Investor coalitions

Following the publication of its Climate Transition Plan, Centrica plc will hold a webinar on Monday 27th January 2025, between 11am-12noon (UK).

The session will discuss the key aspects of the plan, and will include time for Q&A.

Presenters:

• James Rushen, Group Head of Environment
• Fraser Jamieson, Group Head of Investor Relations, 

Higher interest rates and policy uncertainty have resulted in negative sentiment towards clean-tech sectors. This is creating a compelling opportunity for a countercyclical, diversified source of returns.

Although I currently find 2025 to be largely unpredictable, I feel pretty comfortable forecasting that:

• A gazillion hours will be spent casting and re-casting legislation to unpick or recreate (or not?!) regulation on sustainability disclosures by companies within Europe
• A bazillion hours be spent tracking, writing and reading about this process
• A squillion hours will then be spent (by companies) developing and redeveloping the systems required to implement the results of the process
• 96.3% of this time will be completely wasted
• … when all each company needs to do is to spend 20 hours and no money in direct communications with the investors that actually matter to them

I am obviously being a bit provocative but I have to ask: Why is the EU trying to introduce an omnibus when everyone else in the world is using Ubers?

(I must state at this point that I am only writing about investors and not about other stakeholders. In my capacity as a consumer, I will certainly be comparing Carrefour and Casino's CSRD-compliant reports before deciding where to buy brie and apricots on my next holiday to France).

Fundamental active investors use Ubers

A taxi is 'point-to-point'. Similarly, the relationship between a fundamental active investor and a the company that they invest in is focused and specific:

• The investor knows what information they need they need from the company and they can ask the company directly for it
  • (This typically extends to a handful of financially-material sustainability factors and a small number of simple datapoints - which are largely used for compliance and reporting purposes)
  • Importantly, the financially-material factors differ from individual company to individual company. Equally, most of the information that is relevant to investment decision-making lies outside the company's control anyway.
• The company can easily learn the names of the portfolio managers and analysts at the investors that matter to them (and the research providers that influence these analysts and can target their information needs specifically
  • Institutional investors differ from most other stakeholder groups as they are few and individually-identifiable

The rationale above is why smart and progressive companies are now planning their schedule of sustainable investor-facing presentations and meetings for the year ahead.

Basically, these companies are behaving - in respect of sustainability - in exactly the same way as they behave in respect of other investor communications:

• Identify target investors and their needs
• Shape messages
• Communicate directly
• Repeat

The 20 hour / no cost 'Uber' solution

My time estimates for organising a once-a-year sustainability-focused update for investors - via Zoom - on your firm's sustainability exposures and responses are:

• 2 hours: To identify the investors and analysts that are relevant to your firm
  • Tip: Start with your largest 20 investors and find out the sector coverage analysts at each.
  • This can be done for free using the SRI-Connect / Directory
• 2 hours: To engage your team internally
  • Tip: You'll need to engage the Head of IR & the Head of Sustainability / CSR (+ perhaps a couple of technical specialists)
• 1 hour: To set up a webinar presentation on Zoom
  • This should actually 5 minutes but you might have forgotten your password or need to double check what settings to use for a group event etc
• 1 hour: To write an invitation to the webinar
  • This should be super-short - just what (topics), when and who - no fluff. (Investors have too much in their in-boxes. A 5-line email is better than a 10-line email.)
  • You can also advertise it to investors - for free - by posting details in SRI-Connect / Market Buzz
  • … and don't forget to add it to the IR Events page of your own website
• 3 hours: To shape the presentation
  • The best way to do this is to combine your core sustainability messages with your latest corporate strategy presentation
  • We're always happy to give feedback (at no charge) to companies doing this - just so they can get an 'analyst's eye' view on it
• 8 hours: To chase investors
  • This is the annoying bit (… but it can be outsourced at low cost).
  • You have to get on the phones and on the emails to investors and analysts to ensure that your invitation reached the right person and that they have made space in their diary for it and etc. Don’t underestimate this step. It makes the difference between a poorly-attended non-event to an actively
• 2 hours: To deliver the webinar
• 1 hour for each member of your team
• 1 hour: To write up notes on which investors participated and what they were interested in … so that you are well-informed next time you are in contact with them

The advantages of direct contact with (and feedback from) the investors and analysts that hold companies' shares (over reporting into the void) should be self-evident … and are confirmed by the fact that once companies start with this approach, they tend to repeat it on an ongoing annual basis.

Most significantly: This is the way that companies communicate to mainstream investors. Why should sustainability be any different?

So, why do people think an omnibus is still needed?

Given how simple and productive (for both companies and investors) it would be to model sustainable investor communications on mainstream investor communications, we have to ask why this value chain has - instead - adopted an indirect approach that focuses on investors' supposed need for granular comparable data.

My best analysis is that the expectation that investors need granular comparable data is based on a number of deep-rooted and fundamental misconceptions about the use of information within sustainable investment decision-making

• The myth that sustainable investors use (statistical) quants investment techniques
  • … which would certainly require comparable granular data
  • … but there are a vanishingly small number of investors using such techniques - any reader should feel free to challenge this point by naming even one.
• The myth that investors make comparisons between companies on fundamentals
  • … which would require comparability at a granular level
  • … but they don't. They make comparisons based on ratios.
  • Nobody compares GSK's market share in oncology with Merck's market share in neuroscience. The different denominator makes such a comparison ridiculous.
  • It would be equally ridiculous to try to compare the emissions to water of these two companies
• The use of reporting and compliance to try to force action-taking by investors
  • Reporting and compliance always favour quantitative data over qualitative information
  • … but … if the reporting and compliance requirements don't actually cause the investment decision-making to happen … they get left behind as 'stranded' data requirements
• An asymmetric focus on risk over return
  • … which appears to be pervasive and deep within the sustainability mindset and - in an investment context - is exacerbated by the market dominance of ("just don't take our toys") passive investors
• Knee-jerk data requests and data-centred business models
  • … whereby it is the easiest thing in the world for an investor to ask for more data (for engagement purposes or speculative investment purposes) and for data-providers to claim investor use (on scant or spurious evidence)

Data junkies: Uncurable … but ignorable

This was supposed to be a short sharp blogpost based on the observation of a simple parallel.

It has turned into a monster. If you're still with me, thank you, sincerely! I feel I owe you a conclusion.

I think it is simply this:

"I couldn't help it," says the scorpion. "It's my nature"

• Regulators will regulate.
• Data collectors will gather data.

The dynamics of granular, comparable data collection within the sustainable value chain are deeply rooted and will drive forward.

But companies don't have to rely on the omnibus. Ubers are available to help them reach their investor destinations more directly and (in this case) more cheaply … and self-driving (via AI) is on the horizon.

Key Insights

• Sustainability ROI extends beyond short-term financial gains by capturing long-term financial, environmental, and social value.
• Discussions on the value of sustainability will continue, making it essential for companies to measure sustainability ROI.
• Accurately measuring sustainability ROI can be challenging: corporate sustainability teams should start the process by aligning their language with that of the corporate finance function.
• To fully capture sustainability ROI, companies should account for both tangible (easily quantifiable) and intangible (nonphysical, with harder-to-quantify monetary value) benefits, including those that may not be immediately obvious (hidden benefits).
• Few companies are capitalizing on the power of authentic and transparent sustainability communication to showcase their sustainability results and gain internal and stakeholder support for sustainability.

"The Anthropocene Fixed Income Institute (AFII) presents the ‘Deforestation Debt Universe’ – an expanded resource designed to bring greater transparency to the financial risks associated with deforestation for fixed income investors.

We have identified over 100 issuers, with nearly $1.3trn of debt outstanding, that have high to critical exposure to one or more of the commodities that are driving deforestation. This group will be subject to ongoing analysis by the AFII as part of our efforts to highlight sustainability-related financial risks to bond holders.

The Deforestation Debt Universe is built on data from trusted sources Forest IQ, Forest 500, and ZSL SPOTT. The issuers covered are significantly exposed to deforestation risk through the commodities soy, palm oil, beef, leather, timber, and pulp & paper."

Read this article to understand:

• Why investors should care about COP16
• Key outcomes and outstanding challenges following the conference
• What we see as the implications of these developments for investors

Companies increasingly view ESG initiatives as a competitive advantage, making growing investment in compliance, third-party solutions, and AI integration to better navigate complex regulatory and strategic landscapes.

With geopolitical tensions, economic uncertainties, and environmental crises as a backdrop, many businesses are increasingly prioritizing their Environment, Social & Governance (ESG) initiatives to help them navigate this complex landscape.

To shed further light on this, the Thomson Reuters Institute has published its annual State of Corporate ESG report, which offers a comprehensive look into how companies are adapting to new challenges and opportunities in the ever-shifting world of corporate ESG requirements and activities.

The recent trend towards global ESG reporting standardization has likely peaked to be replaced by jurisdictional heterogeneity amid an increasingly polarized geopolitical landscape. While Europe and other regions continue towards a highly aspirational net zero economy, reinforced through mandatory disclosure requirements and a regulatory agenda targeting operational and supply chain sustainability, the U.S. is redoubling on shareholder primacy, an about-face that gained momentum in 2023 and 2024 following politicized pushback on ESG investing from conservative lawmakers.

This is reshaping how businesses engage or disengage with ESG principles. With 2025 shaping up to be a year of extremes for ESG, there are five fronts for businesses to monitor:

1. Trump Administration and the U.S.
2. “ESG” and the battle over the next umbrella term
3. Follow the money and not the terminology
4. The culture wars rage on especially around DEI
5. How should business respond to the bipolarity?

Investor appetite for sustainable funds continues to wane amid ESG backlash.

In 2024, US sustainable funds experienced increased outflows, rising to $19.6 billion from $13.3 billion in 2023. Returns lagged those of conentional peers, political scrutiny persisted and greenwashing concerns endured.

Morningstar’s annual report examines U.S. sustainable fund inflows and performance. With specific fund flows data, asset managers can assess the competition and find pockets of opportunity.

Measuring carbon emissions is vital for net-zero goals. This paper defines corporate emissions types, highlights sector differences & reliable metrics.

Accurately measuring carbon emissions is crucial for achieving net-zero goals. This paper defines the types of corporate emissions, details their characteristics across countries and sectors, and emphasizes the need for reliable metrics in investing.

RFI Foundation: Investing in responsible finance will pay dividends

Looking ahead in 2025, the growing acknowledgement of sustainability as a key issue, both globally and within OIC markets, has pivoted from expanding to new areas of sustainability towards working out ways to implement what is already on the table. Institutions that take the challenge seriously now stand to come out ahead as the impacts of climate change and the climate transition grow.

Regardless of the speed of implementation, the upcoming adoption of IFRS sustainability reporting standards will force financial institutions to prepare to incorporate the resulting disclosures into their decision-making processes. The standard-setting landscape for sustainability has experienced some consolidation with the formation of the International Standards Setting Board (ISSB) and the launch of the IFRS Sustainability Reporting Standards.

Creating a global ‘baseline’ standard, even if not universally adopted, has opened the way for other standards that interact with it to be updated. The GHG Protocol, whose guidance has provided the basis for corporate emissions reporting, is set to be updated, as is the Science Based Targets Initiative (SBTi) standard on emissions reduction target-setting and the ISO Standard on Net Zero. Additional guidance is developing around nature-based data, although not without controversy.

Financial institutions will be impacted particularly by updates to methodologies around financed emissions, which the Partnership for Carbon Accounting Financials (PCAF) is set to update to expand the types of financing assets covered. Financial institutions’ financed emissions reporting will also be affected by changes in disclosure guidance applicable to their customers.

Many companies use the GHG Protocol for their emissions reporting since it has become integrated into the IFRS Sustainability Reporting Disclosure frameworks. There are some points of discontinuity between the GHG Protocol standards and the emissions that PCAF expects to be included in financed emissions totals. From the perspective of financial institutions that have committed to PCAF, the GHG Protocol changes could make their work easier, although any changes would still need to be separately adopted by the ISSB before they impact the mandatory global climate reporting landscape.

The reporting is just a small part of the sustainability priorities for financial institutions. These institutions are generally involved in disclosure as a way to stay ahead of new reporting mandates rather than using it to achieve their sustainability goals. These goals are often connected to staying on the right side of issues like climate-related risks and opportunities.

At times, climate disclosure metrics and climate action can work at cross purposes for financial institutions. Some research has found that banks that scored the most poorly on ESG offered more concessions to attract borrowers with high ESG scores. Even looking at the financed emissions of banks’ entire portfolios may not overcome the fact that they can only measure historical data and may not be good guides to the prospects for financial institutions to achieve their climate goals, or to do so in a way that addresses both environmental and social impacts.

Within the area of climate mitigation, social impacts have gained traction with the increased prominence given to Transition Plans, and agreement on the need for them to realise a Just Transition. The commitment to Just Transitions has become a common part of the sustainable finance lexicon. Most of the effort on transition planning has focused on how to evaluate ‘credibility’, with far less effort taken to define what makes them ‘just’.

The changes to the sustainability reporting framework will impact all financial institutions to varying degrees depending on how large they are and the markets they mainly operate in. For financial institutions in OIC markets, much of what distinguishes between market leaders and market laggards is the degree to which they have set targets or integrated different sustainability issues into their governance frameworks.

With a shift deeper into the implementation of sustainability in core financing operations, as well as various policy and physical risk shocks, the points of differentiation between different institutions are likely to become much clearer.

Being caught off-guard by policy developments needed to achieve national carbon targets, or not anticipating physical climate risks, or ignoring stakeholder involvement in transition plan implementation, will have tangible impacts on the bottom line and on financial institutions’ relationships with their stakeholders.

Want to stay updated about the implementation of responsible finance in OIC markets & Islamic finance? Subscribe to RFI’s free email newsletter today!

abrdn: Climate Scenario Analysis: Steering through transition delays

Is it time to reassess your investment strategy amid climate policy delays and clean technology advances?

The COP29 climate talks in Azerbaijan last month serve as a reminder of the critical role played by policy in shaping climate scenarios and their investment implications. 

For the past four years, climate scenario analysis has helped us answer many of the questions around the investment implications of climate transition and how it can affect an investment portfolio. Our latest update is now available. 

Did you know, globally, industrial processes account for 30% of total energy consumption and emit around 9 gigatonnes of CO₂ annually - roughly one-quarter of global CO₂ emissions? In this commentary, Chloe Tang explores how industries can transition to cleaner, more sustainable processes and how the WHEB strategy is invested in the companies helping this to happen. 

When it comes to climate change mitigation, few technologies are as controversial as carbon capture and storage (CCS). Most climate scenarios expect the technology to grow extremely fast until 2040 and the fossil fuel industry likes to point to CCS as their preferred way to reduce greenhouse gas emissions. Critics, on the other hand, point to the high failure rate of pilot projects (historically 88% of projects failed to meet their targets) and the slow rollout to brand CCS as little more than wishful thinking that distracts from the effective climate action that could be taken now.

So, I am glad that Tsimafei Kazlou and his colleagues have published a detailed study of the potential rollout of CCS in Nature Climate Change. They emphasise that other low carbon technologies like wind, solar, and nuclear all had high failure rates and slow rollouts in the beginning. But as engineers and businesses climbed the learning curve, failure rates dropped a lot and rollout accelerated faster than anyone anticipated. Indeed, to this day, analysts tend to underestimate the growth of renewables like wind and solar.

To estimate the potential future pathways of CCS development, the researchers applied these lessons to CCS. 

... read more ... on future pathways of CCS development

The Root Cause of Nature Loss: Forests, Why They Matter, and How to Assess Deforestation Risk in Investment Portfolios through Nature-Related Data

ISS STOXX's Natural Capital Research Institute's publishes a report to answer the question:

How are global institutional investors exposed to deforestation risks in their investment portfolios, and how can they assess and mitigate those risks—and related impacts and dependencies—while capitalizing on nature-based opportunities?

This roadmap was developed by RMI in collaboration with The Bezos Earth Fund. It describes an action-oriented perspective of what is needed to rapidly scale technological greenhouse gas removal (GHGR).

To do this, the roadmap sets ambitious goals for both carbon dioxide removal (CDR) and non-CO2 greenhouse gas removal.

• CDR: Reach 10 Gt CO2/y of durable technological removals by 2050.
• Non-CO2 GHGR: Advance the science of non-CO2 removal such that decisions can be made by the early 2030s about future development and deployment.

Download report directly

• MSCI: Frozen Carbon Credit Market May Thaw as 2030 Gets CloserThe size of the global carbon credit market remained on ice last year, at around USD 1.4 billion. Credit demand (i.e., “retirements”) was pretty much flat on 2023 while average spot prices fell 20%.
• However, there are some signs of a coming thaw, including the continuing rise in the number of companies setting ambitious climate commitments and a number of positive policy and market developments.
• As a result, the market could rise significantly in the coming years, creating potential new investment opportunities. Our projections suggest it could be worth USD 7 to 35 billion by 2030 and USD 45 to 250 billion by 2050.

Read blogpost via here

Authors

• Guy Turner
• Jamie Saunders
• Utkarsh Akhouri
• Jamie Lambert

𝐁𝐚𝐜𝐤𝐠𝐫𝐨𝐮𝐧𝐝

The execution of Nigerian activist and author Ken Saro-Wiwa alongside eight other Ogoni leaders in 1995 marked a pivotal moment in corporate accountability and environmental justice. Saro-Wiwa had led the Movement for the Survival of the Ogoni People (MOSOP), accusing Royal Dutch Shell of environmental degradation in the Niger Delta, facilitated by its joint venture with the Nigerian National Petroleum Corporation (NNPC).

Oil spills, gas flaring, and pollution of water and farmland affected the Ogoni people’s livelihoods, prompting protests against Shell and the Nigerian military regime at the time. The global spotlight turned to Shell as activists argued the company was complicit. This case became emblematic of the challenges corporations face when operating in politically unstable regions where host governments exert significant influence over operations.

𝐆𝐥𝐨𝐛𝐚𝐥 𝐚𝐧𝐝 𝐈𝐧𝐯𝐞𝐬𝐭𝐨𝐫 𝐑𝐞𝐬𝐩𝐨𝐧𝐬𝐞

The global reaction to the Ogoni crisis was swift. Western governments sanctioned Nigeria, and NGOs like Amnesty International condemned Shell’s alleged role. For investors, the case was a wake-up call. It underscored the financial and reputational risks of neglecting ESG responsibilities; the world was becoming more visible with no hiding place for corporate controversies.

𝐒𝐡𝐞𝐥𝐥’𝐬 𝐈𝐧𝐢𝐭𝐢𝐚𝐥 𝐑𝐞𝐬𝐩𝐨𝐧𝐬𝐞

Institutional investors and advocacy groups such as PIRC (my employer at the time) began calling for greater corporate transparency and accountability. The incidents in the Delta prompted broader shareholder activism, paving the way for ESG considerations to become integral to investment strategies. In the aftermath, Shell sought to repair its reputation through a series of initiatives. The company increased its transparency, committed to environmental remediation efforts, and launched community investment programs. Legal settlements, including a $15.5 million payout to the families of the Ogoni Nine in 2009, were aimed at addressing grievances.

Despite these efforts, Shell has faced significant on-going criticism. Environmental clean ups were slow, and local communities remained sceptical of the company’s intentions. Shell cited its limited autonomy within the joint venture structure with the NNPC, noting that political interference often complicated its operations. This highlighted the difficulties Western corporations face when partnering with state-controlled entities in regions with unstable governance. Shell’s own data show that spills and sabotage remain rampant.

𝐖𝐡𝐲 𝐭𝐡𝐞 𝐂𝐚𝐬𝐞 𝐖𝐚𝐬 𝐚 𝐓𝐮𝐫𝐧𝐢𝐧𝐠 𝐏𝐨𝐢𝐧𝐭

The Saro-Wiwa case was a landmark moment for ESG investing in my view, illustrating how environmental and social risks could translate into financial and reputational harm. It heralded the importance of stakeholder engagement, particularly for corporations operating in high-risk regions. The issue also demonstrated the growing influence of civil society and activist shareholders in holding companies accountable. Shell’s experience in Nigeria became a case study in the need for robust governance frameworks and proactive management of ESG risks, especially in politically sensitive contexts.

𝐏𝐫𝐨𝐠𝐫𝐞𝐬𝐬 𝐚𝐧𝐝 𝐂𝐫𝐢𝐭𝐢𝐜𝐢𝐬𝐦𝐬 𝐎𝐯𝐞𝐫 30 𝐘𝐞𝐚𝐫𝐬

Over the past three decades, Shell has taken significant steps to improve its ESG credentials. The company has prioritised offshore exploration, reducing its exposure to the challenges of onshore operations in the Niger Delta. Shell has also made substantial investments in renewable energy. However, critics argue that Shell’s planned divestment from onshore operations represents an attempt to distance itself from unresolved environmental and social issues. Amnesty International and other organisations contend that local communities continue to bear the burden of decades of pollution and inadequate remediation efforts.

𝐂𝐡𝐚𝐥𝐥𝐞𝐧𝐠𝐞𝐬 𝐨𝐟 𝐎𝐩𝐞𝐫𝐚𝐭𝐢𝐧𝐠 𝐢𝐧 𝐂𝐨𝐦𝐩𝐥𝐞𝐱 𝐏𝐨𝐥𝐢𝐭𝐢𝐜𝐚𝐥 𝐄𝐧𝐯𝐢𝐫𝐨𝐧𝐦𝐞𝐧𝐭𝐬

Shell’s operations in Nigeria highlight the difficulties multinational corporations face when navigating politically complex environments. The joint venture with the NNPC meant that Shell often had limited control over key decisions, as political and military forces influenced the venture’s priorities. Corruption, regulatory uncertainty, and local conflicts further complicated efforts to implement sustainable practices. For investors, Shell’s experience in Nigeria offers a cautionary tale about the importance of thorough due diligence and the need to understand the interplay between political forces, local communities and corporate operations.

𝐋𝐞𝐬𝐬𝐨𝐧𝐬 𝐟𝐨𝐫 𝐈𝐧𝐯𝐞𝐬𝐭𝐨𝐫𝐬

The legacy of the Ogoni crisis is a reminder of the importance of integrating ESG considerations into investment decisions. Companies operating in high-risk regions must adopt transparent reporting, engage meaningfully with stakeholders, and demonstrate a long-term commitment to addressing environmental and social issues. The investor community may like to reflect on the 30th anniversary of Ken Saro-Wiwa’s execution; the lessons from Shell Nigeria and the consequences for a brave group of activists that remain deeply relevant. For multinational corporations and their investors, the journey toward responsible and sustainable business practices is ongoing, with the Niger Delta serving as both a warning and a continuing call to action.

The US SIF Trends Report 2024/2025 provides a comprehensive understanding of the trends driving $52.5 trillion in US assets under management (AUM), including $6.5 trillion explicitly marketed as ESG or sustainability-focused investments.

An analysis of the ‘net-zero’ commitments of 19 major European banks that have signed up to the NZBA.

Letter From GIIN CEO and Co-founder, Amit Bouri

If there’s one thing that’s certain about the year ahead, it’s that it will be a year of change. Voters around the world have rejected incumbent governments and demanded something different in the U.S., Germany, Botswana, the U.K., Japan and beyond. Times of upheaval are also times of opportunity, and I believe private capital will play an increasing role and find new avenues to improve lives and protect our planet. Here are seven trends to watch out for as we enter 2025:  

1] A renewed focus on the working class and poor

Governments around the world are under pressure to deliver for their constituents. People are demanding access to quality jobs, economic opportunities and a liveable environment. Building widespread financial stability will be a critical goal, and will involve improving access to financing, increasing the affordability of basic needs like housing, and building wealth through structures like worker-owned businesses. Improving quality of life will also mean breaking down historic inequities, from urban to rural environments, and giving people the means and opportunity for a better life. While many impact investors have already been actively investing towards these goals, governments will be looking to mobilize more private capital for these solutions.  

2] Emerging market investing getting more global attention

Many countries from Indonesia to Brazil to Nigeria still have their growth stories ahead of them. The development of these economies is critical, and must happen in a way that ensures social equality and a healthy planet.

...

Read more including:

3] A growing demand and supply for catalytic capital 
4] Continued interest in blended finance
5] An expanding impact investing market in Asia
6] Climate solutions rising on the agenda
7] The need to nail the narrative

Key Takeaways

• Climate Risks and Returns
  Climate physical and transition risks have non-negligible impact on global economy, the broad consensus on climate impact also suggests that climate change may play a role in asset pricing and potential investment returns.
• Robust Climate-Aware Capital Market Assumptions
  Given the likely impact of climate risks on asset class returns and risk profiles, we believe it is necessary to develop robust Climate-Aware Capital Market Assumptions (CMA) for use within strategic asset allocation
• Defining Objectives, Finding Solutions
  Climate-Aware CMAs can be an important tool in helping achieve climate-linked investment objectives such as developing net-zero and climate-resilient investment solutions.
• New Asset Allocation Frontiers
  Climate-Aware CMAs can provide insights on efficient allocation frontiers and help build robust portfolios that mitigate climate risks and may have the potential to capture certain upside opportunities resulting from the climate transition.

S&P Global: Big Picture for Sustainability in 2025: Secondary Perils and Protection Gaps

Insured losses from natural catastrophes globally have topped $100 billion in each of the past three years and, thanks to hurricanes Helene and Milton, look set to do so again in 2024. Contributing factors to these high numbers include growing populations in catastrophe-prone areas and rising insured property values because of economic inflation. In hurricane-prone Florida, litigation is pushing up claims costs.

The El Niño-Southern Oscillation, a recurring natural climate pattern, has a big influence on the strength and location of tropical cyclones.

Sustainability has always been about more than just reporting. In this episode of The Pulse by GRESB, our speakers dive into the important theory of change behind sustainability reporting. Tune in as they discuss key topics including the industry’s outlook for 2025 and the years to come. Listen to the episode featuring:
 
Tyler Guthrie (host)
Director, Marketing and Communications
 
Chris Pyke
Chief Innovation Officer

Developments in Artificial Intelligence (AI) and machine learning have led to the creation of a new type of ESG data that do not necessarily rely on information provided by companies.

This paper reviews the use of AI in the ESG field: textual analysis to measure firms’ ESG incidents or verify the credibility of companies’ concrete commitments, satellite and sensor data to analyze companies’ environmental impact or estimate physical risk exposures, machine learning to fill missing corporate data (GHG emissions etc.).

Recent advances in LLMs now make it possible to provide investors with more accurate information about a company’s sustainable policy, innovation or supply chain relationships, or to detect greenwashing.

We also discuss potential challenges, in terms of transparency, manipulation risks and costs associated with these new data and tools.

2024 concluded as another annus horribilis for climate action, with COP29 blowing “hot air”, reinforced geopolitical tensions overshadowing the climate crisis, and the re-election of Donald Trump in the U.S. We only have a couple of years left before spending the totality of the +1.5°C carbon budget. How will the recent political changes and global geopolitical tensions impact the transition?

The energy transition is not a question of ‘if’, but of ’when’ and ‘how’. Climate change is a physical reality, as seen in the recent deadly floods in Spain. Failing to act now means paying a higher price later, and forcing countries to adapt with far greater socioeconomic consequences.

How to ensure that the clean power target enables decarbonisation of heat and transport while avoiding lock-in with high electricity prices.

Decarbonising the economy is a central priority for the new Labour Government, which has adopted a mission-driven approach to deliver Clear Power by 2030. While this is a world-leading objective there is a substantial risk that it could put the UK on a high-cost transition path that could slow down the decarbonisation of heat and transport. 

In fact, unless renewables are prioritised, choosing the wrong path to Clean Power by 2030 target could lock in high electricity prices for the long term. 

The costs to retire certain assets- asset retirement obligations (AROs)- are typically recorded on the balance sheet and can be the source of significant cash outflows when settled.  Refineries carry hefty AROs, but because of prevailing interpretations of accounting disclosure standards, many refining asset AROs are not included on the balance sheet today.

That said, refineries are increasingly exposed to the energy transition. Declining demand for fossil fuels and increasing growth in cleaner alternative energy and fuels (e.g., the electrification of vehicles) threatens to render refining assets unprofitable and obsolete, forcing the early retirement of these assets.  Nevertheless, refining companies are not “accounting” for the huge demand substitution challenge. The effect of early closures and asset stranding will be ARO acceleration and the incorporation of these significant liabilities onto the balance sheet....

First published in 2012, the Global Sustainable Competitiveness Index (GSCI) measures the competitiveness and sustainability of countries. It is the most comprehensive measurement of country performance available.

The GSCI is based on 216 quantitative indicators, derived from international organisations (World Bank, the IMF, various UN agencies. ). The focus on quantitative indicators ensures the evaluation of performance and not systems, and excludes potential subjectivity from the outset.

All indicators are evaluated as-is, and analysed for trends using, amongst others, deep-learning AI tools the clean data and analyse correlations to refine the evaluation process. The outcome is a comprehensive view of strengths and weaknesses for each country, as well as indication of the country’s future direction and potential.

"Each year, we monitor over 40 metrics across five indicators that track the development of the Islamic finance industry by country and globally. The Islamic Finance Development Indicator (IFDI) records the pulse of this market.

Since the start of this decade, the world has been caught in a chain of changes and transitions,
first with the onset of a pandemic then the rapid advances in artificial intelligence (AI), both of which are resulting in sweeping changes across multiple industries. In 2023 alone, we faced conflict in the Middle East, a banking crisis in the US that while contained was not without its consequences, and an earthquake hitting Türkiye and Syria.

The year also saw a turning point in inflation, a sign that the monetary tightening cycle is winding down. The discussions now have turned towards timing and the magnitude of rate cuts.

"In this paper, we focus on corporate green bond issuances to show how this segment has become one of the most important parts of the ESG-labelled fixed income universe. This paper is organised into three sections.

The first section examines the current market landscape and specifically the characteristics of corporate green bonds. The second section explores the distinct yield characteristics of green bonds relative to conventional bonds. The final section assesses how standards are being developed to enhance the integrity of green debt instruments."

"In our third paper in this biodiversity series we explore how nature-related standards and frameworks aim to improve investor understanding when it comes to nature.

The paper is organized into four sections:

• The first section examines the steps investors are taking to understand and assess nature-related risk and opportunities at a portfolio level.
• The second section explores the efforts underway to address the challenges faced by investors to integrate nature-related risks and opportunities.
• The third section then examines some of the tools available for investors to assess the materiality of nature at a portfolio level.
• Following the conclusion, the appendix provides an overview of how the main nature-related standards and framework compare."

For the energy transition to be successful, adding clean energy to the electricity grids is essential. Mike Appleby highlights the £60 billion that National Grid will be investing in this infrastructure over the next five years and why this company’s equities and bonds have been added to the team’s UK equity funds and SF Corporate Bond Fund.

Chris Foster and Simon Clements talk about finding a number of new potential investments on their visit to Japan and subsequently adding Advantest to their global equity funds.

Venture Capitalist Sues Paypal Over Funding Program for Minority Startups

Asian-American fund manager accuses payments company of discrimination by ignoring her application under $100 million initiative. 

Climate and nature will remain the main focus for Robeco’s engagement work in 2025, with two new themes focusing on transition and shareholder rights.

Summary

• Deforestation and diversity themes to cover commodities and human capital
• Two new engagement topics for transition minerals and shareholder rights
• Focus on deepening existing themes rather than launching a raft of new ones

A new paper from BNP Paribas Asset Management, “Impact of ESG Objectives on a Portfolio”, recently published in The Journal of Portfolio Management, details a framework for adding environmental, social, and governance objectives to passively and actively managed equity portfolios so that the impact of the ESG criteria on risk and return is minimised.  

For many investors and asset managers, extra-financial objectives based on ESG factors have gained significant prominence among the characteristics of the funds they invest in. As a measure of that importance, there is a growing array of regulations that govern the ’non-financial’ objectives of funds.

"The following is an extract from our 2025 global outlook.

Pre-election rhetoric left little room for doubt regarding the incoming president’s view of pro-climate policies, with Trump promising to “terminate” funding for what he called the “Green New Deal”.

In contrast, we believe the eventual impact of the Republican administration on the clean energy market will be highly nuanced.

The details will matter, of course. Still, there are practical as well as political complications that could significantly blunt Trump’s stated ambitions...."

Population movements are, in our view, a critical and often under-appreciated driver of potential relative real estate returns.

The Covid-19 pandemic and the associated acceleration in working from home benefited Sunbelt markets at the expense of coastal Gateways. While the near-term prospects for employment growth in Sunbelt markets remain strong, over the longer term we expect this relative strength to moderate, with climate risk an increasingly important factor.

Recent extreme weather events....

nb Climate Asset Management is an independent investment firm co-owned by HSBC Asset Management (HSBC AM) and Pollination.

Head of Middle East & Northern Africa, Responsible Investment Ecosystems Close 25 Jan

Head, Sustainability Initiatives Close 5 Jan

JobPost: PRI - People Partner (Projects & Initiatives) & People Partner (Engagement) (London | Closing: 8:00pm, 5th Jan 2025 GMT)

People & Culture Team
 
Employment Type Full time Please note, where PRI has an office there is an expectation to work a minimum of 2 days per week 
 
Location  Hybrid · London, UK   
 
Seniority Mid-level
Closing: 8:00pm, 5th Jan 2025 GMT

JobPost: PRI - Director, Asia Pacific Responsible Investment Ecosystems - Singapore
 
Employment Type Full time

Please note, where PRI has an office there is an expectation to work a minimum of 2 days per week 
 
Location  Hybrid · Singapore    YOU MUST BE A SINGAPORE NATIONAL TO APPLY FOR THIS ROLE
 
Seniority Senior
Closing: 8:00pm, 5th Jan 2025 +08

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JobPost: Sustainalytics - Stewardship Manager, EMEA & APAC (Amsterdam | Close Unknown)

JobPost: ISS - Climate & Sustainability Sales Executive (NYC | Close Unknown)

JobPost: MSCI - ESG & Climate Consultant (Paris | Close Unknown)

JobPost: JPMorganChase - Asset & Wealth Management, Climate Specialist, ESG Team, Associate (London | Close Unknown)

JobPost: RLAM - ESG and Sustainability Research Analyst (London  | Closing date: 4th December 2024)

Job Title: ESG and Sustainability Research Analyst

Contract Type: Permanent 

Location: London

Working style: Hybrid 50% home/office based

Closing date: 4th December 2024

NB posted 30+ days ago but still advertised

Specialist Sovereign Engagement (Australia & COP 31) - 2 Year Fixed Term Contract - Principles for Responsible Investment - Applied

Intern - Stewardship (3 Month Fixed Term Contract) - Principles for Responsible Investment - Applied