ESG Street Daily Issue from 21 April 2021

The ESG movement needs help from the IMF and World Bank

Last week Norway’s $1.3 trillion wealth fund announced it may no longer invest in assets from the developing world, also known as the “emerging markets,” in order to comply with a new proposal that seeks to tighten environmental and ethical standards in its investments. While cutting off financing to developing countries may increase their portfolio’s environmental, social, governance (ESG) scores, it would be a missed opportunity for the planet. Read more at thehill.com

Drax commits to ESG-linked FX derivative targets with UK banks

Demand for foreign exchange trades linked to environmental, social and governance (ESG) factors is on the rise and a growing number of corporate treasurers are working to lock in hedges that will help prove their green credentials. The latest entrant in the field is UK-based renewable power generator Drax, which signed two ESG-linked FX derivatives agreements with Barclays and NatWest Markets on April 19 covering their respective FX activity – including forwards, swaps and options. Read more at risk.net

Mulberry ramps up sustainability pledges as retailers scramble to boost environmental reputations

Mulberry has become the latest retailer to ramp up its sustainability measures as the spotlight on environmental and social issues has intensified in the wake of fast fashion scandals. The designer accessories brand today announced it will buy back, resell or repurpose any Mulberry bag when it becomes unusable. It has also pledged to achieve net zero carbon emissions by 2035, and will develop the “world’s lowest carbon leather” sourced from organic and “environmentally conscious farms”. Read more at cityam.com

Why Europe is Leaving the US Behind on ESG

North American investors continue to show less interest in taking action and adapting their portfolios in response to climate change in comparison to their European peers, according to a new survey from PGIM. PGIM’s survey – conducted in partnership with Greenwich Associates – polled 101 major investors throughout North America, Europe, and Asia with greater than $3 billion in assets under management. Read more at bankingexchange.com

S. Korea to introduce standardized ESG index

South Korea will launch a standardized environmental, social and governance index as businesses are confused by more than 600 different ESG indices existing home and abroad. The government-envisioned index, which is based on 13 major ESG indexes, includes four main categories -- transparency, environment, society and corporate governance -- and have total 61 subcategories. It is expected to be finalized in the second half of this year. Read more at koreaherald.com

Activists gear up for a fight over green-washing at AGMs

pring is the season for annual general meetings and this year they provide a test of environmental credentials. Activist non-government organisations (NGOs) have tabled ambitious resolutions to several UK-listed companies and they are keen to remind asset managers with voting rights of their stewardship responsibilities to investors and the planet. Barclays (BARC), Rio Tinto (RIO), BP (BP.) and Royal Dutch Shell (RDSB) are subject to resolutions from NGOs seeking ambitious commitments in keeping with the Paris Climate Agreement. Read more at investorschronicle.co.uk

As Nordic banks aim to go greener, lending lags asset management pledges

The greener investment strategies of Nordic banks' asset management units compared with their lending businesses underscores a sustainability gap that lenders will want to close to meet their climate targets and to manage reputational risk. Meanwhile on the banking side, sustainability ambitions are lagging. "Within lending we only see marginal improvements and the policies are written in a way that financial support to existing fossil fuel clients will not really be stopped,". Read more at spglobal.com

The hidden challenge of net zero

For the global climate challenge, 2020 ended with great promise as both China and the United States joined the rest of the global community in setting a timeframe to reach net zero greenhouse gas emissions. 2021 has begun on a positive trajectory, as the shift to replacing fossil fuel electricity generation with renewable sources has continued with great speed and even seen the global oil majors actively participating in renewable energy auctions. Read more at theasset.com

Institutional investors urge banks to step up climate action 

Institutional investors have called on major banks to turn up the heat on climate issues and set enhanced net zero targets for 2050 or sooner.Through the Institutional Investors Group on Climate Change (IIGCC), investors urged banks on Monday to align financing with net zero emissions, scale up green finance, and withdraw from projects that don’t align with Paris goals for a transition away from a carbon-dependent economy. Read more at funds-europe.com

SFDR next step ‘fraught with challenges’ for asset managers

The next stage of the Sustainable Finance Disclosure Regulation (SFDR) could prove to be a major stumbling block for asset managers as they now need to prove their Article 8 and 9 products deserve to sit in those categories.The SFDR came into effect on 10 March with asset managers having to decide whether their fund fits into either Article 6 – regular, Article 8 – light green that exhibits certain sustainable characteristics or Article 9 – dark green that look to reduce carbon emissions. Read more at etfstream.com