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Report Highlights:

PRINCIPLED INVESTING. SUSTAINED STEWARDSHIP.

In this 2023 ESG Impact Report, we share examples of actions we’ve taken on behalf of our clients to transform the systems that guide corporate decision-making and achieve sustained impact.

2023 REACH AND IMPACT RESULTS

Boston Trust Walden’s multifaceted approach to active ownership — refined over nearly five decades of experience — enabled us to reach 83% of the companies held across our investment strategies. Nearly half of the companies we engaged took steps to strengthen corporate policies, enhance public reporting, or advance more sustainable business practices.

DRIVING BOARD DIVERSITY

For more than 30 years, Boston Trust Walden has been actively engaging companies, regulators, and policymakers to advance diversity within corporate boardrooms. In 2023, we leveraged public policy advocacy to defend the Nasdaq Board Diversity rule and ensure investor access to decision-useful board diversity disclosure.

BUILDING MORE INCLUSIVE WORKPLACES

Since the early 1990s, Boston Trust Walden has successfully engaged more than 200 companies to adopt fully inclusive EEO policies and practices — including protections for LGBTQ+ employees. In 2023, approximately 99% of companies held across our investment strategies had in place fully inclusive EEO policies.

GETTING TO NET ZERO

In 2023, Boston Trust Walden implemented a multiyear initiative to engage with portfolio companies encouraging them to set science-based GHG emissions reduction targets. Utilizing a multiphased approach, we engaged nearly 100 companies on this topic – 70% of which were small or SMID cap equity holdings.

Greenbank's latest report details activities of their stewardship activities including:

• Engagement approach 
• Sustainable development themes 
• Priority engagement themes - Health, nature and climate 
• Impact from engagements in 2023

This report covers the calendar year 2023. The report is structured around the 12 Principles of the UK Stewardship Code. Under each of the Principles, you will see the Principle itself set out. You will then find disclosure of Generation’s stewardship ‘activity’ before our reporting of the stewardship ‘outcome.’ For some but not all of the Principles, the Code requires that reporting of activity and outcomes is preceded by disclosure of ‘context.’

The study, which GBSN commissioned Sia Partners to conduct, proposes comprehensive models based on live cases to quantify the opportunities that digitalised documentation processes represent for a sector that is a cornerstone of global trade. These include the adoption of electronic Bills of Lading (eBL) and the use of paperless solutions during the cargo release process.  

Today, shipping accounts for nearly 3% of Greenhouse Gas (GHG) emissions. While shipping remains more carbon-efficient than air transport, there is a pressing need for decarbonisation within the industry as international oversight bodies seek to achieve net zero by 2050. A major hurdle in this direction is the continued reliance on paper documents for legal and regulatory purposes, which adds to the industry's carbon footprint. 

The study suggests that the absence of a universally adopted digital platform creates interoperability challenges, complicating efforts to reduce carbon emissions. Against this backdrop, GSBN's comprehensive global data infrastructure emerges as a good candidate to support interoperability and facilitate the transition to a digital ecosystem. Unlike blockchains such as the Bitcoin network, GSBN’s blockchain infrastructure adopts a more energy efficient consensus algorithm ensuring its carbon footprint is in line with sustainability goals. 

CDP: Managing Risks in the  Palm Oil Supply Chain - A Guide for Investors

Specifically, the report focuses on the sustainability performance of the five largest non-disclosing palm oil producers 

in Indonesia, highlighting the levels of risk they are exposed to that remain invisible to their investors, including:

1. Insufficient no-conversion policy - All assessed companies have a publicly available sustainability policy that includes elements of NDPE. However, none has a no-conversion policy for wider natural ecosystems, demonstrating a low awareness of natural ecosystem protection and its socio-cultural importance. 
2. Incomplete third-party international certifications - All companies indicated their adoption of ISPO standard. However, two companies did not adhere to any international certification schemes. Such certification ensures the existence of policies to eliminate deforestation practices and prevent ecosystem conversion and human rights abuses throughout the supply chain.
3. A lack of forest-related risk assessment - Four of the assessed companies did not perform forest-related risk assessment, demonstrating a low awareness of forest-related risks within their operations and supply chains and inability to manage future uncertainties and liabilities.
4. A lack of landscape approach initiative involvement - Two of the assessed companies did not participate in landscape or jurisdictional approach initiatives, highlighting immaturity in collaboratively working with multiple stakeholders across local jurisdictions and landscapes to achieve common no-deforestation goals.

 Overall, the assessment of this sample shows that although some actions to address deforestation have been taken, 

the ambition is insufficient. Thus, investors’ exposure to deforestation risks may be significant.

As part of being assessed in the World Benchmarking Alliance’s benchmarks, 2,000 of the worlld’s most influential companies are being assessed on 18 core social indicators (CSIs). Between 2021 and July 2023, over 1600 of these companies were assessed and the remaining will be completed by the end of 2024.

These indicators, which are outlined in our Social Transformation Framework, signpost towards high-level societal expectations that companies should meet in order to leave no one behind, support the Sustainable Development Goals and help create a future that works for everyone. The core social indicators measure companies on three areas: respect for human rights, the provision and promotion decent work and ethical conduct.

The World Benchmarking Alliance’s Climate and Energy Benchmark measures and ranks the world’s 91 most influential heavy industries companies apart of the sub-sectors aluminium, cement and steel on their alignment to a low-carbon world.

The 2024 benchmark is the first iteration and the assessment combines the ACT (Accelerate Climate Transition) methodologies and the WBA social and just transition indicators. This approach provides a holistic assessment of companies’ efforts to achieve a low-carbon transition that is just and equitable. 

The aim of this document is to explain our approach to biodiversity and to define our under standing, the basic framework and the tools for addressing the topic in our portfolios and activities, and to identify further steps.

The preservation of biological diversity is of overarching interest. Only with intact ecosystems can the health of our planet, which forms the basis of our existence, be maintained. Between 50 and 60 percent of global economic output depends on functioning ecosystems and the associated services of nature. Biodiversity also strengthens the ability to adapt, for example to climate change.

A company's ability to create value is destroyed by the collapse of ecosystem services. For portfolio managers, this manifests itself as physical and transition risks. Operational disruptions, capital destruction and collateral erosion due to the temporary and physical impacts of biodiver sity degradation are transformed into financial risk, which takes the form of credit risks (increase in loan defaults), liquidity risks (increase in refinancing rates), market risks (erosion of bond and share prices) and operational risks (increased liability and reputational damage). 

Markets to finance the protection, better management and restoration of nature.

Unprecedented global action to address the decline in nature and its causes is underway, and investments in biodiversity will be a critical part of these efforts. The global rate of species extinction is unlike anything the world has seen since the time of the dinosaurs – today, one million plant and animal species are threatened with extinction, many within decades. Because over half of the world’s economy is dependent on nature, these losses threaten the wellbeing and livelihoods of people all over the world.

This paper examines existing and developing market-based pathways for land-based investment to positively impact biodiversity. Nuveen begin with an overview of environmental market frameworks developed to support biodiversity outcomes, with examples spanning voluntary and compliance market frameworks and a range of geographies. Next, they assess the current state of biodiversity credit markets, key challenges and major developing frameworks. Finally, they explore what biodiversity markets mean for investors and some of the risks unique to these markets.

India’s energy transformation could offer compelling investment opportunities in power generation, transmission and distribution, renewables and other green technologies.

Hurricanes, wildfires, heat waves and floods—all made worse by a warming climate—are impacting the global economy, damaging property and infrastructure, decreasing crop yields, affecting tourism and more. In the U.S. alone, the historic number of weather- and climate-related disasters in 2023 resulted in record-breaking costs of $92.9 billion. Yet beyond this visible devastation lies a quieter, and potentially costlier, threat: the impact on human health.  

The U.S. already incurs more than $820 billion each year for hospitalizations, injuries, medical treatments, mental health conditions and lost wages linked to air pollution and climate change. 

As extreme weather events become more intense and frequent, so too will the risks of respiratory illness, heat stroke, infectious disease through contaminated water and food sources, malnutrition and debris-related injuries—all of which will drive up health-related costs.

Morgan Stanley sees a critical need for investors to help mitigate the root causes of climate-related health risks, as well as investor appetite to do so. In a recent survey by Morgan Stanley’s Institute for Sustainable Investing, individual investors ranked climate action and health care as their top two sustainable investment themes globally. This signals a unique market opportunity to boost investments in preventive and sustainable solutions at the intersection of climate and health care. 

Three specific investment areas stand out:

1. nature-based solutions
2. infrastructure resilience
3. equitable access to care. 

US legislation meant to encourage the economy's green transition is boosting clean tech investment. But with the US elections on the horizon, could a shift in the political landscape change trajectory? Our Research team explores potential outcomes.

In recent years, the Biden administration worked with Congress to enact a series of laws – such as the Inflation Reduction Act (IRA) – to encourage the US economy’s green transition, providing government subsidies for and incentives to invest in clean energy technologies.

The future trajectory of that policy – and the transition more broadly – could change as a result of the upcoming 2024 elections. Former President Donald Trump has promised to revisit at least some of these policies, should he win the presidential election in November.

BarCap's independent Research analysts consider the possibility of these laws’ future, post November 2024.

Generali's latest report covers key areas of their activities, including:

• Portfolio decarbonisation 
• Biodiversity 
• Gender diversity, equity and inclusion 
• Monitoring and promotion of good business practices
• Engagement highlights and key trends 
• Voting highlights and key trends

Osmosis Investment Management: Sustainability & Stewardship Report 2023

Osmosis Investment Management's latest report covers key areas including:

• Investment approach
• Active ownership & stewardship 
• Governance

The Sustainability Report 2023 captures the Group’s endeavours in integrating sustainable practices throughout its business model and re flects its commitment to long-term business success while contributing to global sustainability.

Etica's Impact Report is based on the 17 Sustainable Development Goals (SDGs), defined in the 2030 Agenda for Sustainable Development. Key aspects of the report include:

• Investment approach
• Highlights
• Climate change 
• Focus on green bonds
• Public utility and health
• Decent work and social development 
• Responsible production

2023 was another turbulent year for the global economy as inflation, rising interest rates, tight labour markets and geopolitical shocks fuelled uncertainty. It was also the year in which the impact of climate change was writ even larger with catastrophic flooding across 10 countries in 12 days, the hottest ocean temperatures ever recorded, heatwaves that scorched the entire Northern Hemisphere, and the worst drought in 40 years across the Horn of Africa. At the same time, the energy ‘trilemma’ that defined 2022 – managing climate risks while ensuring energy security and affordable access to energy – continued.

Encouragingly, the US Inflation Reduction Act (IRA) of August 2022 spurred renewable energy and clean tech investment, and energy prices eased in many markets. This helped to reduce inflationary pressures, although the cost of living crisis persisted in many markets. This series of environmental and macroeconomic challenges reinforced the focus of our advocacy and stewardship activities in 2023.

Geopolitical tensions also remained heightened in 2023, with no sign of an end to the war in Ukraine and the destabilisation of the Middle East through the conflict in Israel and Gaza. Against this backdrop, we continued to engage with companies on how they address the geopolitical risks facing their businesses and their approach to safeguarding human rights in high-risk regions.

This report describes Federated Hermes' stewardship work during 2023 and the outcomes of these activities. We have followed the structure of the UK Stewardship Code, reporting principle by principle to communicate our policies, processes, activities and outcomes to clients and wider stakeholders. They outline our engagement, voting recommendations, public policy, screening and advisory work carried out on behalf of our clients.

Building on last year’s reporting, we have provided an update on the firm’s diversity, equity and inclusion (DE&I) strategy and the formation of six core DE&I project groups; insights into our engagement approach on worker rights and benefits and the importance of a just transition; highlights of the latest operational enhancements to our client portal; and a detailed update on our work with Climate Action 100+. Examples and case studies are provided throughout to demonstrate how our approach works in practice.

The SLB Handbook from the Anthropocene Fixed Income Institute offers a practical overview of this nascent market. It explores both the financial and sustainable impact aspects of the instrument and includes a first-of-its-kind pricing model for understanding SLB dynamics.

The Handbook provides an objective view of the SLB as a tradeable product by exploring over 40 case studies covering a wide range of actual and potential bond deals, from both the issuer and investor perspective.

It is our intention that this first edition of the Handbook becomes a trusted reference for practitioners and a source of inspiration for SLB structurers, helping to accelerate fixed income capital flows into sustainable and transition financing solutions.

• Amid weakness in global climate stocks' price performance in 2024 (YTD), large defensive climate themes have outperformed
• Waste and Food & Agriculture emerge as the best placed climate themes on the HSBC Climate Radar for Q2 2024
• Both themes trade at inexpensive valuations and show signs of revival; their consensus EPS growth outlook is also improving

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

First Sentier MUFG - Sustainable Investment Institute: Diversity, Equity & Inclusion: Gender and Beyond

HSBC: Sustainable biofuels - Potential transition fuel in Asia?  

• Biofuels could be a short- to medium-term decarbonisation solution in the run-up to full electrification of the transport sector
• Looking at the growth of EVs, oil import dependency, climate targets and feedstock availability of different Asian countries ...
• ... we find India and the Philippines have the biggest incentive to enhance the role of biofuels in their transport sectors

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

'The carbon markets allow companies to purchase credits to offset their carbon footprint until long-term reduction plans become a reality. We take a look at these markets and try to understand how they impact investors, companies and our future.'

MSCI: UK Sustainability Disclosure Requirements (SDR): Challenges, Practical Solutions & Looking Ahead (In-person event | 22 May)

Date
May 22, 2024
 
Time
8:30 a.m. BST London
 
Location
South Place Hotel,
3 South Place,
London,
EC2M 2AF,
United Kingdom.

'Join us on May 22 to deepen your understanding of FCA Sustainability Disclosure Requirements (SDR).  We will explore latest updates and future developments, enabling you to gain insights from peers on challenges and practical solution for SDR compliance.

In November 2023, the Financial Conduct Authority (FCA) unveiled its final framework and rules on its Sustainability Disclosure Requirements (SDR). The SDR aims to enhance transparency and trust in sustainable investment products while combatting greenwashing that includes anti-greenwashing measures, investment labelling, and disclosure requirements. 

This event aims to bring together asset managers and distributors who are impacted by the regulation, offering a platform for discussion and collaboration.'

Despite competing priorities, the focus on ESG issues among investors and companies worldwide presents an opportunity to track international trends and better manage ESG-related risks over time. 

This report tracks and examines the ESG attributes of companies in emerging and developed markets from 2018 to 2022. It sheds light on recent developments across markets, sectors, market caps, and company types, showing how companies in developed and emerging countries are improving their ESG Risk Ratings at different paces. 

Readers of this report will learn how: 

- In developed markets, assets under management (AUM) in sustainable funds increased more than six-fold, from US$321 billion in 2018 to US$2.15 trillion in 2022. 
In emerging markets, AUM has grown almost seven-fold, from US$23 billion in 2018 to US$164 billion in 2022. 
- The average ESG Risk Rating scores of companies in developed markets have improved by 12%, while in emerging markets they improved by 6%. 
Though companies in developed markets are improving their ESG Risk Ratings faster, the pace of improvement in emerging markets trails relatively closely. 
Including emerging-market universes in responsible investing portfolios allows for more diversified investment strategies. 

Stewardship has always played a crucial role in the investment industry. There are countless instances of these activities raising returns and reducing risks. And now, as we approach the next quarter century, we see a new era of the investment industry in which thinking shifts to acknowledging stewardship not merely as a necessary function but as a system-level and value-adding feature.

The focus on stewardship through a holistic lens that reflects the inter-connected features of the investment ecosystem is increasingly seen as pivotal in safeguarding and augmenting the
long-term value of assets. As this understanding gains momentum, concerns regarding whether the investment industry has adequate stewardship resourcing are on the rise.

The stewardship resourcing gap isn’t solely about the quantity of resources allocated to stewardship activities, it is also evident in skills, along with challenges in reporting, data, collaboration, and culture. These are all the soft infrastructure intangibles that need to be in place first to get everything done

How is El Nino impacting emerging market sovereigns through agricultural inflation?

In August 2023, the National Oceanic and Atmospheric Administration (NOAA) predicted that there was a 95% chance of an El Niño occurring in the first half of 2024. El Niño is a period of unusually warm water temperatures in the eastern Pacific Ocean, while La Niña is a period of unusually cool water temperatures. The El Niño Southern Oscillation is the primary cause of global climate fluctuations from year to year.

The warm temperatures caused by El Niño can adversely affect agricultural production worldwide, leading to higher food costs. For the 2024 El Niño, the global economy may face new hazards, especially emerging market economies that strive to balance economic growth with reducing pervasive inflationary pressures. 

EdenTree's latest report sets out highlights from 2023 across four pillars:

• Research
• Screening
• Engagement 
• Governance

Sarasin & Partners: 2023 Stewardship Report

Sarasin & Partners latest stewardship report covers their alignment with the 12 UK Stewardship code principles, as well as their key activities over 2023.

Melrose's latest sustainability report details key areas of their activities, including:

• Environmental impact - water, circularity, biodiversity and waste
• Social impact - diversity, equity and inclusion, community impact and human rights 
• Governance - ethics and compliance, supply chain and product quality and safety

BAE Systems latest Annual Report covers sustainability, including key area such as:

• Environment and climate 
• Social 
• Responsible business practices
• Non-financial and sustainability information statement

We look at the ESG impact of the top three ESG funds by 2023 US inflow, and question whether they live up to their 'green' credentials. 

The global financial market faced a lot of turbulence in 2022, and ESG funds were especially affected, as investors tried to avoid the perceived risk from ESG products to safeguard their wider investments. However, by the end of 2023, ESG funds had started to recover. Three ESG funds stood out, receiving the top net inflows of 2023: 

• iShares Climate Conscious & Transition MSCI USA ETF | $1,556M 
• Xtrackers MSCI USA Climate Action Equity ETF  | $1,484M
• iShares MSCI USA ESG Select ETF  | $1,257M 

The funds track indexes that supposedly lean into holdings that are well-positioned for the transition to a low-carbon economy or that are actively engaging in the climate transition.

A closer examination of these funds shows, however, a complicated story that institutional investors often have to navigate. We compare the actual impact of these top ESG funds, with Morningstar USA Market Extended Benchmark as a reference point, to see whether they live up to their climate credentials. 

Dissecting the ESG Impact 

Renewable Energy and Climate Solutions 

An assessment of the funds' investments in renewable energy and climate impact solutions show a disappointing result.  

Compared to the broad market benchmark, iShares Climate and Xtrackers funds only had 0.7% and 0.4% more of their energy coming from renewable sources, whereas iShares ESG Select actually had 0.7% less renewable energy vs the broad market benchmark. Are we really seeing the sustainable energy transition needed to support positive climate action? 

In terms of revenues from climate impact solutions—such as alternate vehicles, plant-based foods etc, the numbers fare slightly better at 2.8%, 2.2%, and a more promising 5.1% increase vs the benchmark respectively - indicating a cautious, albeit insufficient improvement. 

Temperature Alignment and Climate Risks 

Alarmingly, all three ETFs predominantly invest in issuers projected to contribute to a global temperature rise of over 2.5+ degrees Celsius, with 80% of their holdings falling into this category.  

This contrasts with the urgent need to limit warming to well below 2 degrees Celsius, as per the Paris Agreement, highlighting a misalignment with global climate goals.  

Moreover, over half of each ETFs' holdings’ physical operations face climate disaster risks, underscoring the vulnerability of these investments to the very phenomena they seek to mitigate. 

When looking at aggregate physical risk, iShares MSCI USA ESG Select ETF has the least amount of absolute $ at risk from climate disasters - significantly less than the benchmark:

Products and services 

Despite their ESG label, these funds maintain investments in sectors with notable environmental footprints, such as oil and gas companies, including Schlumberger and Halliburton Company.  

All of them have investments that are involved in environmental damage through some parts of the revenue from their equity holdings, such as General Mills' Dairy revenue, which suggests materiality biases. A materiality-based approach instead of an alignment-based one results in overlooking smaller revenue sources that harm the environment in a portfolio (for example, General Mills 10% revenue from ice cream and dairy or DuPont's 16% revenue from Intermediates). Many small sources can amount to a large unintended impact. Which is why its important to often drill down deeper than the general GICS.  

A Silver Lining: Carbon Emissions 

Credit where credit is due, all three funds have demonstrated commendable performance in reducing carbon emissions, with emissions per $1M revenue significantly lower than the benchmark. This achievement translates into the equivalent of thousands of cars being taken off the road annually*, showcasing a meaningful contribution to carbon footprint reduction. 

• iShares Climate Conscious & transition MSCI USA ETF | 6,765 cars
• Xtrackers MSCI USA Climate Action Equity ETF | 7,420 cars
• iShares MSCI USA ESG Select ETF | 9,350 cars

Same old constituents

It’s no surprise that the same suspects make up the top holdings in each of the funds. This uniformity begs the question of the true environmental impact of these global giants. When we examined the holding percentage of each fund for "Magnificent 7" stocks (defined as Apple, Microsoft, Amazon, NVIDIA, Microsoft, Meta, Tesla) we found that the iShares MSCI USA ESG Select ETF held the least with just under a fifth (19.1%) of its portfolio made up of these companies. Meanwhile, over a quarter of its Climate Conscious cousin's portfolio was made up of these stocks at 25.8%, and the Xtrackers fund consisted of even greater proportions at 27.5%.

Physical Climate Risks 

The magnificent 7 have significant exposure to physical climate risks – for example, Nvidia at a staggering 98.6% economic value at risk, Microsoft at 39.4% and Alphabet at 18.5%.  

This vulnerability, especially to drought risks impacting data center operations, highlights the environmental challenges these tech giants face, emphasising the necessity for sustainable water management practices. 

The Case of Water

In addition to the fact that tech companies rely so heavily on water to operate properly, sustainable water management can be a powerful tool against climate change, by building resilience, protecting ecosystems, and reducing carbon emissions. 

The raw water use figures show the environmental impact of these corporations. Cumulatively, these top constituents use the equivalent of 95 Olympic-sized swimming pools of water every day—a figure that starkly contrasts with the climate-friendly image these ESG funds aim to project. 

ETF Water Usage 

When extending the analysis to include all holdings within the ETFs, the water usage figures become even more staggering. The iShares Climate Conscious & Transition MSCI USA ETF, Xtrackers MSCI USA Climate Action Equity ETF, and iShares MSCI USA ESG Select ETF account for the equivalent of 3,661, 4,369, and 335 Olympic-sized pools of water used per day, respectively.  

Notably, the iShares USA ESG Select ETF demonstrates a significantly lower water footprint, using 13 times less water than its counterparts. 

To put these figures into perspective, the water usage by the Xtrackers ETF holdings’ is equivalent to filling 36.5 Shards, or 12.4 One World Trade Centers—every single day. 

This not only calls into question the climate tilt on these funds, but also the interplay of the high water use and the dependency on water from the top constituents of them. 

The Implications for Investors 

While these ETFs may perform well in certain ESG metrics such as carbon emissions, the significant water usage for example of their top constituents raises important questions about the holistic risk of the investment strategies and their long-term viability. How long will the planet have enough water to sustain the Magnificent 7? 

ESG is a tool – that when used correctly can mitigate a large swathe of these issues. For example, look at our recent work for a large European Pension Plan. Our portfolio engineering solution, SmartESG, resulted in an optimised portfolio having no change in tracking error and substantial environmental improvements, including up to 90% reduction in carbon emissions, freshwater usage, and waste generation vs. MSCI ESG Enhanced and MSCI Paris Aligned benchmarks.

Maybe it’s time investors moved away from broad market benchmarks and looked at creating their own custom solutions?

*Assumes the average passenger vehicle emits c.4.6 metric tonnes of CO2 per year. 

HSBC: Climate Investment Update - Taiwan: Presenting a carbon levy mechanism

• Taiwan releases draft regulation on a carbon levy scheme
• We think the power industry is likely to be under pressure from local manufacturers that will be impacted by EU CBAM
• In our view, the renewable energy sector, in particular offshore wind & solar energy, would benefit from the scheme

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

The mechanism: Last week, Taiwan announced a draft carbon levy collection scheme, part of the Climate Change Bill, for consultation (Navigating its way to 2050, 16 January 2023). Under the scheme, heavy industries are incentivised to engage in voluntary reduction, for example, switching to low-carbon fuels, enhancing energy efficiency, utilising renewable energy, and improving operational systems. Investment in these activities will grant corporates a discount on the to-be-introduced carbon levy. In our view, this could boost investments in expanding renewable capacity.

Goldman Sachs Asset Management's latest report covers key areas of their stewardship activities including:

• Engagements
• Stewardship Framework
• 2023 by the numbers 
• Proxy voting 
• Looking ahead

Norges Report covers a range of their responsible investment topics including: 

• Market, standards, expectations and research 
• Portfolio, investments, risk management and risk-based divestments
• Companies, dialogue, voting and ethical exclusions 

American Electric Power's latest report details key areas of their sustainability activities, including:

• Energy transition - modernising the grid, climate governance and electrification 
• Environment - biodiversity, water use & management and waste management 
• Social - economic impact and community support 
• Our people - career development, safety & health, culture & inclusion 
• Governance - ethics & compliance and political engagement

In commissioning this report, SII aims to contribute to filling this knowledge gap, providing investors with a starting point for considering climate risk impacts on food-related economic activities, adaptation opportunities, and engagement approaches.

Background

In 2022, the IPCC report highlighted the increased risks to global food security which will follow the temperature increases beyond 1.5C. Growing vulnerability of global food value chains to climate risk has become apparent in the recent years, as frequent extreme weather events have been affecting agricultural production in many regions, with examples including: continuous drought and flooding leading to hunger crisis in the Horn of Africa, extreme rain and flooding damaging crops and increasing food prices in Pakistan in 2022, drought and high temperatures in 2023 and 2024 affecting crops in Southern Europe. Weather impact estimates predict that further reductions in crop yields might be significant.

Environmental Defense Fund: Methane Rising - Three questions investors in the food sector should ask their portfolio companies

Agriculture is the largest source of human-caused methane emissions, responsible for 40% of annual global emissions. That’s why initiatives like the Dairy Methane Action Alliance are critical, and why investors should take note of the impact of methane reduction targets on the food and agriculture sector.

Major players like Starbucks and Clover Sonoma joining DMAA signal a positive shift towards reducing methane emissions in the food sector. My newest EDF blog, co-authored with Andrew Howell, explains the questions shareholders need to be asking the companies they invest in.

The agriculture sector is continuing to shift into a #netzero world – and investors should be prepared. Read more here.

'We’ve chosen a provocative title for this Insight piece, but it’s one we think is justified given the shortage of silver that we see emerging. This should translate into growing investor interest as silver’s attractive fundamentals become widely appreciated. In our opinion, they are currently not that well understood by most investors, both professional and retail.

Why has silver’s long and illustrious history faded from people’s minds during the past century and why are more people not drawing attention to its exciting future? In all likelihood, it has something to do with being overshadowed by its much higher-profile precious metals cousin, gold ‒ even though the drivers for supply and demand for the two metals only partially overlap.'

With the escalating buzz around AI & ChatGPT, the interest in our China ICT Transition report exceeded our expectations. CWR's Mirando & report co-author share 5 things we've learned since its release.

• "We were correct, finance had not fully appreciated how carbon intensive ICT sector is but after the report, banks now excited for big green finance opps though challenges remain"
• "Asia set for double digit data centre growth = stymy early retirement of coal-fired power plants; plus, ICT not incl. in Scope 3 reporting = no incentive for “green” data centres"
• "Our engagement with top ICT co's in China found they are on track on carbon & starting to look at water; there is clear momentum, we will continue working for ICT's transition"

NB - see previous Buzz here

Executive summary

Growing demand for sustainability data from investors presents an opportunity for corporate leaders to earn investor trust.

Investors are increasingly incorporating sustainability factors into investment decisions:

• 83% of surveyed investors incorporate sustainability information into fundamental analyses.
• 79% of respondents have sustainability policies in place, compared to 20% five years ago.

Investors are seeking to minimize risks and capitalize on opportunity, with an estimated US$43 trillion in global economic growth projected between 2021 and 2070 if the world economy transforms to achieve net-zero emissions.

Despite growing demand for sustainability data, investors struggle with often inconsistent, unclear, and unreliable information:

• Unclear corporate sustainability strategies
• Incomparable data from ratings agencies
• Frequent lack of measurable outcomes from corporate reports

While regulations and standards are emerging globally to drive data consistency, they are not yet implemented broadly enough to provide fully reliable data to investors.

During this period of transition and beyond, organizations can build investor confidence in their sustainability initiatives through better data— and potentially drive more cost-efficient access to capital and stronger valuations.

United Nations Office for Disaster Risk Reduction, Standard Chartered Bank, KPMG International

The Guide for Adaptation and Resilience Finance sets out what constitutes adaptation and resilience finance. It includes a practical roadmap for financing and over 100 investable activities, including climate-resilient crops, public hospital infrastructure investment, and mangrove conservation and replanting.

To mobilise finance for adaptation and resilience — and help investors, commercial banks, and other financial institutions consider these themes in financial decision-making — the investment potential needs to be understood and recognised. This Guide seeks to provide confidence to investors looking to allocate capital to adaptation projects, as well as to companies looking to raise capital for adaptation and resilience products, solutions, or other investment opportunities.

The Guide maps over 100 investable activities across adaptation and resilience, including: climate-resilient crops, vertical farming, natural flood protection, water conservation and efficiency measures, public hospital infrastructure investment, renewable energy storage solutions, and mangrove conservation and replanting. Indicators to assess the adaptation and resilience impact of a specific investment are also available in the document.

Key findings from Accela’s research

Shell’s strategy is closer to reality but falls short of delivering on customer decarbonisation

Shell scaled back its FY30 Net Carbon Intensity (NCI) target, and is now aiming for a reduction of 15-20% vs 20% prior (2016 baseline). Despite Shell’s newly disclosed FY30 portfolio mix (~14% bioenergy and power, from 9% today), it appears insufficient to meet its FY30 target requiring ~25% of reductions to come from offsets. We estimate this is equivalent to offsets from a mature forest up to 3x the size of Denmark. Between FY22-23, offsets comprised ~50% of Shell’s progress in reducing its NCI.

Shell's LNG ambition exceeds European peers

Across European majors, Shell currently sells the most LNG (67 Mt) and is expected to maintain its leading position with the ambition to grow LNG sales by 20-30% (86 Mtpa) and LNG production (25-30%) between FY22-30. Shell’s commitment to LNG as a transition fuel is underscored by including LNG equity volumes in its energy transition metric within its annual bonus scorecard.

Low-carbon capital allocation trailing European majors

Shell's new plan delivers a narrowed focus on low-carbon, centred on EV charging infrastructure, biofuels and renewable energy solutions to commercial customers. By FY25, Shell plans to allocate ~ 19% of its capex to low-carbon initiatives. This is less than peers, with BP planning to allocate ~50%, TotalEnergies 33%, Equinor 30%, and Eni 28% by FY25.

BP demonstrates greater ambition for low-carbon

As of FY23, Shell has outpaced BP in low-carbon capex together with building a larger EV network, It has however trailed BP on its renewable capacity (0.9x), renewable pipeline (0.7x) and biofuels production (0.8x). To FY30, BP demonstrates greater ambition in establishing low-carbon offerings, with higher EBITDA outlooks and capex for low-carbon.

ArcelorMittal: 2023 Integrated Annual Review 

The 2023 IAR, ‘Preparing for the future’, is structured in nine main chapters:  

• Our business and material issues   
• Driving change in our safety performance 
• Responsible energy use and lower-carbon futures 
• Air, water, land, biodiversity and ecosystems 
• Delivering a circular economy through innovation 
• Value chains our stakeholders trust 
• Attracting, retaining and developing our people 
• Communities and Just Transition 
• Governance and risk management  

New disclosures include: 

• An update on further work done to evaluate physical and transition climate-related risks and opportunities, aligned with current and upcoming regulation. 
• The progress made to better understand our scope 3 emissions and our engagement with suppliers. 
• An update on the certification of our sites to leading third party multi-stakeholder ESG standards such as ResponsibleSteel™. 
• Progress we have made in advancing our Diversity and Inclusion (D&I) roadmap.  
• Our Just Transition framework including the approach and principles for a just transition. 
• The EU Taxonomy report where we are reporting “substantial contribution” to climate change mitigation for revenues, capex and opex for the first time.  

Executive summary

This report provides the most comprehensive stocktake to date of investor climate progress across Asia. It draws on data from 58 investors who responded to the AIGCC Net-Zero Investment Survey, supplemented with a desktop review of key metrics and aggregated progress from more than 200 Asset Owners and Managers, 186 of which are headquartered in Asia. The report therefore reflects the ownership and management of most mainstream capital in Asia.

Many investors in Asia are positioning themselves for a climate-resilient net-zero economy, but not at the required speed.

1. There is movement and momentum toward net-zero. Leading investors see effective monitoring and managing climate change as increasingly essential to long-term value preservation and creation by:
• working to set climate strategies, short[1]term targets, and climate governance for decarbonization and to allocate more capital to climate opportunities
• increasingly working to incentivize companies and governments to go further with credible transition plans in their key markets and to build resilience to physical climate risks
• increasingly financing Asia’s energy transition, recognizing capital must flow to climate-aligned activities and opportunities set to succeed in a net-zero world.
2. However, of the 200+ Asia Investors included in the data review, most fall short of actions needed to effectively manage climate risks and opportunities in line with global climate goals. High-impact areas like fossil fuels and deforestation remain a challenge.
3. The 100 Asia Asset Owners reviewed trail Asset Managers on nearly every key climate metric surveyed, stressing the importance of progress for Asset Owners. Meanwhile, AIGCC members well outperform the market when evidencing climate progress and engagement across the areas reviewed.

The progress outlined in this report is benchmarked against the Investor Climate Action Plans (ICAPs) Expectations Ladder, which provides a pathway for investors’ transition plans to a net-zero economy – a key framework for investor climate action regardless of where they are at on their climate journey, and the structure from which this paper is modelled and actions assessed. 

Executive summary

• The transition to a cleaner steel industry is underway, enabled by low-carbon technologies, industry commitments and supportive government policies.
• While reuse of scrap metal is reducing the sector’s carbon intensity and meeting rising demand, the production of primary steel must be fundamentally transformed in order to align the industry with net zero.
• In the short term, steel producers employing electric arc furnaces (EAF) constitute an immediate and durable investment opportunity. Longer-term, emerging technologies and processes, such as direct reduced iron (DRI), need to be scaled up to become cost competitive.

At a glance:

• As the world moves towards net zero, a “green skills” gap is emerging, with the number of people with skills useful in transforming the economy growing more slowly than the job vacancies requiring these skills.
• A lack of skilled workers is already having operational and financial impacts for companies and may even lead to a temperature rise of 0.1C by delaying progress on the construction of renewable assets for clean energy.
• Columbia Threadneedle Investments is engaging with sectors critical to the transition to net zero to understand how they are managing their human capital. Here we look at mining, utilities and industrials to see how they are attracting, hiring and retaining workers with appropriate green skills, as well as their plans to retrain and equip existing employees with the skills required for roles that underpin their transition strategies.

Rockefeller Capital Management: Ocean Engagement: Shifting Tides Rising 

Need for Investments and Engagement in the Blue Economy

Rockefeller Asset Management has over a quarter of a century of experience in thematic investing. In recent years, we turned our focus to the ocean: the world’s largest ecosystem and seventh largest economy. We believe that the “Blue Economy” is an emerging investment opportunity due to increased regulations, changes in consumer buying preferences, and technological advancements.

Through our decade-long partnership with The Ocean Foundation, we have created a framework to identify and gain relevant exposure to blue economy investment opportunities, while also seeking to catalyze positive impact through engagement. This paper dives deeper into our investment framework, the ocean investment opportunity, and our main investment themes of pollution prevention, carbon transition, and ocean conservation.

See further details below:

Instructional Design Lead - Investor Education

Specialist Stewardship (Nature) - Latin America

Specialist Stewardship, Sustainable Financial Systems

Specialist Stewardship (Nature) - Latin America

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JobPost: JP Morgan - Environmental, Social & Governance Controller - Associate (New York | CloseDate: Unknown)

JobPost: S&P Global - Associate Director/ Senior Analyst – Sustainable Finance, Japan & APAC (Multiple Locations | CloseDate: Unknown)

JobPost: S&P Global - Senior Associate / Associate Director, Sustainability Solutions (Hong Kong/Dubai | CloseDate: Unknown)

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JobPost: MSCI - ESG & Climate sales specialist (Hong Kong | CloseDate: Unknown)

JobPost: MSCI - Vice President - ESG & Climate Client Consultant (Toronto | CloseDate: Unknown)

JobPost: MSCI - ESG & Climate Coverage Intern (Monterrey | CloseDate: Unknown)

JobPost: Citi: UK Risk & Controls – Climate & ESG Lead, UK Legal Entities (London | CloseDate: Unknown)

JobPost: CPP Investments: Analyst, Infrastructure & Sustainable Energies (Mumbai | CloseDate: Unknown)

JobPost: Sustainalytics: ESG Research Senior Analyst, Transportation & Infrastructure (Frankfurt/Amsterdam/Timisoara/Toronto | CloseDate: Unknown)

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JobPost: Sustainalytics: ESG Research & Methodology Senior Analyst, Risk Products (Amsterdam & Frankfurt | CloseDate: Unknown)

JobPost: PRI - Research Associate Responsible Investment Ecosystems - Canada (Temp) | Closing: 8:00pm, 19th May 2024 BST 

Job Description
The Research Associate, Canada RI Ecosystems will be responsible for conducting research on leadership in the field of sustainable finance within the province of Quebec. The Research Associate will investigate practical examples of local responsible investment and stewardship best practices from Quebec-based PRI signatories, in order to produce written materials that highlight examples of such leadership in action.

Through this research, the Research Associate will contribute to PRI’s body of thought leadership by ways of a process that is informed by signatories and of value to the local – as well as the global – RI ecosystem that underpins the PRI.

The role requires an understanding of the investment industry, the sustainable development agenda, as well as the relevant local and regional policy and regulatory environments.

Apply here

Executive Assistant, Chief People Officer and one other Executive (10 Month Family Leave Cover) - Principles for Responsible Investment - Applied (beapplied.com)

JobPost: Sustainalytics: ESG Research & Methodology Senior Analyst, Risk Products (Amsterdam / Frankfurt | CloseDate: Unknown)

JobPost: Sustainalytics: ESG Analyst, Indicators & Metrics Team (Timisoara / Bucharest | CloseDate: Unknown)

JobPost: GIIN: Director, Impact Measurement & Management Engagement (New York / Hybrid | CloseDate: 28 July)