The Institute for Energy Economics and Financial Analysis (IEEFA) has urged investors in Australia to encourage fossil fuel firms to accelerate greenhouse gas emissions reductions by pressing for improved methane reporting and abatement efforts. A new report from the institute highlighted that some of Australia’s largest companies in the oil and gas and coal mining sectors have been slow to reduce the amounts of methane emitted as part of their operations, while simultaneously planning “substantial expansions” of production that will intensify their methane emissions. “By not implementing methane abatement measures, companies risk missing their own emissions reduction targets or breaching regulatory requirements,” said Anne-Louise Knight, Lead Analyst, Australian Coal at IEEFA. “Companies will also be forced to rely on purchasing carbon offsets, increasing their risk exposure in the event of a rising Australian carbon price.” The report examined the records of five companies: oil and gas firms Woodside, Santos and APA Group and two of Australia’s largest coal mining companies, BHP and Whitehaven. It found a significant risk that their self-reported methane emissions are underestimated due to their reliance on flawed estimation methods. The five firms have also taken “minimal action” on methane abatement to date, with “zero or limited” capital allocation or targets specifically addressing methane emissions. “There is a real opportunity for investors to incentivise more rapid action on methane emissions by incorporating methane reporting and abatement into their engagement with fossil fuel companies,” said Joshua Runciman, Lead Analyst, Australian Gas at IEEFA.
Sustainable Investor
News in Brief
The Australian Securities and Investments Commission (ASIC) has issued new guidance on virtual meetings to allow more flexible engagement between investors company management. This includes setting out ASIC’s expectation that members have the same opportunities to participate at virtual meetings as they do in-person. Speaking at an event in Sydney, ASIC Commissioner Kate O’Rourke said that, in a time of technological change and disruption, AGMs remain a key accountability mechanism for corporate Australia. “We do not view the Corporations Act as always requiring a telephone line, so long as the virtual meeting format allows members to exercise any rights orally and in writing, and the virtual meeting technology meets the broader requirements of meetings,” she said. O’Rourke added that one of the lessons from the pandemic was that shareholder participation at AGMs could be increased by holding both hybrid and virtual meeting. In February, Australia’s government announced that it had “accepted or accepted in principle” all recommendations of an independent panel that was tasked with reviewing legislative amendments to provide for virtual company meetings and the electronic distribution, signing and execution of company documents.
Global trade association the International Capital Market Association (ICMA) has presented recommendations to help the sustainable fund market navigate regulatory challenges. In a recent paper, the association said that the implementation of the new regulatory landscape creates a “significant challenge” for the sustainable fund market. “Regulatory initiatives primarily in the EU and UK will have a structural impact on the sustainable fund market, the paper read. “It is already leading to a major reorganisation and rebranding of funds which will impact more than half of such funds in existence. The outlook is therefore a rebranded sustainable fund segment possibly alongside funds that may implement sustainability as a criterion but may not be marketed as such.” ICMA stressed that future regulation, particularly from the EU’s Sustainable Finance Disclosure Regulation review, should be “consistent to avoid disruption and/or discouragement of the sustainable fund market”, with many funds having been “substantially rebranded and reorganised because of recent initiatives”. The paper concluded that to avoid a “dramatic narrowing of the investable universe in sustainability”, EU regulators should not restrict the assessment of sustainable investments solely to the EU Taxonomy and remain open to other official and leading market taxonomies as well as established assessment tools and approaches. It also recommended that to grow transition-themed funds, terminology and investment strategies must identify more transition investments that cannot necessarily be accommodated by other sustainable fund categories. This could include those in the fossil and hard-to-abate sectors. Regulators may need to adapt their greenwashing prevention efforts to avoid deterring such investments, said ICMA.
The UK’s Financial Conduct Authority (FCA) has invited ESG ratings providers to complete a voluntary survey which will inform future policy in the space. “As we continue to develop the future regulatory regime, we are engaging widely to inform our approach, which includes ESG ratings providers and users,” the FCA said. Input from the survey will inform the regulator’s cost benefit analysis, policy development and ultimately ensure that any future regulation is tailored to the needs of the market, it added. The FCA is seeking to better understand the business models and group structures used to provide ESG ratings, how these are constructed and distributed, and what policies and processes firms already have in place. In addition, the watchdog said it wants to understand how ESG ratings providers are interacting with broader sustainability disclosures. The issuance of the survey follows responses to a government-run consultation on the draft legislation about bringing ESG ratings providers into regulation. “In 2024, we confirmed, subject to government endorsement of the International Sustainability Standards Board standards, we plan to consult on amending our climate-related disclosures rules for listed companies to refer to these new standards [as well as consulting on] strengthening our expectations for listed companies’ transition plan disclosures, with reference to the Transition Plan Taskforce disclosure framework,” the FCA said. Providers have until 16 May to respond.
Japan’s Financial Services Agency (FSA) has published draft revisions to the country’s stewardship code aimed at supporting better dialogue between institutional investors and their investee companies. The identities of shareholders who exercise their voting rights via custodians – as many do – are currently masked, making it harder for firms to enter into a constructive dialogue with them. To identify the individuals directing the votes, companies must commission costly surveys, which can take at least two months to complete. To fix this, the draft revisions said that “institutional investors should, in response to requests from investee companies, explain how many shares they own or hold in the company and should disclose in advance a policy on how they will respond to such requests from investee companies”. Another revision to the code aims to encourage collaborative engagements between institutional investors, saying that these are an “important option” and should be considered as a way to contribute to the “sustainable growth of investee companies”. Japan’s stewardship code was initially introduced in 2014. It was subsequently revised in 2017 and 2020. The latest draft revisions are open for consultation until 20 April.
UK-based Legal and General (L&G) has committed a further US$235 million in private debt financing to nature conservation and sustainable development in emerging markets (EMs) through its Nature and Social Outcomes strategy. This initial investment, made through L&G’s Future World Multi-Asset Fund and Retirement Income Multi-Asset Fund, takes L&G’s overall commitment to nature conservation and sustainable development in EMs to US$1.1 billion. The new strategy aims to further diversify L&G’s private markets platform, addressing funding gaps across EMs by leveraging financing methods that benefit from credit enhancement through multilateral guarantees and insurance, including use of proceeds bonds, debt conversion bonds, and outcome bonds. The strategy will deploy capital through projects that aim to deliver strong commercial returns alongside positive nature and social outcomes. Projects targeted by investment will include habitat and biodiversity conservation, as well as socially beneficial infrastructure to support education, healthcare and access to clean water. “Exposure to EMs has the potential to offer attractive returns for investors whilst aiming to support communities and ecosystems which play an indispensable role in upholding economies across the globe,” said Jake Harper, Senior Investment Manager at L&G. “Innovative debt financing allows investors to allocate to nature conservation and sustainable development in EMs whilst benefitting from an improved credit rating and higher returns.”
Global investment manager New Forests has co-created the Future Forest Innovations Fund, a corporate forest investment fund, to help reach its 2030 environmental goals. New Forest partnered with Oji Holdings, a Japanese paper manufacturer, on the fund, with the latter investing US$300 million. Through the vehicle, Oji will look to invest in productive plantation forestry assets in Southeast Asia, North America, Latin America and Africa, which generate a financial return and provide “considerable climate benefits”. Oji will seek to target an additional 1.5 million Tonnes of Carbon Dioxide Equivalent per annum of net sequestration by 2030 from the forestry assets it acquires. Oji aims to invest in 70,000 hectares of plantation forests, across greenfield and brownfield assets in the four main regions, adding to the 635,000 hectares it has already invested in. Established in 2005, New Forests has A$11.7 billion (US$7.4 billion) in AUM across more than 4.2 million hectares of investments. “We are continuing to see momentum and interest from corporates looking to invest in forestry and the natural capital asset class,” said Mark Rogers, CEO at New Forests. “By investing in sustainable forest plantations in four major regions of the world, we will be assisting Oji to achieve their 2030 mission of growing their sustainable forestry assets and reducing overall carbon emissions.”
Nordea Asset Management (NAM) has added or kept ‘sustainable’ in the names of 17 of its ‘Nordea 1’ SICAV fund range, in keeping with the European Securities and Markets Authority’s (ESMA) naming rules. The funds commit to a 50% minimum allocation to sustainable investments while adhering to Paris-aligned Benchmark exclusions. Included in this suite is NAM’s flagship ESG STARS equity and fixed income range, which launched its first solution in 2011, as well as the Global Climate Transition Engagement Fund and European High Yield Sustainable Stars Bond Fund – the latter of which recently surpassed €1.5 billion (US$1.6 billion) in AUM. “We see a lot of movement in the responsible investment space right now, with several players reconsidering their commitments to ESG,” said Nils Bolmstrand, NAM’s CEO. “Our dedication to sustainability has always been at the heart of Nordea Asset Management’s mission. Our alignment with ESMA’s new guidelines underscores our ongoing dedication to delivering clear, transparent, and effective responsible investment solutions that meet the evolving needs of our clients.”
The Responsible Investment Association Australasia (RIAA) has selected Kate Turner, Global Head of Responsible Investment (RI) at global asset manager First Sentier Investors, as its new Chair. She replaces Ross Piper, who has stepped down after seven years in the role. RIAA said that Turner brings a strong legal background with deep expertise in global sustainable finance from her time at First Sentier. She has spent five and a half years in RI-focused roles at the firm, including two and a half years in her current position. Turner was also an associate director at Sustainalytics, the ESG research unit of data, analytics and indexes provider Morningstar, for three and a half years. “Kate’s commitment to advancing RI practices is seen in her role as Chair of Investors Against Slavery and Trafficking APAC and her membership of the Advisory Group of the Net Zero Asset Managers initiative,” said RIAA. Under the leadership of outgoing chair Piper, RIAA has looked to advance RI across Australasia. This has included RIAA’s ongoing work on standards, certification, policy, advocacy and leading practice. “With shifting political, social and investment market dynamics, RIAA’s mission to align capital with a healthier society, environment and economy has never been more important,” said Piper. “It has been a privilege to serve on the RIAA Board over the past seven years, and to contribute to RIAA’s catalytic work in the growth and maturation of responsible investment.”
Former CEO of investment community CFA UK has been appointed as the first Executive Director of the Future of Sustainable Data Alliance (FoSDA). FoSDA was established in 2020 to help capital markets tackle global environmental and social challenges through data and analytics. Goodhart will start the newly created role on 22 April. In this position, he will help raise the voice of FoSDA and support them in providing the evidence base to better inform the work of policy makers, regulators and standard setters. Goodhart stepped back from his role at CFA UK earlier this year so that he could spend more time on sustainable finance. “This appointment reflects our members’ commitment to shaping the future of sustainable data at a pivotal time for the sustainable data and research industry and its clients,” said Catalina Secreteanu, Chair of FoSDA’s Board and Managing Director, ESG Solutions, Europe at Morningstar Sustainalytics. “Collaboration is key, and Will’s leadership will drive FoSDA’s initiatives, foster partnerships and champion the role of high-quality data and decision-making. The Board looks forward to working with Will to raise the voice of sustainable data and analytics ecosystem and to lead FoSDA into its next phase of its development.” Goodhart was nominated for the role following what FoSDA described as a “competitive selection process”. FoSDA’s current members and associate members are Bloomberg, ClarityAI, EcoVadis, LSEG, Moody’s, Morningstar Sustainalytics, SIX, S&P Global, CDP, Icebreaker One and Climate Bonds Initiative.
