A coalition of 27 sustainability-focused organisations grouped under the Rockefeller Philanthropy Advisors’ Nature Positive Initiative (NPI) have launched a consultation on standardised state-of-nature metrics. Unveiled at the Nature Positive Summit in Sydney, the metrics propose a universal approach to measuring the state of nature, aiming to transform how businesses, financial institutions and other key stakeholders embrace action and report on nature-positive outcomes. The proposed measurements are organised around four core indicators – ecosystem extent, ecosystem condition, landscape intactness and species extinction risk – and are designed to integrate metrics under existing frameworks, such as the Taskforce on Nature-related Financial Disclosures, the Science Based Targets Network, and the Global Reporting Initiative. They also aim to support companies in meeting upcoming obligations under the EU Corporate Sustainability Reporting Directive. “Nature’s rapid decline threatens global economic stability and human welfare, yet there is no common approach to measure nature’s decline or recovery,” said Marco Lambertini, Convener at the Nature Positive Initiative. “This presents a significant challenge for organisations and also an excuse for inaction, evidenced by the fact that only 6% of Fortune Global 500 companies have developed targets to address their impacts on biodiversity.” The metrics were developed through a six-month stakeholder engagement programme involving 100 organisations including conservation groups, Indigenous forums, scientific institutes and private sector firms, with support from EY and The Biodiversity Consultancy. The process distilled more than 600 existing metrics into a “robust, credible and practical set for widespread adoption”, the NPI said. The online consultation will run until 4 November, with the final version planned for January 2025 – aiming to ensure a standardised and comparable way of measuring progress towards the global goal to halt and reverse biodiversity loss by 2030, as stated in the Global Biodiversity Framework.
Sustainable Investor
News in Brief
World Bank Group member the International Finance Corporation (IFC) and HSBC Asset Management (HSBC AM) have partnered to set up a specialised fund targeting corporate bond issuers in emerging markets (EMs). Aligned with Article 9 of the Sustainable Finance Disclosure Regulation, the fund will support the existing HSBC Global Emerging Market Corporate Sustainable Bond Strategy, investing in publicly listed bonds issued by corporate and financial institutions in EMs. The partnership between the IFC and HSBC AM will aim to increase sustainable growth and impact in EMs by investing in key areas including sustainable technologies and social impact. It will leverage the IFC’s extensive EM investments experience – deployed across more than 100 countries – to help mobilise backing from institutional investors. In the 2024 fiscal year, the IFC committed US$56 billion to private companies and financial institutions in developing countries. “By aligning with SFDR Article 9, which places a strong emphasis on issuer-level sustainability and transparency beyond just an issuance’s use-of-proceeds, the HSBC corporate bond strategy will support the growth of sustainable businesses and accelerate their green transition,” said Mohamed Gouled, Vice President of Industries at the IFC. “The IFC’s investment is expected to mobilise additional institutional investors and increase the pool of capital dedicated to sustainability-related transactions in EMs.”
IFC and @HSBC launch a new strategy to drive sustainable growth and impact in emerging markets by investing in key areas such as sustainable technologies and social impact. Read more here: https://t.co/dq7D0Bb7Gx #LivablePlanet pic.twitter.com/qvwWK7FLPx
— IFC (@IFC_org) October 2, 2024
The Institutional Investors Group on Climate Change (IIGCC) has published guidance outlining how investors can address methane emissions in their investment portfolios. “Where the Kyoto Protocol defines six greenhouse gases, all are not created equal in their atmospheric and warming impacts,” said Roger Lewis, Head of Sustainability and Responsible Investing at investment manager Downing LLP. Some – carbon – get almost all the attention, but the others also trap heat and can be concentrated in certain sectors and countries [so] these definitely deserve attention from investors.” The IIGCC has outlined engagement frameworks for addressing methane emissions from oil and gas and coal operations, and for engaging with the wider ecosystem on related risks – including banks, policymakers and fossil fuel value chains. In addition, the paper considers the climate science of methane and the existing regulatory and reporting landscape. “Methane is a major source of global warming that has been underappreciated by the financial sector – especially since a significant share of methane emissions can be eliminated at a reasonable cost,” said Andrew Howell, Senior Director for Sustainable Finance at Environmental Defense Fund. “IIGCC’s new methane paper is a timely and much-needed contribution to the conversation the investor community needs to be having around methane from oil and gas and coal mining.”
The European Securities and Markets Authority’s (ESMA) new fund naming guidelines create inconsistencies with other sustainable finance regulations, the European Fund and Asset Management Association (EFAMA) has warned. In particular, it is misaligned with the EU Green Bond Standard (EU GBS), running the risk of hampering growth in the corporate green bond sector. As such, clarification is urgently needed to enable, rather than restrict, EU sustainable investment, EFAMA said. “Our hope is that ESMA will see the logic of this when it comes to green bonds,” said Anyve Arakelijan, Regulatory Policy Advisor at EFAMA. “If Europe wants to remain a world leader in sustainable finance, consistent understanding and application of key concepts will be crucial.” While the EU GBS doesn’t restrict the eligibility of issuers or exclude companies based on standards for Paris-aligned benchmarks (PAB), the fund naming rules do – regardless of the project being financed. “This means that a bond fund investing in green bonds might have to change names if it does not restrict the eligibility of bond issuers,” EFAMA explained, adding that this restriction limits the investable universe for green bond funds. The largest corporate issuers are typically utility companies, which play a vital role in developing the infrastructure needed for a sustainable future, the association said – as such, excluding them from funds using sustainable or environmental terms in their names could raise their cost of capital, hindering key projects and slowing down the energy transition. “The EU has seen significant growth of the green bond market and accounted for almost half the world’s green bonds last year,” said EFAMA Director General Tanguy van de Werve. “If the EU wants to remain competitive in this area and facilitate the financing of green projects in Europe and beyond, regulators and supervisors need to ensure rules like the fund naming guidelines don’t hinder this market or unnecessarily increase regulatory complexity for end investors.”
The ACCESS pool – a collaboration of local government pension schemes (LGPSs) from central, eastern and southern English counties – has chosen Orchard Street Investment Management to manage its Impact Real Estate strategy. Composed of 11 LGPSs, ACCESS’s participant pension funds have combined AUM of approximately £45 billion (US$58.9 billion), with the organisation making an initial £100 million commitment to the impact real estate strategy. Orchard Street will look to deliver financial returns within a formal impact investment framework focused on the decarbonisation of buildings to deliver ESG–led outcomes based on measurable targets. The partnership sees Orchard Street adds a second LPGS pool to its list of institutional clients, having previously launched the Orchard Street Social and Environmental Impact Fund with cornerstone investment from the Brunel Pension Partnership. “We have been impressed with Orchard Street’s history of impact investing in commercial real estate and [its] leading stance on responsible investing,” said Mark Kemp-Gee, Chairman of the ACCESS Joint Committee. “This investment partnership will provide attractive long-term financial returns for our members alongside measurable targets to decarbonise, improve health and create social engagement with local communities with a manager that is fully aligned with all the outcomes desired by our members.”
BNP Paribas Asset Management (BNPP AM) has listed four ESG equity exchange-traded funds (ETFs) on the London Stock Exchange (LSE). The four funds aim to enhance the firm’s capabilities across ESG and thematic investing by tapping into the UK ETF market pool and providing investors with related innovative investment solutions that align with ESG-related standards. “These landmark listings mark the realisation of a journey two years in the making, which began when we decided to set up the ICAV, and are the result of an important collective effort across BNPP AM,” said Lorraine Sereyjol-Garros, Global Head of Business Development ETF and Index Solutions. The ETFs are sub-funds of BNPP AM’s ICAV, which was first created at the start of 2023.
The International Capital Market Association (ICMA) has published the voluntary Hong Kong Code of Conduct for ESG Ratings and Data Products Providers. The development of the code was sponsored by the Hong Kong Securities and Futures Commission (SFC), which last year appointed the ICMA to provide the secretariat and convene an industry working group. In line with recommendations by the International Organization of Securities Commissions (IOSCO), the code focuses on promoting transparency, good governance, management of conflicts of interest, and strengthening systems and controls in the sector. A public consultation was also held earlier this year to gather feedback from market participants. Welcoming the involvement of key stakeholders from the private and public sectors, ICMA Chief Executive Bryan Pascoe said the association would continue to contribute to best practices in the market, as well as Hong Kong’s wider sustainable finance initiatives. “We congratulate the working group and ICMA for the successful finalisation of the voluntary code,” said Julia Leung, Chief Executive Officer of the SFC. “[It] will establish a benchmark for the provision of high-quality, reliable and transparent ESG information to combat greenwashing in Hong Kong’s growing green and sustainable finance ecosystem.” The code will be hosted and maintained by the ICMA, with ESG ratings and data providers encouraged to adopt it to enhance transparency and foster trust in their offerings.
Dutch specialist investment manager Van Lanschot Kempen has partnered with private markets impact specialist Collective Action to bolster its impact investing knowledge and boost its access to the market. “We see a strong increase in demand for high-quality impact solutions from our institutional clients,” said Wilse Graveland, Head of Institutional Solutions at Van Lanschot Kempen. “With Collective Action, we will provide institutional investors access to deep experience and expertise, along with a global network in impact investing.” The collaboration looks to strengthen Van Lanschot Kempen’s advisory services and provide clients with additional opportunities to invest in high-quality impact investments – particularly in biodiversity. Van Lanschot Kempen has offered impact solutions since 2018 and currently manages approximately €4 billion (US$4.4 billion) in impact-related solutions. “Dutch investors have ambitious goals, and stakeholders are increasingly realising that the capital they represent can not only generate financial returns but can also make a positive impact on major social and environmental challenges,” said Marlene Stam, Founding Partner at Collective Action. “With our joint expertise, we elevate knowledge and quality to a higher level, supporting investors who aim to take a leading role in impact investing, where risk management, return and impact are seamlessly integrated.”
ISS ESG, the sustainable investment arm of ISS STOXX, has augmented its suite of regulatory solutions to support investors in meeting evolving ESG disclosure requirements across the UK and EU. The suite has been updated to support the European Securities and Markets Authority’s Fund Names guidance and the UK’s Sustainability Disclosure Requirements (SDR). Both solutions aim to provide investors with the flexibility to create custom screens tailored to specific investment objectives and strategies, while accessing the underlying data to conduct a more granular analysis of funds’ sustainability characteristics. “With the new ESMA fund name guidelines and UK SDR regulation coming into effect in November and December, respectively, the timely launch of ISS ESG’s dedicated new solutions helps investors meet their imminent compliance deadlines,” said Till Jung, Head of ESG Business at ISS STOXX. ISS ESG has also added enhancements to its existing EU Taxonomy solution to support investors’ upcoming disclosure obligations, which will come into force early next year.
UK-based CCLA Investment Management has published its annual report on investor efforts to combat modern slavery in company supply chains, highlighting progress across corporate engagement, public policy and data. Launched in 2019 by CCLA, the workstream is now supported by investors representing £15 trillion in AUM, using their leverage to help companies find, fix, and prevent modern slavery in their supply chains. Over 50 million people were estimated to be in modern slavery in 2022, while the International Labor Organization tallies 28 million people who are victims of forced labour – which CCLA’s initiative focuses on. This year’s report highlighted progress made over recent years, including: the launch of the CCLA Modern Slavery Benchmark, which assesses modern slavery statements and other disclosures from the largest 100 UK companies; a roundtable held by the Cabinet Office, CCLA, LGT Wealth Management and the Supply Chain Sustainability School, attended by 17 major UK-listed and private construction companies; and active engagement with government, policymakers and regulators to promote a meaningful regulatory environment. “The number of people trapped in modern slavery has grown over the past six years as Covid-19, conflict and climate change have disrupted labour markets, and so it is vital that businesses do everything they can to prevent it in their own organisations and value chains,” said Dame Sara Thornton, Modern Slavery Consultant for CCLA. “As investors, we can have influence not just over the companies in which we invest but across the wider system. However, in order to know where to start – we need information and data, which in the case of modern slavery, can be hard to come by.” Modern slavery is increasingly a financially material risk for investors, the report noted – particularly with upcoming regulations on business to address human rights risks, including the EU Corporate Sustainability Due Diligence Directive.
