-fired power projects. Retrieved October 02, 2020, from https://www.eco-business.com/news/kb-financial-is-the-first-korean-bank-to-stop-funding-coal-fired-power-projects/
  6. Jessop, S. (2020, September 28). Exclusive: Five groups ousted from U.N.-backed responsible investment list. Retrieved October 02, 2020, from https://www.reuters.com/article/global-investments-pri/exclusive-five-groups-ousted-from-u-n-backed-responsible-investment-list-idUSKBN26J10K
  7. Oxford launches new principles for credible carbon offsetting. (2020, September 29). Retrieved October 02, 2020, from https://www.ox.ac.uk/news/2020-09-29-oxford-launches-new-principles-credible-carbon-offsetting
  8. Staff, B. (2020, September 28). South Korea national assembly declares ‘climate emergency’. Retrieved October 02, 2020, from https://www.businessgreen.com/news/4020801/south-korea-national-assembly-declares-climate-emergency
  9. Ward, M. (2020, September 22). ‘The time is now,’ says EY CEO Carmine Di Sibio, as the Big Four corporate accounting firms get serious about ethical governance and endorse official ESG reporting standards. Retrieved October 02, 2020, from https://www.businessinsider.in/international/news/the-time-is-now-says-ey-ceo-carmine-di-sibio-as-the-big-four-corporate-accounting-firms-get-serious-about-ethical-governance-and-endorse-official-esg-reporting-standards/articleshow/78262703.cms

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s