Media - specialist SRI

A rebound in growth stocks helped sustainable funds beat traditional funds in the first half of 2023, as assets under management rose and ESG investors increased their use of restriction screening.

In the first half of 2023, sustainable funds saw a median return of 6.9%, beating traditional funds’ 3.8% and reversing their underperformance in 2022, according to a new “Sustainable Reality” report from the Morgan Stanley Institute for Sustainable Investing. Investor demand also remained strong as sustainable funds’ assets under management (AUM) reached record levels.

“Our mid-year update shows the resilience of ESG funds with a return to outperformance after a challenging 2022,” says Morgan Stanley's Chief Sustainability Officer and CEO of the Institute for Sustainable Investing Jessica Alsford. “Investors are increasingly turning to sustainable funds with sustainable AUM now at ~8% of total AUM globally.”

Understanding 2023 Fund Performance

Last year, a rapid rise in interest rates contributed to declines in both equities and bonds. Value stocks (those trading cheaply) and high-quality, short-duration fixed income benefited, which contributed to the relative underperformance of sustainable funds in 2022, since sustainable funds tend to skew away from these categories. This year, a rebound in growth stocks (which prioritize long-term potential) has especially helped sustainable funds’ relative outperformance.

By asset class, sustainable equity funds posted the strongest gains, showing a 10.9% median return and outperforming traditional equity funds’ 8%. Fixed-income outperformance was more muted, with sustainable funds at a 3.8% median return vs. traditional funds’ 2.2% (see Figure 1).

The global aviation industry is aiming for decarbonization. And while it will be a long and expensive journey, the transition could bring billions of dollars in investment opportunity. 

The challenge: How to curb and offset the industry’s carbon dioxide (CO2) emissions, which were estimated at 1 billion metric tons in 20191–roughly equivalent to those of Japan—and expected to double or even triple by 2050 amid increased demand for international air travel, according to the UN agency that regulates international aviation.  

To meet net-zero targets aligned with the Paris Agreement, the airline industry needs to reduce its carbon footprint to around 885 million metric tons by 2030, 13% below a 2019 baseline, and to about 200 million metric tons by 2050—an 80% reduction, according to International Energy Agency estimates.

“Sustainable aviation fuel, which can offer over 80% reduction in CO2 emissions over conventional jet fuel, presents the best solution for decarbonizing in the near to medium term,” says Ravi Shanker, Morgan Stanley's Freight Transportation and Airlines Analyst.  

Supply and scale will be a big part of the success story for sustainable aviation fuel (SAF), with investment implications for global refiners, airlines, chemicals and aerospace companies.  

This SRI Report explains La Banque Postale's approach as a responsible investor and conviction: to draw on all the levers it has to encourage a – fair and organised – transition, to contribute to the general interest and deliver financial, environmental and social performance to our customers. 

Editorial

"2022 was a year of powerful commitments for LBP AM and its subsidiary Tocqueville Finance. As part of its participation in the Net Zero Asset Management Initiative, the group set out a decarbonisation trajectory for its portfolios with an ambitious objective: 80% of total assets would be aligned with a decarbonisation target compatible with the objectives of the Paris Agreement from 2030. This ambition is underpinned in particular by an across-the-board and transparent policy for managing fossil fuel allocations, applied to oil and gas since 2022 through distinct measures. 

Concurrently, it has stepped up its commitment to the conservation of biodiversity, with the deployment of a policy and a dedicated fund... 

Executive summary

• A growing body of research demonstrates the financial materiality of physical, transition and adaptation risks to companies, issuers and their investors.
• Investment to reduce or mitigate greenhouse gas (GHG) emissions will lower the costs of physical risks arising from climate change, but trillions of dollars must also be spent to adapt the global economy to the new climate regime.
• Though many experts believe markets are widely underestimating climate-related risks, studies show that lower-emitting companies and those with transition plans have delivered financial outperformance

The 2022 RBC Global Asset Management Responsible Investment Survey was answered by over 700 participants from around the world, including the U.S., Canada, Europe and Asia. Respondents came from all corners of the investment business.

Nearly 45% of the respondents represent organizations with $1 billion or more in assets with the highest number, or 21%, coming from organizations with $1 to $10 billion in assets. However, smaller firms with assets of less than $100 million were nearly equally represented, with 19% of respondents working at these firms.

Key Highlights from the survey include:

• Climate change has broken away from the pack of ESG themes of greatest concern: 51% of investors cited it as their top #1 or #2 ESG concern - more than double the next highest concern, renewable energy (21%). Rounding out the list of the top five #1 or #2 concerns are water, human rights and anti-corruption.
• Aligning investment portfolios with the goal of achieving net-zero emissions by 2050 is important for a majority (54%) of global investors.

Impax Asset Management: The transition will not be televised – Part 3

In Part 1 of this series, Impax focused on changes in the ‘upstream’ portion of the clean electricity value chain, exploring the potential for technologies like wind and solar to accelerate their existing growth rates. Part 2 unpicked the emerging ‘midstream’ in clean power that’s using storage and hydrogen technologies to make renewables more flexible and reliable.

Here, Part 3 looks at how energy users in the ’downstream’ segment (industrial, commercial and residential customers) are changing the way they buy and use energy. This looks at how falling technology costs and accelerating government policies are creating new opportunities for companies at the cutting edge of shifts in US energy demand.

Executive summary

• A potential re-ordering of the relationship between energy producers and consumers presents numerous opportunities for equipment suppliers, infrastructure providers and new market entrants.
• Technological advances are enabling consumers to take charge of their energy use. Early adopters are demonstrating the bottom-line benefits of wrestling control away from incumbent energy producers.
• With this push from consumers, the US energy system could shift rapidly towards higher rates of efficiency, electrification and independence from fossil fuels. But the potential won’t be realized without substantial hardware and software upgrades to US power networks.
• Consumers can be an important catalyst for innovation – if regulators let them. Regional and state agencies should resist their pressure to restrict the higher levels that distributed generation enables.

TPI’s Carbon Performance assessment is based on the Sectoral Decarbonisation Approach (SDA). [1] The SDA translates greenhouse gas emissions targets made at the international level (e.g., under the Paris Agreement to the UN Framework Convention on Climate Change) into appropriate benchmarks, against which the performance of individual companies can be compared.

The SDA is built on the principle of recognising that different sectors of the economy (e.g., oil and gas production, electricity generation, and automobile manufacturing) face different challenges arising from the low-carbon transition, including where emissions are concentrated in the value chain, and how costly it is to reduce emissions.

Therefore, the SDA takes a sector-by-sector approach, comparing companies within each sector against each other and against sector-specific benchmarks, which establish the performance of an average company that is aligned with international emissions targets. 

TPI currently uses three sectoral benchmarks for the assessment of companies in most sectors, including steel:

1. A 1.5 Degrees scenario, which is consistent with the overall aim of the Paris Agreement to hold “the increase in the global average temperature to well below 2°C above pre-industrial levels and to pursue efforts to limit the temperature increase to 1.5°C above pre-industrial levels”.
2. A Below 2 Degrees scenario, which is also consistent with the overall aim of the Paris Agreement to limit warming, albeit at the middle of the range of ambition.
3. A National Pledges scenario which is insufficient to put the world on a path to limit warming to 2°C, even if it will constitute a departure from a business as-usual trend. 

Key areas of the latest report include: 

• Stewardship updates and committee 
• Engagements, themes and process 
• Public policy engagements 
• Collaborative engagements, including CDP, WDI, Climate Action 100+ and Share Action

Highlights:

• Global green bond issuance hit a record US$314 billion in the first half, with the finance sector dominating the market, while governments and agencies also played a larger role.
• Analysis on the use of proceeds from impact bonds indicates that the most common category of project for such funds was renewable energy , with around 400 issuances representing more than US$157 billion of investments.
• The issuance of sustainability-linked bonds amounted to US$35 billion in 1H 2023, falling 28% year on year. European corporates accounted for 65% of issuances globally. Among all sectors, the industrial sector issued the largest amount of such bonds in the first half.
• The Asia-Pacific region had a record half-year with US$140 billion of impact bonds issued. Japan and Hong Kong drove regional growth, though China remains the top issuing country globally.
• North America saw a 20% year-on-year drop in first-half issuance, with US$42 billion of impact bonds: growth in green bond issuance was offset by falls in social and sustainability-linked bonds.

Comgest: Annual Responsible Investment Report 2022 

This report covers key areas of their responsible investment strategy and progress in 2022, this includes: 

• Responsible Investment approach and 2022 highlights 
• Governance and resources 
• Intergrate 
• Engagements 
• Transparency on key ESG metrics

Sycomore AM: Sustainability and Shareholder Engagement Report 

This report is Sycomore AM's response to meeting the requirements of Article 29 of France's Energy and Climate Law. It follows the recommendations of the Autorite des Marches Financiers on reporting and meets SFDR requirements on the disclosure of principal adverse impact indicators. 

Key areas of this report include:

• Responsible investment approach, covering main areas of progress in 2022
• The sustainability of Sycomore's investments, environmental, social and governance analysis
• Shareholder engagement, implementation of the voting policy 
• Governance to support sustainability 

Breckinridge Capital Advisors: In Evaluating Risks from Weather Extremes, Insurers and Bond Investors Share Strategies and Goals

• Insured catastrophic storm losses in 2022 totalled $132 billion, with average insured losses reaching an all-time high of $86 billion.

• Strategies employed by property and casualty insurance companies and bond investors to assess and protect against financial losses due to extreme weather events share important commonalities.

• Materiality is an essential consideration for both insurers and investors when assessing risks within the context of business sustainability.

Sabanci Holdings' 2022 Sustainability Report is available to read and download here.

See here for further Corporate Governance and Sustainability reports and information.

A Best Practice Guide for Plastics – Executive Compensation: A report card for plastic-related companies can be downloaded here. Click here to download the Engagement Sheet.

Tesco: Annual report 2023 & Sustainability reports

Tesco has published its Annual report for 2023. The report contains information on Climate and TFCD reporting; standalone reports on the following are available

• Climate change
• Healthy, sustainable diets
• Food waste, Packaging
• Diversity and inclusion
• Sustainability data book 2022/23.

See here for Tesco's approach to sustainability reporting.

Date and time
Thu, 16 Nov 2023 08:00 - 19:00 GMT
Location
1 Birdcage Walk London SW1H 9JJ

UKSIF's annual Leadership Summit is back for 2023, and we're pleased to host you on Thursday 16th November at the prestigious One Birdcage Walk.

This is a chance to hear from senior representatives from across our membership. Giving a spotlight and platform for the people we think are doing most in sustainability, talking about the barriers they've faced, solutions and how the rest of the industry can follow.

Tickets for this event are limited and will be allocated on a first come, first serve basis.

Attendance is reserved for UKSIF members, if you are not a member your ticket will be cancelled without warning.

The risk of organizational liability – and directors’ personal liability – is increasing rapidly. But board reporting has not kept pace, creating an imbalance that is likely to have drastic repercussions if solutions aren’t put in place.

Cybersecurity. Climate. Diversity. Endlessly evolving regulations. The list of issues facing boards in 2023 is longer – and more complex – than ever before. At the same time, board members are sitting on more boards and are exposed to more information, but with less opportunity to focus. It’s an equation that doesn’t add up.

But there is a solution – and it comes from the core of the organization. Functional leaders in the business need to break down complex data into actionable insights for the board, to distill day-to-day complexities into reports that offer ample opportunity for meaningful engagement.

Planet Tracker: Agriculture’s pathway – how financial markets can help

Read the full blog here

The IEA’s Breakthrough Agenda report clearly shows that the global food system is continuing down an unsustainable pathway, generating more GhG emissions not less. 

It is continuing to add to the harms to nature through actions such as deforestation. 

This cannot continue if we are to meet our interlinked Paris and Montreal-Kunming climate and nature goals. 

The ‘Breakthrough Agenda’ Report (2023) provides a valuable insight into the low-carbon transition pathway for the global agricultural sector. It is not a comforting read. 

But the good news is that financial instruments, such as a deforestation-linked sovereign bond, could help deliver a faster transition. 

UNFCCC COP28 this December is being promoted as a crucial decision-making point – the food system is on the agenda, but will we see concrete actions or just more words?

Planet Tracker: Global Plastic Treaty headwinds

Read the full blog here

We are faced with a major opportunity to end plastic pollution.

The UN is providing the opportunity for sovereign states to tackle the global plastic pollution crisis. Negotiations for a Global Plastic Treaty are soon to enter their third round; but there are significant headwinds.

If global economic growth resumes, plastic demand can be expected to rise while at UNFCCC COP28, plastics is struggling to make the agenda. Unsurprisingly, oil and chemical giants are keen to focus on downstream plastic pollution solutions rather than upstream production. Politically, there are major economies, notably in the G20, unwilling to push for a transition away from fossil fuels while continuing to provide subsidies.

The Zero Draft option paper quite rightly includes a reduction in fossil-based plastic as part of the solution. The UN deserves more support from politicians to ensure that the fossil fuel industry does not assign this opportunity to the waste pile along with the plastic it produces.

We need a meaningful Global Plastic Pollution Treaty.

Planet Tracker: Robin Millington named Global Sustainable Business Leader of the Year

We are so proud that Planet Tracker’s CEO, Robin Millington, has been awarded Sustainable Business Leader of the Year, Global, by the Environmental Finance Sustainable Company Awards judges. This is the latest in a string of awards for the financial think tank, which also won two awards at Environmental Finance’s Sustainable Investment Awards earlier this year. 

Robin co-founded Planet Tracker in 2018, with the aim of embedding the true value of nature into global financial flows to ensure sustainability of the environment and of the businesses and products dependent upon natural capital. 

She leads a growing team of specialists with expertise in financial analysis, and environmental data to produce reports which target environmentally unsustainable industrial practices, identify the companies causing the damage and the investors who are enabling these practices to continue unchallenged, call out greenwashing and provide investors with practical tools such as interactive databases and shareholder questionnaires to help them put pressure on corporate management.  

Over the past 12 months, Planet Tracker has published over 20 reports, including the  Financial Markets Roadmap for Transforming the Global Food System which analysed over 400,000 companies across the food supply chain and sets out practical steps that investors can take to help achieve a net zero food system by 2050. 

The growing impact of Planet Tracker’s reports includes Uruguay’s recent announcement that it has successfully issued a Deforestation-Linked Sovereign Bond (DLSB) which closely matches the structure Planet Tracker proposed in its July 2021 report and specifically references Planet Tracker’s  recommendations in its published sustainability-linked bond framework. 

Robin commented: “Planet Tracker’s mission is to create significant and irreversible transformation of global financial activities by 2030 towards a financial system that is fully aligned with a resilient, just, nature-positive economy and supports sustainable and just business practices. 

“At the heart of our thinking is the belief that a holistic approach to the planet’s problems is now essential. Climate and Nature can no longer be considered separately. Nature loss, despite the widespread acceptance of its severity, has remained in the shadow of the Climate Change movement as a subject of political and financial concern until more recently – notably the adoption of the Global Biodiversity Framework in December 2022. 

“To win an award for leadership in the sustainability space is a rare honour. This is a recognition of Planet Tracker’s contributions which would not have happened without the hard work and dedication of this amazing team and the fact that we all share a common vision: where the future of the planet is concerned, accepting the status quo is not an option”.

Craig Inches, Head of Rates and Cash, looks at the importance and possible ways of bringing responsible investing to liquidity and short-term fixed income management.

Clean energy technologies are set to drive growth in demand for critical minerals over the next two decades, throwing up a rich seam of investment opportunities – and challenges.

Read this article to understand:

• Why demand for metals such as copper is set to soar
• The obstacles to increasing global supply
• Opportunities presented by the electrification of mining

Short discussion of areas Tesla needs to improve on to stay ahead of the competition

RFI: The Global Stocktake offers a wake-up call for financial institutions working towards long-term climate targets

A Global Stocktake to update on the world’s progress towards goals set down in the Paris Agreement shows notable ambition, although not enough ambition or follow-through to keep on a 1.5° C trajectory. One of the upcoming milestones required to stay on track is for the world to reach peak global emissions by 2025. The nearness of this deadline highlights an important reality in addressing climate change — the world is working on mitigating an issue that will bring catastrophic consequences if unmitigated, and we will only know whether we’re back on target long after the actions we are discussing today may be completed.

The financial sector has a particularly important role in this process because investments made in the next 1–2 years will determine whether global emissions peak in time to preserve the possibility to limiting warming to 1.5° C. A lot of efforts in responsible finance are focused on long-term trajectories, improving data collection quality and Net Zero alignment of high-emitting sectors. Those efforts are important, but will produce less effect if we collectively fail to reach peak global emissions by 2025.

There is also a need to step up the urgency of action by using as much of the financial sector’s assets as possible. A key message from the Global Stocktake is that although the development of cost-competitive renewable energy has progressed quickly (unit costs for some technologies have dropped 80%), it isn’t leading to a reduction in emissions at the scale needed.

The Global Stocktake summarizes the ‘all-of-the-above’ approach with the call to action that “achieving net zero CO2 and GHG emissions requires systems transformations across all sectors and contexts, including scaling up renewable energy while phasing out all unabated fossil fuels, ending deforestation, reducing non-CO2 emissions and implementing both supply- and demand-side measures”.

For the purpose of finance, that means climate action through responsible finance cannot be limited to allocating funding towards renewable energy generation, although that amount should be increased as much as possible. It does not mean only addressing deforestation enabled by the financing of companies working in forests, although that is also important. Addressing both supply- and demand-side measures means looking across a financial institution’s whole set of financing to see how it can contribute to reducing emissions.

That sounds like an obvious point, but much of the work being done in the financial sector is narrowly targeted towards high-emitting sectors’ direct emissions, beginning with efforts to build better data collection systems. Given the urgency of the emissions reductions needed to reach global peak emissions, however, financial institutions should work more broadly and fully across their financing assets, even where data are less available or less reliable.

Methodologies such as that embedded in the RFI Foundation’s financed emissions reports which are based on top-down models may not reach the precision of developing emissions data collections standards, but they do provide broad outlines of what’s needed and do so in a way that is coherent with our top-down understanding of global emissions and the links between supply- and demand-sides. The bigger-picture issue is that broad action is urgently needed and lack of data cannot be an excuse for lack of action.

Want to learn more about responsible finance in Islamic markets & Islamic finance? Subscribe to RFI’s weekly email newsletter today!

KEY TAKEAWAYS

• Environmental, social and governance (ESG) adoption continues to grow in many parts of the world, fuelled by increased client demand and changing regulations.
• ESG integration, the most widely used implementation strategy, focuses on identifying those ESG risks and opportunities that are likely to affect the longer-term value of an investment.
• ESG integration has become a valuable aspect of investment-idea generation, research and analysis, alongside supporting engagement with issuers of equities and bonds.

'This is the seventh year that our firm, Generation Investment Management, has published The Sustainability Trends Report, with contributions in recent years from our new business, Just Climate.

Sustainability has several dimensions, of course, but given the rising urgency of the climate crisis, it is the primary focus of this work.

The report is meant to answer a simple question with complex implications: In the transition to a low-emissions economy, where do we stand?

(You will learn in this report that for every beacon of hope and progress, another signpost makes clear how very far we still have to go.)'

During the latest proxy season, investors voted on many more environmental, social, and governance-focused resolutions at U.S. companies’ shareholder meetings. Yet, these higher volumes of resolutions haven’t resulted in increased support from asset managers. In fact, our latest research on proxy voting shows the opposite is true. BlackRock and Vanguard lowered their level of support for ESG-focused resolutions, lamenting ‘poor quality’ or even ‘redundant’ proposals, which was a key factor in the overall decline in shareholder support. 

This event is organised by UKSIF
03/10/2023 8:30AM
Location: Riverbank House
Address: 2 Swan Ln , London

'Good Money Week is back for 2023, and we're pleased to host you in person in Central London! This is a chance to look at new research, discuss greenwashing and see how the most successful businesses are engaging the retail sector, talking about making green finance accessible to the public and implementing SDR. Space for this event is limited, we will act on a first come first serve basis. Attendance is prioritised for UKSIF members, if you are not a member your ticket may be cancelled without warning.'

Pirelli: Integrated Annual Report 2022

The 2022 integrated annual report1 of Pirelli (“Annual Report”) aims to provide a comprehensive overview of the process of creating value for the Company’s Stakeholders, resulting from the integrated management of the financial, productive, intellectual, human, natural, social and relational capitals. The reporting reflects the business model adopted by Pirelli, which is inspired by the United Nations Global Compact, the principles of Stakeholder Engagement set forth by the AA1000, and the Guidelines of ISO 26000.

See here for more information    |     Pirelli Sustainability

Natura & Co: Annual report - Sustainability data 2022

Natura & Co's Full Annual report 2022 is available to read and download.

In addition, the company has published a standalone documents containing sustainability data. This document supplements Natura & Co's 2022 Annual Report, providing additional data, transparency and accountability on its environmental and social performance across four Business Units (Natura &Co LATAM; Aesop; The Body Shop and Avon International) from 1 January 2022 to 31 December 2022, in line with global reporting frameworks.

 In July 2023, this document was updated to include new sections covering environmental, social & governance / economic indicators.

See here for other Sustainability updates.

While climate targets have been the centre of attention for a while, investors are increasingly focusing on implementation of transition plans. This shift was highlighted in a recent Sustainable Fitch webinar on transition finance where participants were asked to anonymously choose the most important indicator of a credible transition plan. Almost 40% of respondents answered that strong governance and accountability for senior management are the main indicators for the credibility of a company’s transition plan.

The in-depth, ‘Mid-Year Review’ report complements the annual world outlook report, Actionable Insights: Top ESG Themes in 2023 – Global Edition.

The new report draws on comprehensive ISS ESG data, with research and insights from ISS ESG’s financial research and sector leads, climate specialists, and regulatory experts to help investors assess the extent to which key ESG risks and investment opportunities have been actionable so far this year.

From expanding the use of ESG margin ratchets to navigating a new generation of fund classifications, Barings Asset Management explores how it continues to seek value for clients.

In its inaugural report aligned with the recommendations of the TCFD, Barings Asset Management outline both the potential impact of climate-related issues on clients’ investments, as well as on Barings as a corporate entity.

HSBC: Global Commodities

• Commodity prices are down from the recent peaks, but are still high, despite China's slowdown ...
• ... as resources supply remains 'squeezed' by geopolitics, climate change and the energy transition
• ... These forces are re-shaping commodity markets, creating new opportunities and challenges

Clients of HSBC Global Research can access the full report via the HSBC Global Research website or by contacting Wai-Shin Chan

Not long ago, global commodity market observers were scrambling to declare that the upswing was a 'super-cycle'. Now, China's slowdown has shifted the tone, with many concerned about demand weakness. We see the truth as somewhere in between. Commodity prices are down from their peaks, but still generally quite high, as commodity supply remains tight. In our view it's not so much a 'super-cycle', as a 'super-squeeze'. The supply-side is structurally tight due to geopolitics, climate change and energy transition. These forces are creating opportunities, particularly for large renewables, green metal and 'critical mineral' producers, but challenges too, including for energy and food security and adding to sticky global inflation woes.

WHEB: Putting the backbone into a renewable energy future

The International Renewable Energy Agency believe that renewable energy and electrification can deliver 75% of the energy-related CO2 emissions reductions needed to keep global temperature increases “well below” 2°C.

The question is: can the infrastructure cope?

Wind and solar energy sources are both variable and decentralised. In contrast, the existing electricity network was designed around very stable and centralised power generation sources. As a result, innovation and investment are needed to modernise the grid to support a growing share of renewables.

Alongside this challenge, end-use electrification (of transport and heating for example) also increases the demand burden, meaning grid expansion will be necessary alongside modernisation. On the positive side, increased deployment of digitalisation and “smart technology” can enable more flexible demand.

Victoria MacLean explains why we believe that these challenges are underestimated, but how we also see under-appreciated opportunities in this area.

• 'G20 adopts the New Delhi Leaders' Declaration, raising ambition to triple renewable capacity by 2030...
• ...but language around fossil fuel "phase-down" continues to draw criticism
• In our view, the G20 failed to deliver any new commitments that would increase the chances of success at COP28 

Clients of HSBC Global Research can access the full report via the HSBC Global Research website or by contacting Wai-Shin Chan

Curtain closes: The G20 summit, held under India's Presidency with the theme 'One Earth, One Family, One Future', concluded on 10 September 2023. Despite initial scepticism about reaching consensus and the spectre of a deadlock, leaders came together, adopting the New Delhi Leaders' Declaration covering a range of issues including climate change and sustainable development. We examine some of the key takeaways for climate action.

Renewables take centre-stage: In a significant development, for the first time, the target of tripling global renewable energy capacity by 2030 - a goal advocated by the COP28 chief, was endorsed. While the wording was somewhat vague, in our view, this is a strong signal that G20 countries are confident they will achieve this target. As per International Energy Agency (IEA)'s Net Zero Roadmap, tripling of renewable energy capacity is pivotal for attaining net-zero emissions from the energy sector by 2050.

Navigating challenges ahead: The renewable energy sector shines brightly on the green investment horizon. In addition to this commitment, the African Union (a new member of the G20) committed to 300GW renewable capacity by 2030. Meeting these target may, however, be more challenging than many countries anticipate as we set out in our note The Nairobi Declaration: Africa speaks with one voice but can it deliver on its domestic climate ambition?. HSBC analysts have also examined current problems in the offshore wind sector (China wind: Reading across the supply chain after 1H23 results, 11 September 2023). Meeting these targets will require, amongst other things, strong, clear and credible public policy, strong institutions and better coordination and resilience across supply chains.'

FTSE Russell: Closing the gap to 1.5° - What can we learn from Marginal Abatement Cost Curves?

There is a significant gap between the warming implied by G20 countries’ combined decarbonisation policies and the commitments of the Paris Agreement. This study assesses how G20 countries might close this gap and ‘get-back-on track’ for a 1.5°C aligned trajectory by 2030.  

Using Marginal Abatement Cost Curves (MACC), we evaluate the sectors and kinds of technologies which could deliver the required emissions abatement between now and 2030. We do this at the G20 level and for each member state in turn, assuming that abatement occurs where it is most economically efficient. 

What our research means for investors:

This framework allows us to identify the primary avenues (in terms of sectors and technologies) for the G20 and its member states to economically and effectively reduce carbon emissions. It helps to identify the sectors with the greatest potential for emission reduction and suggest the optimal technologies to deploy for high-efficiency abatement. Investors can use this information to contextualise decarbonisation pathways for sovereign issuers.

Notably, we find that G20 countries may already have a significant majority of the tools required to accelerate decarbonisation towards a 1.5°C trajectory. Half of the abatement needed to ‘get back on track’ at the G20 level can potentially be met through ready-to-use decarbonisation technologies like renewables, with a further third of decarbonisation potentially being met by improving energy and resources efficiency.

Points of differentiation:

• The novelty of this approach lies primarily in bringing together two important and unique datasets: 
• First, the Beyond Ratings’ sovereign climate data (specifically the CLAIM methodology) which allows us to calculate country level carbon budgets under specific warming scenarios (e.g. 1.5°C aligned trajectories) and timeframes.
• Second, detailed marginal abatement cost curves (MACC) produced by Enerdata, which offer a sectoral breakdown of the marginal cost of abating emissions for each sector in each jurisdiction
• Bringing together this data allows us to propose how countries might most efficiently ‘get-back-on-track’ for 1.5°C aligned trajectories by 2030, breaking this down by sector and technology type. This is particularly novel for being available at both G20 and member state level.

…is essentially zero. That is what a study by Gilbert Metcalfe and James Stock found for countries that have introduced a carbon tax as high as $130/tCO2e.

Finland was the first country in the world to establish a carbon tax in 1990, followed closely by Sweden and Norway the year after. Today, Sweden has the highest carbon tax in the world at $128.91/tCO2e in 2018 US Dollars. The Swedish carbon tax covers some 40% of the greenhouse gas emissions of the country and generates around $2.6bn in revenue for the Swedish government.

And concerns of industry and anti-climate lobbyists are that this kind of carbon tax will reduce economic growth and cost people’s jobs. At best, they argue, businesses will simply move their factories abroad to countries where they can avoid the carbon tax and then re-import the manufactured goods. This potential regulatory arbitrage is also why the EU is working on plans to introduce a carbon border adjustment tax to prevent that from happening.

HSBC: Climate Investment Update - not on track for 1.5°C 

• 'The Global Stocktake Technical Assessment report shows a 20-24GtCO2e emissions gap in 2030; not on track for 1.5°C 
• It was released just ahead of the G20 and also the Climate Ambition summit (20 Sep) in order to catalyse a response 
• We think the political messaging of the GST will be critical

Clients of HSBC Global Research can access the full report via the HSBC Global Research website or by contacting Wai-Shin Chan

It's technical: On Friday (8 Sep), the UN Framework Convention on Climate Change (UNFCCC) released the synthesis report of the technical dialogue of the global stocktake (GST). The GST is designed to assess progress towards the Paris Agreement's purposes and goals. It consists of three phases (Figure 1). Phase two (technical) concluded at SB58 in June (see The rocky road from Bonn to Dubai, 16 June 2023) and the consideration of outputs will take place at COP28. It is supposed to inform Parties as to the level of global ambition that is required to get "back on track" with a 1.5°C pathway as climate pledges (NDCs) are revised before end-March 2025. It does not present its findings on a country basis nor direct its recommended actions at particular countries or regions.

There's a lot to digest: The synthesis report is a summary of all the inputs and discussions that went on in the first two phases of the GST. Over 170,000 pages of documents were reviewed and there were multiple "focused exchanges of view" and discussions. The report is split into familiar sections of: mitigation, adaptation, means of implementation and support. Importantly, there is a "way forward" with examples of good practices as well as information gaps. There were 17 key findings (Figure 2).

Off-track, how to get back on-track: "There is broad commitment to the Paris Agreement" however, "the world is not on track to meet the long-term goals". The emissions gap (based on current pledges, on a 1.5°C pathway) in 2030 is 20.3-23.9Gt CO2e, which is roughly half of current annual greenhouse gas emissions but "global emissions have not yet peaked". The general view (as summarised in the report) is that "there are now sufficient cost-effective opportunities to address the 2030 emissions gap". Economic diversification is a key strategy. There was also a lot of messaging on just transition, funding for adaptation and loss & damage, scaling climate finance and a recognition that the foundation of sustained climate action is capacity building.

It's political: In our view, the final phase of the GST is the most challenging and political. Essentially, this will determine how ambitious the messaging of "getting back on track" will be. It is especially important as Parties update climate pledges to 2030 - this is a concern given mounting geopolitical tension and a wavering global economy. One key issue to watch will be the response by countries to language buried on pages 20-21 in the GST on "phase-out of unabated fossil-fuels", which is more ambitious than language agreed at COP27. COP28 takes place in the UAE (30 November - 12 December).'

• Detail any changes in ownership, control structure, key personnel or corporate governance culture at the listed and unlisted subsidiaries of the conglomerate.
• Identify and detail any concomitant changes in attitude to broader ESG/sustainability issues.

• Repetition or regurgitation of the corporate’s public statements (e.g. in their integrated or standalone sustainability/ESG reports) without evidence of action.
• UN SDG mapping.
• Carbon emission targets that are not scientifically evidenced.
• A background on companies and their business.

• Analyse the historic standards of corporate governance in the group, as defined by attitude to minority shareholders and broader stakeholders, reliance on political connections for business advantage, and willingness to compromise on best practice governance standards.
• Identify the direction of travel for the group's corporate governance over the last few years; we would like to know whether this is improving, deteriorating or static.
  • What have been the last three governance issues with the group, when did these occur, and how egregious were they?
  • Has the approach of the controlling shareholders changed since then? Evidence of this evolution is important.
  • Has there been personnel changes within the controlling group that might have precipitated a change in governance standards?
  • Have there been any concomitant changes in attitude to sustainability and ESG issues more broadly.
• Study ‘Rep Risk criticism’ of each group and evidence positive change resulting from these criticisms. (We can provide RRR).
• Identify any areas of sustainability/ESG performance in which the group and its subsidiaries are either leaders or laggards. Relevant topics may include but not be limited to labour practices, plastic packaging, emission standards, etc.

• TCC Group Thailand
• Lippo Group
• SM Investments Group
• Charoen Pokphand Group

Carmignac Gestion's 2022 Stewardship report is the second of its kind and details its continued approach to sustainable investing and stewardship. Taking into account investors growing interest for ESG and sustainable investment, Carmignac Gestion launched its ‘S’ fund, Carmignac Portfolio Human Xperience, which completed its thematic range alongside existing Carmignac Portfolio Climate Transition (our ‘E’ fund) and Carmignac Portfolio Family Governed (our ‘G’ fund).

The report details its approach to stewardship and incorporation of ESG considerations into stewarship and sustainable investment.

MainStreet Partners is a specialized ESG and Impact data provider in the field of Green, Social, Sustainability and Sustainability-linked (GSS) Bonds.

This report focuses on the European Taxonomy and the GSS Bond Market and Green Bonds within the Real Estate Sector. 

• Research 19 cement companies’ approach to reducing their environmental footprint.
• No more than a one-page summary on each company.

• Cement alternatives, which are not economically viable or are difficult to scale.
• A background on companies and their businesses.

• An assessment of the future of cement based on a survey of global regulatory approaches and emerging low-carbon alternatives, focussing on any regulatory changes that could adversely impact the cement industry (two pages max.)
• Any changes to the cost of moving cement in the last few decades?
• Identify leaders and laggards in the cement industry (please refer to the company list below). Focus on carbon and water intensity in operations and direction of travel, capital allocation towards reducing future environmental impact, and the impact of carbon taxes on the P&L. A comparison / ranking table or summary would be favourable.
• Feel free to add to this analysis any cement companies not listed below that demonstrate leadership.
• Identify two companies looking to disrupt the cement industry at scale.

New Forests' 2022 Sustainability Report aims to help existing and prospective clients, employees, business partners and wider stakeholders understand the environmental, social and governance (ESG) issues that are important to New Forests and how it performs in relation to these across corporate operations and assets under management. Increasingly, the report is presenting the positive impact created for the business, stakeholders, society and the environment.

The data included in this report has been gathered from several sources, including sustainability metrics reported by assets and New Forests’ internal company reporting. This report focuses on the 2022 financial year, which differs across the regions in which we operate as follows:

• Global business operations (New Forests Pty Ltd): 1 July 2021 – 30 June 2022
• Australia and New Zealand funds under management (New Forests Asset Management): 1 July 2021 – 30 June 2022
• Southeast Asia, US and Africa funds under management (New Forests Asia, New Forests Inc. and New Forests Africa, respectively): 1 January 2022 – 31 December 2022.

Significant events that occurred in the global business operations and in the Australia and New Zealand funds under management between 1 July 2022 and 31 December 2022 are mentioned in the report narrative but not in the data.

See here for more information about the report

Chronos Sustainability has worked with the Principles for Responsible Investment (PRI) to produce a new report –Climate Data and Net Zero: Closing the Gap on Investors’ Data Needs – analysing the data investors need to deliver on their net zero commitments.  The research included a review of the requirements of 17 major investor led net zero and similar climate change frameworks and initiatives, a review of 62 climate data products, provided by 19 data providers and interviews with 16 institutional investors around the world about their climate data needs. 

The headline conclusion is that investors need better climate data to deliver net zero, and offers a series of detailed recommendations on how the climate data market might be strengthened.

The recommendations focus on three main actors: 

• Standard-setters and regulators who are encouraged to support efforts to improve corporate disclosures through requiring companies to (a) report emissions and targets on an ownership (equity) basis, (b) explain changes in GHG emissions and climate targets, (c) describe their strategy to meet their targets, and (d) publish transition plans describing how they intend to align their business models with net zero by 2050. 
• Data providers, who are encouraged to improve the coverage and quality of their products through
  • (a) extending their coverage of the investable universe moving beyond developed market listed equities and investment grade fixed income to emerging market equities, high yield fixed income and other asset classes,
  • (b) providing greater detail on the sources of entity-level emissions data and on the methodologies, data and assumptions used for assessing company performance,
  • (c) providing analysis of forward-looking company climate change data, including f the alignment of a company’s strategy with the company’s emission reduction targets, and
  • (d) developing methodologies that enable investors to report on real-world emission reductions and on net zero alignment.  
• Investors and investor-backed initiatives, who are encouraged to facilitate data comparability through
  • (a) establishing common definitions of net zero and alignment,
  • (b) agreeing a common approach to assessing and reporting fossil fuel reserves,
  • (c) developing common principles to be used by data providers in identifying climate solutions, and
  • (d) agreeing sector and geographic pathways.

Chronos Sustainability: The Changing Climate Policy Landscape

Chronos Sustainability has worked with the Investor Agenda to produce a new report - The Changing Climate Policy Landscape: Considerations for Policymakers and the Needs of Investors - that analyses major domestic climate policy measures (e.g. the US Inflation Reduction Act, the European Union’s Fit for 55 and RePowerEU plans). The report acknowledges the scale of these interventions and welcomes the fact that policymakers are now thinking about how to make climate policy an integral part of long-term economic development.

The report argues that, when governments and policymakers set appropriate policies, it creates an environment where investors can deploy significant capital to help mitigate global warming and protect communities and economies from climate damage and disruption. In turn, this helps governments meet their climate goals and obligations, while protecting the interests of beneficiaries. 

The report identifies eight key features of good climate policy that are necessary to limit global warming to 1.5°C and achieve the goals of the Paris Agreement. These are:  

1.       Clear commitments to action.  

2.       Clear short-, medium- and long-term targets that align with the goals of net zero.  

3.       Policy measures that are comprehensive and at scale.  

4.       Sector-specific policies that are aligned with the government’s commitments and targets.  

5.       The right incentives are provided to encourage investment into ‘green’ activities.  

6.       Social justice and just transition considerations guide the development and implementation of climate policy.   

7.       Transparency.  

8.       Commitments and targets are underpinned by robust transition planning by the public and the private sectors. 

Notes:

The Investor Agenda is a common leadership agenda on the climate crisis that is unifying, comprehensive, and focused on accelerating investor action for a net-zero emissions economy. The founding partners of The Investor Agenda are seven major groups working with investors: Asia Investor Group on Climate Change, CDP, Ceres, Investor Group on Climate Change, Institutional Investors Group on Climate Change, Principles for Responsible Investment and UNEP Finance Initiative. 

Robeco has a long track record of investing sustainably. In many strategies, we prioritize investments in sustainable companies and avoid investing in unsustainable ones. This begs the question: Who does invest in unsustainable companies, and why?

Summary

• SI initiatives surprisingly have little influence on unsustainable ownership
• External pressure can induce lower ownership of poor scoring companies
• Country of origin and support levels for the SDGs are major determinants

JobPost: JP Morgan & Co - Business Manager - ESG Paris / Net Zero Reporting- Sr Associate (New York | CloseDate: Unknown)

JobPost: JP Morgan & Co - ESG Business Manager - Wealth Management Solutions - VP (New York | Close Date: Unknown)

JobPost: Moody's - Associate Lead Analyst – Sustainable Finance (São Paulo | CloseDate: Unknown)

JobPost: S&P Global: ESG Client Engagement Specialist (New York or Toronto | CloseDate: Unknown)

JobPost: Interfaith Center on Corporate Responsibility: Program Associate: Climate Change & Environmental Justice (New York | CloseDate: 15 Oct)

Do you want to make a difference in the transition toward a sustainable economy? Are you interested in a fast-paced and demanding role, working with industry leaders to develop influential and forward-thinking work to shape the future of the investment?

The University of Cambridge Institute for Sustainability Leadership (CISL) is a globally influential institute within the University, working with business, finance, government and civil society to develop leadership and solutions for a sustainable economy.

We are looking for a highly motivated, experienced senior project manager to join the Investment Leaders Group (ILG) within CISL’s Centre for Sustainable Finance.

The ILG is a growing global network of pension funds, insurers, and asset managers with over $9 trillion under management and advice, working to advance the practice of responsible investment. Convened by the Centre for Sustainable Finance, the ILG works with its members to co-create leading actionable research insights. Our research draws on the intellectual breadth of the University and an international network of leading thinkers and practitioners to tackle the most important collective sustainability challenges across investment and the broader financial sector.

The role requires individuals manage multiple workstreams, demonstrating exceptional project management capabilities. This includes the ability to think strategically about project developments, measuring and evaluating research impact, and working with a wide range of stakeholders and external partners.

JobPost: Director, Impact Measurement & Management (IMM) Engagement: Global Impact Investing Network (New York/hybrid | Posted 2 Sept)

JobPost: ISS ESG: ESG Product Manager - Regulatory Solutions (Berlin/Stockholm/Munich/London | 6 Sept)

Contract role (6-12 months, full time or part time)

JobPost: Pyrford International (within Columbia Threadneedle): ESG Operations & Reporting Manager (London | CloseDate: Unknown)

JobPost: UN Global Compact: Project Manager - Sustainable Finance & Reporting (London | CloseDate: 11 September)

JobPost: JPMorgan Chase & Co.: Business Manager - ESG Paris / Net Zero Reporting - VP & Senior Associate (New York / Wilmington | Posted 21 Aug)

Senior Associate role

Vice President role

JobPost: Sustainalytics: Associate, Debt Capital Markets & Sustainable Finance (Toronto | CloseDate: Unknown)

JobPost: S&P Global: ESG Client Engagement Specialist (New York or Toronto | Posted 23 August)