Buzz: Transfer to editor

EthiFinance has published the first edition of the "SRI study on the Spanish Private Equity market" presents the developments in the ESG (Environment, Social and Governance) maturity of Spanish Private Equity Asset Managers, highlighting new ESG trends in the market and identifying areas for improvement for Asset Managers.

Four main aspects are analysed: ESG approach, exclusions, resources dedicated to ESG and SFDR classification of the funds.

This study is based mainly on public information made available by the Asset Managers on their website and the information contained in the pre-contractual fund documents, available on the Spanish National Securities Market Commission (CNMV) website.  The data was collected from 112 Asset Managers (and independent investment funds) active in Private Equity in Spain.

Download report - In English (EN) | In Spanish (ES)

Trillium’s shareholder advocates are in the thick of the proxy voting season in the first quarter of 2024 and are pleased to share updates on several issues – including excitement about Starbucks agreeing to negotiate a collective bargaining agreement with their employees’ union, a major success after more than two years of investor pressure.

Trillium has withdrawn several shareholder proposals after reaching satisfactory agreements with several portfolio companies on issues ranging from improved reporting of workforce diversity data and access to paid sick leave. They also have an update on firm-wide work to encourage companies to set science-based targets. See the Advocacy Impact Report for more details.

Climate change cost the U.S. over $90 billion in 2023. Last year was the hottest year in recorded history and had a record physical impact. Swiss Re warns that rising temperatures are likely to reduce global wealth significantly by 2050 as crop yields fall, disease spreads, and rising seas consume coastal cities, among a host of other harms.  

Linking greenhouse gas emission reduction targets to executive compensation is one important lever by which CEOs can be incentivized to achieve timely and systematic progress on climate. This second edition of the Pay for Climate Performance report analyzes how effectively 100 of the largest U.S. companies by market capitalization, across 11 sectors of the economy, are currently linking GHG emissions reduction incentives to CEO remuneration.

These 100 companies collectively represent a market capitalization of $28 trillion. Building upon the 2022 Pay for Climate Performance report’s analysis of 47 U.S. companies, this edition enables year-over-year comparisons and provides broader coverage across industries.

This report also provides a succinct overview of best practices and investor expectations, evaluates the 100 companies on how they incorporate climate metrics into CEO compensation, and considers the associated investor challenges in assessing climate-related CEO compensation incentives.

Summary: 
 
- ESG ratings have started to address shortfalls in scoring methodology and overall transparency. 
- Key improvements include clearer definitions, more transparent scoring methodology, and public access to ESG scores.
- Looming ESG regulations are a key driver of change, with initiatives underway in Japan, the UK and India. 
- Greater ESG ratings transparency is paving the way for expanded data collection that companies will need to monitor. 

To help business understand emerging trends, frameworks and reporting requirements – and how they can respond to these by taking some decisive first steps towards positive action on nature – the report is broken down into four main chapters:

- Why the nature agenda is shaping business strategies examines the need for action with a particular focus on the agri-food sector as one of the industries most reliant on healthy natural systems.
- The farming and nature nexus looks in more depth at the structure of agricultural value chains and the challenges existing structures pose to greater action on nature.
- What this means for business – how to prepare focuses on nature targets under the TNFD and SBTN, two of the most prominent assessment and disclosure frameworks.
- Key success factors for becoming nature positive examines the three areas identified as critical to addressing nature issues for agri-food businesses:

• Getting the right nature-related data
• Engaging with key stakeholders across the value chain
• Embedding nature action within a wider holistic strategy

This World Earth Day, RBC BlueBay Investment Grade Fixed Income Portfolio Manager, Harrison Hill reflects on the investment potential for fixed income within a circular economy.

Discussions around sustainable finance often centre around private equity and venture capital, however, fixed income has an equally large part to play. However, to-date this asset class has been arguably underutilised within this space.

The concept of a ‘circular economy’ is rising in prominence as the impact of climate change and resource scarcity increasingly pose risks around the globe.

For investors, this concept represents an opportunity to gain an exposure to sustainable business models that can potentially lead to reduced costs, improved efficiencies, and reduced dependence on finite resources. Despite this, investment in the circular economy from a private sector standpoint remain subdued despite a growing arsenal of ways to invest within the space.

"In our view, high-impact companies should prioritize the protection of biodiversity alongside their transition to a net-zero economy. We would like this publication to serve as a call to action for high-impact companies to address the challenges related to land use, deforestation, water conservation, climate change mitigation, waste management and species conservation.

In this report, we present the findings of a survey we received from 70 respondents (out of more than 220 surveys sent) from high-impact industries to understand their approach to biodiversity and assess the actions they have taken to address biodiversity-related concerns. We selected companies that have a significant impact on the reduction in biodiversity, as well as those that are highly dependent on it."

Financial risk and opportunities for investors related to processed foods

There is increasing emphasis on the need to align financial interests with public health objectives. There is a growing awareness around the adverse impact of the financialization of UPF and how this impacts diets.

Overall, the investment case for considering nutrition when investing in the food sector is strong and the majority of ATNI’s 80-plus Investors in Nutrition and Health have integrated nutrition in their responsible investment approaches – thus aiming to leverage the healthiness of processed foods for both business and society. However, the topic of food processing is relatively newfor the investment community. For investors who are interested in nutrition and health, the level of food processing and its effects on health is a logical issue to consider in relation to their responsible investment strategies.

Banks such as Rabobank and Barclays are already explicitly paying more attention to processing, outlining in their consumer trend reports that food companies should look at the potential risks that processed foods pose to financial returns over the long term, and opportunities to mitigate them.

For example, one opportunity recently highlighted by Rabobank involves reverse engineering and redesigning food production processes to retain the positive aspects of food processing without being linked to adverse health outcomes.

Cutting aluminum emissions is a challenging but vital step toward industrial decarbonization as demand is expected to grow sharply in coming years.
 
Producing “green aluminum” and securing a climate-safe economy while meeting rising demand will depend on significant collaboration across governments, international organizations, and industry. In this report Climate Advisers developed in partnership with the Atlantic Council, we dive into the complexities of decarbonizing the global aluminum market, how actors are working to produce the metal with cleaner methods, and recommendations for stakeholders to advance industrial decarbonization.

Aluminum production accounts for 3 percent of the world’s climate change emissions. This is set to increase with demand projected to rise by nearly 38% from 2020 to 2030. To learn more about how meeting growing demand for aluminum can be decoupled from climate emissions and how various countries are implementing the solutions listed below, download this report. 

In September 2023, FirstRand published its annual climate-related disclosures across the following reports: climate change strategies report 2023 (climate report), Basel Pillar III disclosure 2023 (Basel III), governance report 2023, and remuneration report 2023. These are read with the bank’s climate change policy 2022 and its policy on energy and fossil fuel financing. Although the bank has published a document setting out its policy statements relating to restrictions on the financing of certain sectors/activities, this does not deal with fossil fuels, merely referencing that thermal coal is addressed in a separate policy. 

Just Share has also engaged with FirstRand on several issues arising from its 2023 disclosures.
This briefing draws on the bank’s published disclosures and on clarifications provided by FirstRand during these engagements.

FirstRand has produced a clear and useful set of climate disclosures. It has attempted to address most elements of the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD), and its disclosures make it possible for stakeholders to identify the gaps and challenges that it is facing in fully integrating climate risk into its decision-making. This briefing addresses someof these gaps, to focus investors and the bank on the issues that will help or hinder FirstRand’s ability to meet its long-term climate commitments.

Solactive: EU Taxonomy-Aligning Benchmarks 

EU Taxonomy-Aligning Benchmarks are proposed investment strategies that center on the EU Taxonomy for Sustainable Activities. These benchmarks would strategically leverage companies' disclosed capital expenditure aligned with environmentally sustainable economic activities.

Essentially, their overarching objective would lie in prioritizing companies directing capital towards pivotal sustainable initiatives, serving as a complementary framework to EU Climate Benchmarks.

Action is urgently needed by UK policymakers to tackle the causes of obesity and diet-related disease, as well as acting to reduce the environmental impact of our food system. 

This policy briefing summarises research by Sustainable and Healthy Food Systems (SHEFS) which models the possible effects on food choice of a salt and sugar tax, as recommended in the 2021 National Food Strategy (NFS). It looks at the impact of consumers substituting frequently consumed foods for lower salt and sugar alternatives within the same food category, assessing the affordability of such swaps, and modelling the impact they might have on healthy weight and the environment. 

The research finds that even very small swaps within just eight commonly consumed food categories (therefore likely to be realistic for the general population) can have notable impacts on both healthy weight at a population level and several environmental impact outcomes. 

The findings support the introduction of targeted fiscal incentives for reformulation, such as a salt and sugar tax, ensuring that any potential risk to people on low incomes is minimised. 

William Nicolle and Leland Werden discuss the white paper's key highlights. They explain the urgent need for a more holistic approach to reversing global biodiversity loss by 2030 and to achieving a nature-positive world by 2050.

Associated white paper available here