The Partnership for Carbon Accounting Financials (PCAF) has issued a public consultation on its newly developed methods for measuring and reporting financed greenhouse gas (GHG) emissions. The first of two consultation documents outlines new methods and guidance for measuring financed emissions that fall under or support Part A of PCAF’s Global GHG Accounting and Reporting Standard. It covers use of proceeds accounting, securitised and structured products, and sub-sovereign debt. The second document presents methods for two new lines of business under Part C of the standard – project insurance and treaty reinsurance – to expand emissions measurement capabilities within the international insurance sector. “As the need for greater transparency and accountability in climate reporting grows, PCAF remains committed to continuously expanding the standard to provide the international financial sector with increasingly robust tools for emissions measurement,” said Hetal Patel, Chair of the PCAF core team. The proposed methods were developed by industry-led working ground made up of PCAF signatories. “[The consultation represents an important step forward in refining global standards that promote credible and consistent data reporting across the financial sector,” said Caspar Noach, PCAF’s Technical Director. Respondents have until 28 February 2025 to submit their feedback.
Sustainable Investor
News in Brief
Finnish impact data firm Upright has unveiled a new database for the private equity (PE) sector which aims to promote transparency around firms’ sustainability progress. Informed by natural language processing-enabled technologies, it maps science-backed impact quantifications for more than 1,000 PE and venture capital (VC) funds and more than 20,000 portfolio companies globally, collectively representing a “significant portion” of the US$13 trillion PE industry. “It has been thought to be impossible to measure the impact of private equity because unlisted companies disclose little about their sustainability,” said Annu Nieminen, Upright’s Founder and CEO. “The focus of sustainability efforts has been on regulatory ESG disclosures, [but] Upright’s database […] marks a turning point in the PE sector’s sustainability potential. We can have an honest discussion about PE’s real-world impact and provide the data needed to drive meaningful change.” The database will allow investors to benchmark their impact performance against peers, identify areas for improvement in their portfolio management, and evaluate impact claims beyond marketing materials. “PE firms have unique opportunities to shape the global economy through their active investing mode, close relationships with portfolio companies, and longer investment horizons,” said Nieminen. “With PE’s growing influence comes increased responsibility to address global environmental and social challenges.”
Global asset manager Insight Investment has hired Chandra Gopinathan as Head of Responsible Investment (RI) Research, joining from UK pension scheme Railpen. He will be responsible for leading Insight’s sustainability-related research activities and integrating research findings to improve the firm’s decision making. Managing £665.1 billion (US$841.1 billion) in assets, Insight is a subsidiary of global financial services provider BNY. Gopinathan spent more than four years at Railpen as Senior Investment Manager, where he co-led the credit strategy and manager selection team, with responsibilities including energy transition investment, policy engagement and stewardship, and net zero strategy. He also chairs the Transition Plan Taskforce’s Asset Owner Working Group and is a steering committee member at the Transition Pathway Initiative (TPI) Global Climate Transition Centre. “Chandra has impressive experience gained over two decades across investment strategy, credit, stewardship, climate and net zero initiatives with a specific focus on fixed income,” said Robert Sawbridge, Head of Responsible Investment at Insight. “He has proven experience of implementing and delivering responsible investment research programmes in institutional markets and comes with an important understanding of asset owner requirements in this space.” Gopinathan’s work on sustainable ownership and climate at Railpen was taken over by Adam Gillett, Senior Investment Manager, Sustainable Ownership, while his work with external managers has been absorbed by Kunaal Vora, Head of External Manager Oversight.
Indonesia will encounter “significant implementation challenges” in its plans to phase out all fossil fuel-based power plants within the next 15 years, according to credit ratings agency Fitch Ratings. The target was revealed last month at a Group of 20 summit by Indonesian President Prabowo Subianto, who also announced plans for 75 gigawatts of additional renewable energy over the next 15 years and expansion of biodiesel production. Coal-fired generation currently represent around 67% of Indonesia’s power output, with a further 20% coming from gas and diesel plants. Fitch projects fossil fuels to account for more than 80% of power generation in the country until 2027. “Phasing this capacity out by 2040 could heighten execution and policy challenges around Indonesia’s energy transition, as well as raising risks to energy security,” the briefing warned. The agency highlighted that the country has been “weak” in following through on energy transition commitments in the past, noting that Indonesia has fallen far short of its 23% renewable power share target by 2025, achieving just 12% in 2023. Fitch added that the credit profile of corporates in Indonesia’s power and coal sectors could be detrimentally affected over the medium term if the government adjusts its policy approach to meet the target. Larger Indonesian coal producers are developing plans to diversify away from thermal coal, but the government’s support for a faster coal-power phase-out could accelerate investments and encourage more to consider investing in businesses other than thermal coal, Fitch noted.
Progress toward race equality has stalled among UK-based financial services firms, according to a new study which also reported decommissioning and reduced funding of diversity, equity and inclusion (DEI) programmes. The fourth annual ‘Race to Equality: UK Financial Services Report’ found that two thirds (62%) of UK finance sector employees think their employers’ current ethnic and racial diversity efforts was unchanged or worse than two years ago. The study, published by campaign group Reboot, is based on a survey of 800 sector employees on their views toward equality and diversity in the workplace. Four in ten (42%) said budget cuts were the biggest contributing factor to a slowdown in DEI efforts, with 22% having seen reduced funding for diversity programmes and more than a quarter (26%) reporting an elimination of diversity-focused roles over the last two years. Six in ten (61%) respondents said significant action by top-level leaders to address racism would have a “considerable positive impact” on firms’ culture and revenues. A total of 58% told Reboot their companies actively encourage employees to inform change and build an ethnic and racially inclusive culture, with 74% stating that their firm is seeking to be more racially diverse when hiring. But slightly less than half also said they felt increasing pressure not to advocate for or discuss equality and diversity issues. Reboot’s Race to Equality Index rose to 66.2 from 2023’s 64.8, but still fell short of 2022’s figure. The organisation said this was driven by an increase in the representation of diverse employees in the pensions sector, offsetting a “notable decline” in the hedge fund, wealth management and banking sectors. The report’s recommendations included a call on the government to fulfil its commitment of making ethnic pay gap reporting mandatory.
BNP Paribas Asset Management is to stop investing in the bonds of firms operating in the oil and gas sector, according to an update of its responsible business conduct policy. The firm has almost €600 billion (US$634.18 billion) in assets under management and will be the second largest asset manager in Europe if its purchase of AXA Investment Managers is approved. NGO Reclaim Finance called on BNP Paribas to apply the same approach to other subsidiaries, including insurance arm BNP Paribas Cardif, and for Crédit Agricole to follow suit, starting with its subsidiary Amundi. “This is a historic step that confirms and reinforces the transformation underway within the BNP Paribas Group,” said Lara Cuvelier, Sustainable Investment Campaigner at Reclaim Finance. “For the first time, a giant in the asset management sector is acknowledging the scientific imperative of halting the expansion of oil and gas production by taking action on bond investments. This measure is crucial, as bonds are one of the most important modes of financing for companies in the fossil fuel sector today.” Last week, a group of beneficiaries called on US pension fund CalPERS to commit to stop buying long-dated bonds issued by US fossil fuel firm ExxonMobil. In an open letter, around 2,000 members and supporters of campaign group California Common Good warned of the financial risks of investing in bonds issued by the firm maturing in 2074. “Exxon bonds fuel oil and gas expansion and many do not mature until well past CalPERS’ 2050 target for achieving net zero. These bonds provide Exxon with unrestricted funds to continue business as usual, despite the ever-increasing systemic risks of climate change,” the letter said.
UK-based pension fund consultancy Pensions for Purpose has expanded its advisory group, bringing in 12 new members to add to its eight retained advisers. New advisory group members will serve three-year terms until November 2027, offering strategic guidance on market developments, shaping educational initiatives and helping advance sustainable and impact investing within the UK. Pensions for Purpose said the appointments represent a “major strengthening” of sustainable investing expertise within the UK institutional investment and asset management industries. New advisers include Piers Lowson, Director of investment management firm Baillie Gifford, Kathy Ryan, Chief Sustainability Officer at global investment manager M&G, and pension scheme Universities Superannuation Scheme‘s Non-executive Director Helen Shay. “This breadth of expertise across the investment chain – from the most large and influential to small impact-focused boutiques – demonstrates the growing momentum behind sustainable investing and reinforces [our] commitment to driving change amongst key institutional investor audiences,” said Pensions for Purpose. Charlotte O’Leary, the firm’s CEO, added that the new members’ “collective expertise and diverse perspectives will be invaluable as we continue to advance our mission of promoting sustainable and impact investment”.
#PensionsforPurpose welcomes the appointment of 12 Advisory Group members to join our remaining eight advisers, to advance #impactinvestment in the UK. Our newly appointed group of #advisers draw on unparalleled expertise from across the investment chain.https://t.co/TBKKZzj44U pic.twitter.com/ZQHiqc43kh
— Pensions for Purpose (@Pension4Purpose) November 28, 2024
Europe’s construction industry is failing to transition in line with the goals of the Paris Agreement, according to think tank Buildings Performance Institute Europe’s (BPIE) latest EU Buildings Climate Tracker. Progress on decarbonisation has stalled, the report said, with the emissions gap more than doubling since 2016. Carbon emissions from building energy use have decreased by 14.7% since 2015 – far below the 27.9% reduction required by 2022 to remain Paris-aligned. In addition, final energy consumption in buildings has only logged a 2.8% decrease since 2015, while the share of renewable energy in buildings has grown by 6.3 percentage points since 2015 – below the required 18 percentage point increase. Renovation investments also only reached 60.6% of the required levels between 2015 and 2022. “Slow decarbonisation of buildings isn’t just a climate problem, it’s a people problem,” said Oliver Rapf, BPIE’s Executive Director. “Increasing renovation rates and scaling up renewable heating systems represent a generational opportunity to reshape Europe’s economy, boost resilience, and provide safer, healthier homes for millions.” BPIE has called for bold action from EU institutions and national governments to reverse this trajectory. “This is Europe’s chance to replicate the success of landmark projects like the Single Market – turning today’s challenges into a foundation for lasting prosperity. We cannot afford to let this slip away,” said Rapf.
Sustainability is a key topic for all asset managers, requiring them to increase resources and integration in support of their strategic objectives, according to guidance from the Asia Securities Industry and Financial Markets Association (ASIFMA). The trade association said asset managers in the region needed to increase their level of sustainability expertise, accountability and decision-making ability, “irrespective” of their sustainability or ESG ambition. “Most importantly, an organisation needs clarity about its sustainability positioning so that its sustainability objectives, efforts, and resources are aligned,” it said. ASIFMA added regulatory developments, including the impending adoption of International Sustainability Standards Board disclosure standards, were among the key drivers for asset managers to assess their sustainability capabilities. “These regulations have wide-reaching implications across a growing range of functions, including investments, products, legal and compliance, distribution, and communications,” said CEO Peter Stein. The report offers guidance on building sustainability skillsets across asset management firms and integrating sustainability across strategy, governance and risk management, also addressing the need to integrate ESG data to facilitate decision making and reporting. “We seek to counter the challenges of an evolving topic with its own language and terminology, amid an environment of regulatory and reputational risks,” said ASIFMA. The report also includes examples from members of good practice to help asset managers in future-proofing how they integrate sustainability to meet sustainability-related objectives and expectations. ASIFMA said the report was aimed primarily at asset managers but was equally relevant to asset owners.
Non-profit ChemSec’s annual ChemScore report has found the world’s largest chemical firms are making only incremental progress in transitioning to sustainable chemicals. The maximum score a company could receive via their scoring system is 48, but the average total this year stands at just 15.6. While this marks progress from the 14.1 average in 2023, ChemSec said progress remains too slow. “Many companies want to score higher and are adapting their reporting to what we ask from them,” the ChemScore report read. “There is a large difference in performance between companies, demonstrating that change is possible. There are no structural obstacles to prevent companies cleaning up their acts – it is a matter of will.” Created in response to investor demand, the benchmark scores the 51 biggest chemical companies – based on revenue – on their environmental impact and treatment of hazardous chemicals. This year, more than 70 investment companies with US$20 trillion in AUM wrote to chemical firms covered by ChemScore requesting that they engage with the rankings. More than half (54%) of the chemicals companies responded to ChemSec’s engagement efforts following the first ChemScore results in 2020. This has since gradually increased, with 71% responding to ChemSec’s requests for information this year. The report also noted that there had been “very little” decrease in chemical companies’ production and use of hazardous chemicals, despite increasing recognition of investor concerns over such chemicals impacting their bottom line.
🥳 It’s here, ladies and gentlemen, the moment you’ve all been waiting for — #ChemScore 2024.
📺 So grab a seat, get comfy, and hit play to find out who takes the crown this year: https://t.co/l3cLsFhRGt
— ChemSec (@chemsec) November 28, 2024
