Ninety-five percent of the world’s top 250 companies are now publishing their carbon emissions reduction targets, according to Big Four accountancy firm KPMG’s ‘2024 Survey of Sustainability Reporting’. This is an increase from 80% in 2022. In addition, more than half (56%) of the top 250 companies have a sustainability leader and 30% of the top 100 companies consider sustainability in leadership pay – up from 45% and 24% respectively in 2022. Some companies have changed their business practices ahead of the move to mandatory reporting under the EU’s Corporate Sustainability Reporting Directive (CSRD), such as by reporting material topics in accordance with the European Sustainability Reporting Standards (ESRS). Adoption of Task Force on Climate-related Financial Disclosures (TCFD) recommendations also continues to rise, with nearly three quarters of the top 250 companies reporting climate risks in line with framework. Despite moves towards mandatory reporting, voluntary standards – such as those offered by the Global Reporting Initiative (GRI) – remain widely-used. “KPMG’s findings – and the fact that there are more sustainability leaders within executive teams at the boardroom than ever before – are clear evidence that we’re making solid progress on the journey toward greater transparency and positive corporate actions to address [ESG] challenges,” said John McCalla-Leacy, Head of Global ESG at KPMG International. “The mainstream view today is that businesses that measure and report ESG risks – clearly and in-depth – are also likely to manage these risks better and deliver greater long-term value.” The survey, which is produced every two years, provides analysis of the sustainability and ESG reports from 5,800 companies across 58 countries and jurisdictions.
Sustainable Investor
News in Brief
A new report offers advice to Christian investors on selecting and working with asset managers to ensure their assets are invested in a manner consistent with their faith. Published by Church Investors Group (CIG), which represents organisations with £26 billion (US$33 billion) in AUM, the guidance outlines the steps involved in selection, appointment and monitoring. It also provides a framework to help ensure that church investors’ values, beliefs, and policies are integrated in the management of their investments. “We have faith in sustainable investment; but we also want our asset managers to have more room for faith,” said Stephen Beer, CIG Chair of Trustees. “Our aim is to help members form long-term relationships with asset managers, built on mutual understanding.” CIG promotes ethical investment for the public benefit, encouraging the development of investment policies based on Christian ethical principles and drives responsible business practice through engagement with company management. The guide helps Christians to engage constructively with their investment managers, recognising that Church investors will want to avoid making investments contrary to their beliefs, while also seeking to support tangible and positive social and/or environmental outcomes. The Christian investment universe is estimated to represent around US$1.75 trillion across individual and institutional investors. “At the heart of this project is a framework to help Christian investors set clear expectations for the asset managers who enact their mandates,” said Dr Rory Sullivan, the report’s co-author and CEO of Chronos Sustainability. “This creates alignment right through the value chain in terms of the systems and processes they expect managers to have in place, the specific issues they expect managers to consider, and the outcomes and impacts they expect managers to achieve.”
Hong Kong’s Securities and Futures Commission (SFC) has outlined regulatory expectations for how asset managers conduct due diligence on ESG ratings and data products providers. The SFC said its previous fact-finding exercise highlighted common concerns among asset managers regarding service providers’ data quality, transparency and conflicts of interest management. The commission expects asset managers to exercise due skill, care and diligence when engaging third-party service providers and ensure that resources are adequate and effective for the proper performance of their business activities. “To meet such regulatory expectations, asset managers should conduct reasonable due diligence and ongoing assessments on third-party ESG service providers,” the SFC said. The commission’s circular said that the due diligence and ongoing assessments should allow asset managers to “reasonably understand the ESG products provided by the third-party ESG service providers”. This includes product functionality – such as the source and timeliness of underlying information, any use of estimates, methodologies applied, and the criteria and approach for assessing the covered entity – as well as product limitations and purposes. To meet regulatory expectations, the SFC says asset managers can take into account the principles and recommended actions of the recently-finalised Hong Kong Code of Conduct for ESG Ratings and Data Products Providers, or “other similar or higher standards” during their due diligence and ongoing assessment process.
Global real assets investment management firm CBRE Investment Management (IM) has selected George Crone as Sustainability Lead for UK direct investments. Joining from CBRE Advisory, which provides investment advisory services in commercial and residential real estate, lending and indirect markets, Crone will support asset and portfolio managers across the UK in accelerating the delivery of the firm’s ‘Sustainability Vision’ and ‘Zero Emissions Building Roadmap’. “With investor pressure on returns and the delivery of sustainability – particularly zero emission buildings – now is a challenging but exciting time to join the investment management business,” said Crone. He has consulted on CBRE IM portfolios since 2018 and will now report to Robbie Epsom, EMEA Head of Sustainability. “Our focus on sustainability is fundamental to mitigating risk, creating value, maximising long-term investment returns and helping to preserve our planet for future generations,” said Epsom. “We are thrilled that George has joined the investment management team, where, using his extensive knowledge of our portfolio and occupiers, he will help accelerate our ambition to deliver net zero carbon performance and physical resilience across our assets.” CBRE IM has US$148.3 billion in assets under management, as of 30 September.
Private equity impact investor LeapFrog Investments has closed its fourth fund with commitments and designated co-investments totalling US$1.02 billion, having initially targeted US$1 billion. The fundraise included US$808 million of primary fund commitments and up to US$210 million of pre-allocated co-investment to accelerate high-impact healthcare and financial services companies in growth markets. In combination with a partnership with Prudential Financial to invest in African financial services firm Alexander Forbes, the close brings new allocations to LeapFrog’s healthcare and financial services strategies across the recent fundraising cycle to over US$1.15 billion. Separately, LeapFrog also recently launched a climate strategy investing in green tools and technologies across Africa and Asia. Cornerstone investors for Fund IV include limited partners such as Temasek, AIA, Prudential Financial, and development financial institutions, including the European Investment Bank and the US International Development Finance Corporation. LeapFrog also drew commitments from global asset managers Sumitomo Mitsui Trust Bank and Van Lanschot Kempen, healthcare strategic investor Eli Lilly, and foundations and endowments such as the Ford Foundation and the IMAS Foundation, a purpose-led independent asset manager supporting the INGKA Foundation. Fund IV also broadened its investor base to Singapore, China, Japan, Austria, Norway, Oman and Turkey. According to LeapFrog, the fund aims to support 100 million emerging consumers and producers and has already reached 24 million through five initial companies. “Fund IV will be instrumental in scaling the impact champions of the future in financial services and healthcare, as well as building future prosperity and economic resilience for emerging consumers,” said Chairman Dominic Barton.
ISS ESG has released a customisable version of its Climate Impact Report to help investors improve their climate-related target-setting, risk management, reporting, and engagement activities. The tool leverages ISS ESG’s scenario alignment offering, which has been supplemented to reflect the latest developments in best practices for measuring portfolio alignment and incorporated the recommendations of the Glasgow Financial Alliance for Net Zero for transition planning by financial institutions. Policy and technological developments are assessed through report’s scenario analysis models, as well as projected temperature rises ranging from 1.5°C to more than 3°C by 2050. The new offering looks to meet market demand for a more unified approach to scenario alignment, by enabling subscribers to customise the scenario alignment section of their climate impact report and base their analysis on a selected single model. ISS ESG subscribers can select either a standard or advanced package, incorporating either two or five possible models respectively, and up to 22 possible scenarios. Using the tool, investors can assess the performance of their portfolios for both 2030 and 2050, with the new report applying implied temperature rise metrics. ISS ESG plans to further innovate its climate solutions suite next year. ISS ESG is the sustainable investment arm of global index provider ISS STOXX.
Shareholders in the food and drink sector have challenged CEOs at some of the industry’s largest companies – including Coca-Cola and Mondelez – to be more transparent about the healthiness of their products. “Health is a systemic risk that affects the whole economy,” said Tom Sanders, Senior ESG Analyst at UK-based pension scheme Nest. “Food and drink companies must take responsibility in helping manage these risks by being more transparent, using standards as an important first step.” The investors, coordinated by NGO ShareAction and collectively managing £2.34 trillion (US$2.94 trillion) in assets, asked targeted companies to adopt internationally-accepted nutrition standards for reporting the healthiness of their sales, highlighting their concern that an overreliance on sales of less healthy products promotes poor diets and sicker societies. This harms economic productivity and threatens long-term business success and financial returns, the investors said. The current lack of transparency hinders investors’ ability to fully assess their portfolio exposures to such risks. “It’s really encouraging to see the momentum building among the investment community to hold the food and drink sector to account for its impact on public health,” said Thomas Abrams, Co-head of Health at ShareAction. “By adopting a responsible investment approach to public health, investors can not only manage financial risks but also help more people to enjoy healthier lives for longer.” Recent research has shown that large food and drink producers are increasing their share of revenues from healthier products, but are still failing to embed nutrition into their business models.
Global index provider FTSE Russell has introduced the FTSE MIB ESG Risk-Adjusted Index for investors seeking to manage ESG risks when investing in leading Italian stocks. According to the firm, the new benchmark will provide users with improved index-level ESG performance, adjusting ESG and carbon risks, active industry weights and maximum stock weight with a low tracking error. It will tilt away from companies with fossil fuel reserves and carbon emissions and towards firms with higher ESG scores. The index will incorporate a range of exclusions, focusing on controversial weapons, tobacco, thermal coal, oil sands, shale energy, and Arctic exploration. Firms that potentially breach the UN Global Compact principles are also excluded. “Increasingly, investors are seeking products that provide a simple alternative to flagship market cap benchmarks with a greater emphasis on ESG risks to complement more focused sustainable strategies,” said Stephanie Maier, Head of Sustainable at FTSE Russell. “This launch is in response to growing customer demand and will provide investors with a tool to access equity market exposure whilst also reducing exposure to key ESG risks.” FTSE Russell said the new index, part of a family launched in April 2023, would provide investors with broad exposure to the Italian stock market, while improving the ESG and climate risk characteristics of their portfolio. The FTSE MIB is the benchmark stock market index for the Borsa Italiana, the Italian national stock exchange, owned by Euronext since it was divested by the London Stock Exchange Group (LSEG) to secure European regulatory approval for the acquisition of Refinitiv. FTSE Russell is wholly owned by LSEG.
To support its investment in renewable energy, pan-European fund manager Downing has made five appointments to its energy and infrastructure investment team, which now totals 18 people. Ingrid Edmund has joined the firm as Senior Investment Director from Columbia Threadneedle Investments, where she was Head of Financing, Infrastructure Equity Investments. Edmund has more than two decades experience of acquiring, financing and managing infrastructure investments across EMEA in sectors including energy transition, digital, transport and social. She previously spent almost two years at HSBC Global Asset Management as Director of Infrastructure Debt. “Ingrid brings deep expertise and extensive relationships across all our key markets, and she will make a major contribution to the ongoing growth of our business,” said Tom Williams, Head of Energy and Infrastructure at Downing. Yusra Siddique has joined the team as an Associate Director from global offshore wind developer Corio Generation – a Macquarie Asset Management portfolio company established in 2022 – where she was Vice President in the Origination and Capital Finance team. Downing has selected Tomas Schwarzenberg as Investment Executive, who brings both renewables and energy transition-focused experience. The firm has also appointed Totti Saikkonen as Investment Executive and Mate Toth as Investment Analyst to enhance its Nordic region expertise. Since 2010, Downing’s energy and infrastructure team has made more than 200 investments and has £920 million (US$1.2 billion) of AUM in the solar, wind, hydro and battery storage sectors. “Each of the new appointments bring complementary skills to the energy and infrastructure team’s capabilities and demonstrate our commitment to continued expansion,” said Williams.
Climate-focused funds globally are set to collectively suffer their first year of outflows to the tune of almost US$24 billion, according to new research by data provider Morningstar Sustainalytics. The report, which reviewed the global climate funds landscape from January to the end of September, noted that these outflows are in “stark contrast” to the US$345 billion combined inflows over the last four years. Investors pulled the most money (US$25 billion collectively) from funds focused on climate solutions and clean energy and tech funds. Funds tracking Paris-aligned benchmarks also experienced US$7.4 billion in outflows during the nine months tracked, despite their general outperformance. In addition, the number of climate funds launched globally fell to 69. However, global assets in mutual funds and exchange-traded funds with a climate-related mandate increased by 6% since January to US$572 billion. In the US, climate transition funds continued to see positive flows, with assets reaching US$10.7 billion – up 25% in the last nine months. “As the consequences of climate change become increasingly visible and costly, it may be surprising to see outflows from strategies designed to help investors consider climate in their investment portfolios,” said Hortense Bioy, Head of Sustainable Investing Research at Morningstar Sustainalytics. “However, investors can see this either as a risk factor or as an opportunity.” She said several factors have contributed to this trend, including the high interest rates environment, an uncertain political and regulatory, and greenwashing concerns and anti-ESG sentiment. “Whether these headwinds will subside or continue in 2025 and beyond remains to be seen,” Bioy noted.
