9fin Featured Content

TalkTalk — ESG QuickTake (9fin) (15/02/2023)

TLDR: TalkTalk has a non-SBTi-verified net zero by 2024 target and is on track to achieve its SBTi-verified near-term carbon reduction target. Like its competitors, it uses renewable energy for its electricity consumption. In 2015, it was subject to a cyber attack that released the personal data of over 150,000 customers.

ERM — ESG QuickTake (9fin) (14/02/2023)

TLDR: Environmental Resources Management (ERM) has two SBTi-verified near term emissions reduction targets, but its net zero target is not SBTi-verified. ERM works with clients in the oil and gas industry and reports that it assists these companies to respond to regulation, but does not explicitly state whether it assists these clients to decarbonise or invest in renewable energy. In 2013, environmental groups criticised ERM for potential conflicts of interest.

Aggreko — ESG QuickTake (9fin) — UPDATE (14/02/2023)

TLDR: Aggreko has improved its net zero and climate change targets. These are more ambitious than peers and outline a credible near-term strategy, though they are still not SBTi-verified. Despite lacking verification, recent progress in reducing operational carbon emissions has been strong. Between 2020 and 2022, Aggreko developed its offering of cleaner technologies and fuels compatible with a low-carbon transition economy.

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News Stories

European Companies Still Lack Credible Climate Action Plans, Study Says (16/02/2023)

A study of nearly 1,500 European companies conducted by CDP, a nonprofit that analyses climate disclosures, and consultancy Oliver Wyman found that about half of the firms have stated plans to limit global warming to 1.5C. Despite these pledges, the report concluded that less than 5% of companies reported specific climate actions proving that they are making necessary changes to meet their targets.

UK financial watchdog hit with claim over prospectus climate risk disclosure (16/02/2023)

Client Earth has launched legal action against the UK Financial Conduct Authority, with the NGO claiming that the FCA unlawfully signed off listing documents that allegedly failed to adequately outline oil and gas producer Ithaca Energy’s climate change risks. This marks the first time ClientEarth has targeted the UK regulator. The claim has been filed as a judicial review case and FCA has stated it will oppose the petition by ClientEarth to bring the case to the High Court.

Financial institutions ‘woefully behind’ on deforestation risk, says Global Canopy (16/02/2023)

According to Global Canopy’s Annual 500 report, financial institutions are not taking sufficient action to address deforestation risk. According to the report, 92% of financial institutions exposed to the companies with the highest deforestation risk do not have a commodity-specific policy on deforestation for any of the forest-risk commodities they are exposed to through their portfolios.

Morgan Stanley Doubles Down on ESG Despite the Politics (15/02/2023)

Since the beginning of the month, Morgan Stanley has introduced six ESG products. The equity and fixed-income exchange-traded funds are managed by Calvert Research and Management, a leader in environmental, social and governance investing that Morgan Stanley acquired in 2021 as part of its purchase of Eaton Vance Corp. Morgan Stanley’s decision is particularly notable given the increasing pushback against ESG by Republican politicians, including some potential presidential aspirants, and their fossil-fuel industry donors.

U.S. EPA sets soot pollution rule, energy companies warn of costs (15/02/2023)

The US Environmental Protection Agency said on Tuesday it sent the White House its final plan to slash interstate smog and soot pollution from the power sector, but big energy companies warned that the measure on track to be finalised next month would cost them billions of dollars. The plan, first proposed last year by the Environmental Protection Agency (EPA), would require the power industry to slash nitrogen oxides, or NOx, pollution to curb a decades-old problem of power plant emissions fouling the air in other states. Kinder Morgan Inc has warned the plan would cost an estimated $4.1bn in upgrades and retrofits to about 950 engines along its pipelines, which carry about 40% of the natural gas consumed in the United States.

Amigo avoids £73mn fine due to ‘serious financial hardship’ (14/02/2023)

The Financial Conduct Authority has censured Amigo Loans for failing to properly assess if borrowers could afford its loans but the subprime lender avoided a fine in order to preserve funds to repay customers. The FCA said that Amigo’s “assessment of whether a customer could afford to borrow was inadequate” and that the group’s “complex” IT system meant that between November 2018 and March 2020 it extended unaffordable loans to borrowers. A quarter of guarantors, who agreed to make payments when borrowers could not ended up having to step in to help make repayments. The watchdog waived a fine of £72.9m because of the potential to cause “serious financial hardship” to the company. The FCA added that a “fine would also have threatened Amigo’s ability to meet its commitments to a High Court-sanctioned scheme of arrangement, which aims to pay redress to customers.”

Adani Shock Rips Through ESG Funds as Strategy Fails Test (13/02/2023)

The Adani scandal represents another bad milestone for ESG as investors are left wondering why a strategy intended to shield against risks such as greenwashing and bad governance — often at an extra fee — didn’t protect them from the latest meltdown. Adani stocks appear in more than 500 Article 8 funds that are supposed to “promote” environmental, social and governance goals under European Union rules. About 80 of those exposures are via direct holdings, while the rest are mainly through funds of funds or index trackers. Patrick Wood Uribe, the CEO of Util, an ESG research firm said that “There can be a very large mismatch with what investors are expecting,” when they place their money in a company or a fund classified as ESG, Wood Uribe said in an interview. And by offering an “overly simplified view,” ESG ratings end up doing a “disservice” to investors, he said.

ESMA flags ‘misuse of SFDR as a marketing tool’ (10/02/2023)

ESMA has warned that the current SFDR classifications do not include “the type of requirements usually attached to voluntary labels, prompting further concerns of potential greenwashing.” Despite this, investor demand remains strong for products with high sustainability credentials, with the share of ESG assets growing from 8% to 19% over the past two years. ESMA also noted that sustainability-linked bonds could be a “free lunch” due to the small penalties associated with their ESG margin ratchets. ESMA stated that for SLBs to make meaningful change credibility issues must be addressed.

ESG Bond Sales Hit 12-Month High; Debut Deals Pile Up (08/02/2023)

Global sales of sustainable debt last month increased to the highest in 12 months. Sales of bonds linked to environmental, social and governance projects around the world reached $111.4 billion in January. Green bond sales, the largest category of sustainable debt by amount issued, rose to $57.2 billion in January, the most since November. Sustainability-linked bond sales jumped to $22.4 billion from about $8.8 billion during the prior month, with Franco-Dutch airline Air France-KLM raising €1 billion in a two-part inaugural sustainability-linked bond offering.