Pan-European market infrastructure Euronext has unveiled its Euronext Sustainable Network, intended as a collaborative ecosystem consisting of key European players in sustainable finance. Participants in the initiative will include investment firms, banks, lawyers, audit and advisory companies, carbon brokers and data providers. According to Euronext, the network will focus on promoting best practice, supporting the around 1,900 European issuers and 6,000 international investors associated with Euronext, and enhancing collaboration to drive innovation. Further, it will seek to advance sustainable finance by aligning efforts across stakeholders, educating members on ESG topics, regulations, and emerging trends, as well as leveraging collective expertise. The announcement was one of several made at Euronext Sustainability Week, including the launch of the exchange group’s ESG Trends Report 2024, which covers the reporting and performance of listed firms. According to the report, Euronext-listed firms registered an average decrease of 14% in Scope 1 and 2 greenhouse gas emissions over the past three years, with mid-cap companies reporting a 29% reduction. Euronext also published an updated version of its ESG Reporting Guide for listed firms – incorporating the latest EU regulations, recent developments in ESG standards and case studies on ESG practices. It also launched an ESG advisory solution to support implementation of European Sustainability Reporting Standards by small- and medium-sized companies under the Corporate Sustainability Reporting Directive. “The ongoing development of our ESG products and services underscores our dedication to equipping companies with the essential tools to navigate the evolving regulatory landscape, elevate their ESG performance, and contribute to a more sustainable future,” said Stéphane Boujnah, Euronext’s CEO and Chairman.
Sustainable Investor
News in Brief
A coalition coordinated by the World Benchmarking Alliance (WBA) has urged asset managers to review and adjust their approach to sustainable investing to ensure it does not inadvertently lead to divestment from emerging markets. Organisations joining the call included the New York City Comptroller, Prudential, Ninety One, the Institutional Investors Group on Climate Change, Pensions for Purpose, and the UN Principles for Responsible Investment. Growing evidence suggests that ESG-related policies and sustainable investment strategies adopted by financial institutions may discourage investment in emerging markets and developing economies (EMDEs) due to perceived higher ESG risks, the call to action stated. Yet, EMDEs are home to 85% of the global population, account for over half of global GDP, and contain most of the world’s natural resources. “By 2050, six of the seven largest economies in the world are projected to be EMDEs,” the WBA said. “Significant capital is needed to support [their] sustainable transition, achieve the UN Sustainable Development Goals, and drive economic development in these regions.” To ensure sustainable investing helps, rather than hinders, capital flowing into EMDEs for environmental and social purposes, the alliance – in collaboration with asset owners, asset managers and investor groups – developed best practice guidance, including region-specific transition pathways and engagement strategies. “Investing in EMs presents challenges like governance issues and high carbon intensity, often resulting in investors shifting focus to developed markets,” said Bruna Bauer, Research Manager at Pensions for Purpose. “However, incremental improvements and active engagement can enhance transparency and drive economic and social progress. Investments in these markets can capitalise on opportunities such as demographic shifts and the energy transition funding gap. By adopting strategic approaches and fostering transparency, investors can unlock significant impact potential, contributing to sustainable long-term growth.”
ISS ESG, the sustainable investment arm of index provider ISS STOXX, has introduced a new Biodiversity Fund Screening dataset, enhancing its ESG Fund Rating thematic coverage. The expansion, launched alongside new fund-of-funds coverage, sees new biodiversity factors added to further differentiate the firm’s offering in the market, providing a wider range of themes and data factors. ISS ESG fund-rating and fund-screening solutions support investors in evaluating the environmental, social and governance performance of equity and bond funds globally, in line with key ESG risk and performance metrics. This enables investors to identify funds that meet clients’ ESG preferences, and screen funds that outperform against specific ESG characteristics such as climate or biodiversity. In January, ISS ESG enhanced its Biodiversity Impact Assessment Tool. “ISS ESG has applied its ESG research and data management expertise to enhance its ESG Fund Rating thematic coverage, developing a broad and deep dataset to help support a wide range of investor use cases,” said Till Jung, Head of ESG Business at ISS STOXX. “This is especially important with the introduction of ESG regulations in several jurisdictions to standardise disclosures and combat greenwashing.”
Visual Lease, a specialist in integrated lease management, accounting and reporting, has announced a strategic partnership with reporting services provider Workiva to streamline financial and sustainability disclosures. “Our shared mission is to empower organisations in achieving transparent reporting, which includes the timely and growing need to accurately report against their sustainability goals,” said Robert Michlewicz, CEO of Visual Lease. The partnership comes at a critical juncture, with new and evolving ESG disclosure requirements being introduced across the world and placing increasing pressure on businesses. “Through our technology partnership, our solutions can automate data flows and ensure precision in meeting evolving sustainability disclosure standards and data validation for assurance, as well as empower our shared clients to make informed, data-driven decisions benefitting both their organisations and the environment,” said Paul Volpe, Workiva’s Senior Vice President of Solutions and Growth. Separately, cloud-enabled audit, financial reporting and data analytics solutions provider Caseware has extended its ESG reporting application across the Netherlands, Belgium, Luxembourg and Denmark. The app provides users with clear guidance throughout the implementation process of reporting standards such as the EU’s Corporate Sustainability Reporting Directive (CSRD), ensuring accuracy of documentation and tracking at each stage. It also provides users with materiality analysis, information collection and collaboration, and support in building the final report. “There is a substantial need for support in establishing a strong and precise process for complete ESG reporting, especially as the CSRD imposes considerably greater requirements on companies,” said Heike Kramer, Business Development Manager at Caseware Germany. “The solution will give customers across Europe the tools they need to fulfil their obligations and streamline the process.”
The London Pensions Fund Authority (LPFA), an £8 billion (US$10.44 billion) local government pension scheme fund, has asked stewardship solutions firm Minerva Analytics to provide additional insight into climate-related fund manager voting and rationale. Under the arrangement, Minerva will help the LPFA track how share voting decisions made on its behalf are aligned with the Net Zero Voting Guidance of the Institutional Investors Group on Climate Change (IIGCC). The LPFA is a member of the Paris Aligned Asset Owners, an international group of asset owners committed to supporting net zero by 2050 or sooner, supported by the IIGCC. As a part of the service, Minerva will develop a bespoke voting policy which aligns with the LPFA’s net zero objectives and targets to decarbonise real world emissions. Voting rights are exercised by Local Pensions Partnership Investments (LPPI) as the delegated manager of the LPFA’s pooled global equities. Minerva’s analysis will provide the LPFA with independent evidence of how LPPI’s voting actions support common net zero priorities. “The UK Stewardship Code calls on asset owners like us to monitor their asset managers, so it’s essential that we can evidence how our investments are managed in alignment with our stewardship strategy and policies,” said Paul Hewitt, LPFA’s Responsible Investment Manager. “Our strong commitment to net zero and good stewardship means we have a responsibility to make sure we do our bit to understand how our managers are aligning with that commitment and we take these responsibilities seriously.” The partnership will also give the LPFA access to specialist ESG research which will support other aspects of its active ownership programme, including as a member of the IIGCC’s Net Zero Engagement Initiative. According to the LPFA’s most recent net zero progress report, the scheme has already reduced its emissions intensity by 75% compared its 2019 baseline, six years ahead of its 2030 fixed target.
An investor group representing US$21 trillion in AUM has backed global nonprofit the Access to Nutrition Initiative (ATNI) in its call to use common standards to measure the healthiness of food portfolios at major corporations. The commitment follows a year of research and consultation conducted by ATNI, involving 86 experts from 14 countries across the investment community, the food industry, NGOs and academia. One in five deaths globally are associated with a poor diet, the ATNI claimed, adding that “as the hidden costs of the food system mount, the need for corporate accountability becomes greater than ever”. The nonprofit insisted that investors and regulators needed universal and clear standards to measure baselines and progress on the industry’s transition to more nutritious product portfolios. “Nutrition is a key material topic for a wide range of businesses – from food and beverage companies to out-of-home,” said Frank Wagemans, Senior Investment Specialist at Achmea Investment Management. “Until now, it was almost impossible for investors to compare the healthiness of product portfolios between companies.” Up to 400 different nutrient profile models (NPMs) are currently being used sporadically to measure the healthiness of food products and portfolios. To address the lack of standardised nutrition performance measurements, ATNI conducted research starting in June 2023 – funded by The Pictet Group Foundation. A three-round Delphi process also facilitated cross-sectoral stakeholder alignment. ATNI found three government-endorsed NPMs as most appropriate for future investor reporting – Health Star Rating (HSR), Nutri-Score, and the UK NPM. “This [should] enables us, as investors, to assess, compare and engage companies on this topic and will be a building block for reporting standards such as GRI, SASB and the CSRD requirements,” said Wagemans.
The UK’s Financial Conduct Authority (FCA) has given asset managers temporary flexibility to comply with the naming and marketing rules under its Sustainable Disclosure Requirements (SDR), until April next year. The regime, which was introduced in November 2023, aims to reduce greenwashing risk by introducing new compliance and disclosure requirements for products to qualify for an SDR label. Firms have been able to use the investment labels on their products since the end of July, but upon interacting with the investment industry, the FCA determined that it was taking longer than expected for fund managers to make the required changes. “Given the importance of getting SDR right for investors, we are seeking to take a pragmatic and outcomes-based approach to provide further support to those firms which may need additional time to operationalise any changes required,” the FCA said. As such, fund managers now have until 5pm on 2 April 2025 to comply with the naming and marketing rules – but must continue to comply with all other rules as originally scheduled, including the anti-greenwashing rule that came into effect in May. “We are pleased that the FCA has listened to industry and granted investment management firms additional time to comply with the SDR investment labelling rules,” said Chris Cummings, CEO of the Investment Association. “Our industry has been working hard and at pace to implement the SDR requirements, which will raise standards and improve confidence for investors in the market for sustainable investments.”
UK-based professional pensions trusteeship and governance services provider the Independent Governance Group (IGG) has launched a dedicated Strategic Pension Solutions offering. The services will be led by David Farmer, who becomes IGG’s Head of Strategic Pension Solutions. Having joined IGG from PwC in 2023, Farmer brings 25 years of experience in pensions law and corporate transactions, as well as in advising on alternatives to full-scheme buyouts. He was specifically formed to support schemes that are navigating the rising complexities associated with surplus distribution, utilisation and other endgame strategies. Strategic Pension Solutions is the latest addition to IGG’s ‘centres of excellence’ – first created following the group’s formation in February 2023 – and will set out a clear path for each pension scheme’s future, covering all variables in developing a robust strategy that meets its objectives. In parallel, IGG has announced a new partnership with advisory firm Pensions for Purpose (PfP) on climate, housing and pensions. As part of the partnership, IGG will become PfP’s community partner, furthering its commitment to addressing challenges faced by the pensions industry through systemic risks such as climate change, biodiversity loss and income inequality. The initiative builds on work carried out earlier this year by the two entities on the inadequacy of UK pension savings for people who retire without owning a home. PfP and IGG shared several concerns, including the increasing number of people with mortgage terms extending beyond retirement age, necessitating continued payments from their pensions. “Ensuring pension funds are managed with a sharp focus on sustainability is a key value and focus area for us,” said Tegs Harding, Head of Sustainability and Trustee Director at IGG. “This closely aligns with PfP’s core mission of empowering industry stakeholders to value people and planet alongside profit.”
Netherlands-based pension services provider APG is one of three anchor investors in Allianz Global Investors’ (AllianzGI) Impact Private Credit strategy, which raised €560 million (US$618 million) from institutional investors at first close. Helped by commitments from the European Investment Fund and La France Mutualiste, the Sustainable Finance Disclosure Regulation Article 9-classified fund reached more than half its target size within a few months of launch. Using a proprietary framework, it will offer impact direct lending solutions to European small- and medium-sized companies whose core activities provide solutions to crucial environmental and social challenges. According to AllianzGI, the strategy is designed to accompany the development of “impact champions” looking to solve societal challenges, with a focus on three core themes: climate change, planetary boundaries and inclusive capitalism. In terms of environmentally focused investments, will target firms involved in clean and efficient energy, resource efficiency, sustainable food, and agriculture. On the social side, priority will be given to investments facilitating access to quality, accessible and affordable healthcare and education. “Impact investing within the private credit market is still in its infancy but is developing rapidly,” said Menno van den Elsaker, Head of Alternative Credits and Marcin Lenart, Expert Portfolio Manager for Alternative Credits at APG Asset Management. “Given the ambitious impact goals of APG’s pension fund clients ABP and bpfBOUW, APG intends to be at the forefront of these developments and to establish leading impact investing practices.”
A group of investors representing US$1.4 trillion in assets has asked companies to urgently assess and disclose their nature-related impacts and dependencies. The Nature Collective Impact Coalition – launched by the World Benchmarking Alliance (WBA) – has approached 800 companies assessed under the WBA’s Nature Benchmark on associated risks across both the upstream and downstream parts of their value chains, noting that over 55% of the world’s GDP is either highly or moderately dependent on nature. “The unprecedented rate at which biodiversity is declining is nothing less than a global emergency,” said Nana Li, Head of Sustainability and ESG at Impax Asset Management. “To confront this loss effectively, companies must better protect biodiversity and embrace opportunities that investments in natural capital can create.” The 2023 iteration of the benchmark showed that just 2% of assessed companies have so far disclosed their environmental impacts – though none of them has comprehensively addressed and disclosed nature dependencies. Companies now need to “step up”, the coalition said, with investors rewarding those taking positive steps and pressuring the laggards to do more. “As investors, we have a fiduciary duty to minimise financially material risks to our portfolios, and that responsibility extends to nature-related risks,” said Matt Crossman, Stewardship Director at Rathbones. “We see the assessment of impacts and dependencies on nature as a fundamental step in improving corporate action on nature, and how it creates risks and opportunities.” Other members of the coalition include Scottish Widows, Velliv and the Swiss Association for Responsible Investors.
