Research from UK-based pensions consultancy Isio has identified 50 asset managers with an established ESG policy, with half of 120 funds under their management having ESG objectives in place. In its inaugural annual Sustainable Investment Survey, Isio assessed the state of ESG integration across various asset classes to provide insights into firm– and fund-level practices, exploring positive developments as well as areas for improvement in asset managers’ ESG commitments, investment approaches, risk management and reporting. Isio found that 98% of surveyed asset managers had a dedicated sustainable investment team supporting ESG risk management and stewardship, while 75% had set firm-level net zero commitments. Additionally, 65% of firms were signatories of the UK Stewardship Code, while 63% were part of the Net Zero Asset Managers initiative. “Sustainable investing is dynamic and has evolved significantly over recent years, especially when it comes to good practice across different asset classes,” said Cadi Thomas, Head of Sustainable Investment at Isio. “We’ve seen industry-wide improvements in climate-related reporting but continue to see a lag in social and nature-related reporting across all asset classes. It is however encouraging to see investors increasingly engage with environmental and social frameworks, such as the Taskforce on Social Factors and the Taskforce on Nature-related Financial Disclosures.”

Industry members have welcomed the scale of the new UK government’s ambitious transition plan following Labour’s win last week, but have stressed the need to secure enough investment to meet those targets. As part of its Green Prosperity Plan, the Labour party has committed to doubling onshore wind, tripling solar power and quadrupling offshore wind – but ensuring the right energy generation mix is maintained through supply security will require strong investment signals and action on planning, according to LCP Delta – a consultancy supporting the energy sector through its transition. Plans to reach a clean power sector by 2030 mean gas generation will fall significantly as the sector decarbonises, which will also reduce the profitability of existing energy plants. However, maintaining an operational gas fleet will be essential for the security of supply, LCP stressed. “Labour has outlined the need for a strategic gas reserve for this reason,” the group said. “[Our data] suggests that an efficient market-based mechanism would reduce costs and could be viable through specialised capacity market auctions for converting gas stations.” Faster decarbonisation could also bring further challenges – such as pressure on supply chains and network infrastructure. “The Green Prosperity Plan will be delivered through multiple new funds and investment vehicles, including the National Wealth Fund and Great British Energy, which have the potential to help mitigate these risks,” LCP said. “The government will want to carefully consider the support it provides to some technologies and project types to maximise its impact and avoid crowding out private investment.”

Think tank E3G and Mistra Geopolitics have urged financial institutions to map resilience-building pathways to tackle the economic fragility of debt-burdened and climate-vulnerable countries. The new report – ‘Breaking the cycle of risk: Addressing resilience and debt for a new global financial architecture’ – explored the relationship between climate, debt and resilience, and the impact of geopolitics. As international financial architecture is reformed to better support the climate transition, it is just as important to address the debt and resilience crisis for more climate-vulnerable countries, the report noted. “In the run-up to COP29’s focus on reforming financial systems […] we must not forget that countries burdened by both economic and climate vulnerability need transition finance that will not push them further into debt as they seek to build more resilience and adapt to the impacts of the changing climate,” said Ronan Palmer, Chief Economist at E3G. However, the availability of financial aid to these countries remains inadequate, the report mentioned, with climate vulnerability leading to higher interest rates which in turn make debt harder to pay off. In addition, the report has considered the ongoing challenge of investing in resilience, financing investment in resilience, debt as a constraint on resilience, and the geopolitics surrounding investing in resilience. “It is crucial to acknowledge the dual challenges of climate and debt risks,” said Dileimy Orozco, Senior Policy Advisor, Global Macro and Resilience at E3G. “Many economies will remain highly vulnerable to climate impacts without investing in resilience and responsibly taking on strategic debt. These countries need a robust safety net and a new contract with International Financial Institutions, including multilateral development banks (MDBs), the IMF [International Monetary Fund], and the private sector to ensure they thrive and have access to finance, particularly in the hardest times.” 

Nearly a third of the world’s power will be generated by wind and solar by 2033, BMI has predicted, increasing its forecast by 22% on predictions it made two years ago. The company, which is a subsidiary of Fitch Solutions, said it had upgraded its forecast due to a “a ramp-up in capacity development, predominantly from solar” and a surge in pro-renewable policy announcements. Non-hydro renewables today account for 18% of total power generations, but this will rise to 31% by 2033, BMI predicted. Overall, it expects 54% of the world’s electricity to be generated by carbon-free sources such as wind, solar, hydropower and nuclear energy by 2033 – up from 42% today. Most of the growth will come from Asia, especially China and India, with North America and Europe accounting for the next highest amount of additional capacity. Coal-fired power, meanwhile, will likely see a large global decline, led by developed economies and parts of Asia. The share of coal in global electricity generation will fall from 33% in 2024 to 24.3% by 2033, the report stated. However, emerging markets in Asia will drive new adoption of coal – particularly India, which is set to represent over 85% of new output consumption. “We expect to see a reliance on traditional natural gas power remain in many markets, owing to supply imbalance risks,” BMI added.

US asset manager BlackRock has overhauled its voting policies for funds with climate objectives to address conflicting decarbonisation priorities in the US and Europe. The firm’s new climate and decarbonisation stewardship guidelines will apply to 83 funds with US$150 billion in assets from Q4 this year. The funds affected are based in Europe, but the guidelines could eventually have knock-on effects for those in the US. Under the strategy, BlackRock funds with a climate and decarbonisation focus will utilise a different stewardship approach to the managers’ wider product offering, with a stronger emphasis on Paris alignment. BlackRock will expect the affected funds to consider shareholder proposals that, for example, request firms disclose Scope 3 greenhouse gas emissions or climate-related lobbying activities. The new approach will see the asset manager try to balance the demands of European and US clients who are driving efforts to decarbonise, and US laws – which require fund managers to prioritise financial returns. Later this year, BlackRock’s US and Asian funds with specific climate mandates will choose whether to adopt the policy. Earlier this year, the firm scaled back its involvement with the Climate Action 100+, having faced increased political backlash and legal threats in the US.

More than 90% of US companies intend to increase reporting based on the Securities and Exchange Commission’s (SEC) climate disclosure rule, according to a joint report by Persefoni and the Financial Education & Research Foundation (FERF). The Benchmarking Sustainability Reporting 2024 report also found that almost 90% of the more than 50 chief accounting officers and controllers from some of the largest US public companies surveyed intend to enhance reporting efforts under the EU’s Corporate Sustainability Reporting Directive (CSRD) and California’s climate legislation. The research said that despite legal challenges facing both the SEC Climate Rule and the California Climate Disclosure Laws, businesses are still overwhelmingly preparing for climate disclosure. It found that 87% of organisations are increasing their internal reporting capabilities, while 59% are  integrating carbon data into risk management reporting. More than half (53%) of firms are expanding their Scope 3 reporting to include new categories. However, 48% of finance teams face challenges in acquiring Scope 3 data and navigating reporting mandates, the report noted. “Sustainability reporting is one of the most transformative challenges finance professionals are facing today,” said Andrej Suskavcevic, President and CEO of FERF. “This report specifically addresses what our members need to know to pilot their organisations through ever-evolving informational demands from internal and external stakeholders.”