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Daily ESG Briefing: Aegon calls out MSCI in take-down of third-party ESG ratings

The latest developments in sustainable finance

Aegon Asset Management has called out ratings agencies for “missing crucial aspects of ESG analysis and taking a top-down approach” to assessing companies, which the €364bn fund manager claims “leads to perverse outcomes such as tobacco companies scoring highly on ESG factors”. In a blog on the topic, Sustainable Investment Analyst Euan Ker criticised third-party ratings for “focusing mostly on how a company operates, rather than what it does”. Consequently, he continued, “the ratings can inadvertently attribute strong sustainability credentials to companies whose products may be fundamentally unsustainable. MSCI gives Imperial Brands (a tobacco company) an A rated ESG score, for example.” He suggests ‘bottom-up’ analysis is a better approach to identifying stocks with good sustainability characteristics. 

Impact specialist Cornerstone has merged with mainstream advisory firm Pathstone. Erika Karp, Cornerstone’s CEO and founder, will take the role of Chief Impact Officer and will also join Pathstone’s Executive and Investment Committees. Cornerstone’s Chief Investment Officer Craig Metrick and Chief Impact Strategist Katherine Pease will also join Pathstone. The merger brings the total assets under advice to $25bn. 

The UK has said that it will establish an infrastructure investment bank with fighting climate change as one of its core objectives. The bank, which will have £12bn of equity and debt capital available, and the ability to issue £10bn of guarantees, will primarily focus on the infrastructure sectors laid out in the UK's national infrastructure strategy: clean energy, transport, digital, water and waste. Its initial focus will be on climate change mitigation and resilience, and it will be able to invest in sustainable fuels, carbon capture and heat efficiency.

ACCESS, a £31bn pool of UK local authority pension funds, has appointed Minerva Analytics to help develop its responsible investment strategy by reviewing and revising its responsible investment guidelines. Fellow pension pool LGPS Central is seeking a fund manager for its £700m Targeted Return Fund, in a mandate that includes a requirement for the integration of responsible investment. 

Investment manager M&G has joined the Powering Past Coal Alliance and aims to end investment in thermal coal in developed countries by 2030 and emerging markets by 2040. 

A quarter of companies will be carbon neutral by the end of the 2020s, according to Fidelity International’s annual analyst survey. The survey, which studies the views of Fidelity’s in-house analysts, also found increasing awareness of ESG issues. 54% said that most of their companies were regularly discussing sustainability issues, up from 13% in 2017.

The Sustainability Accounting Standards Board (SASB) has opened a 60-day public consultation on its eXtensible Business Reporting Language taxonomy. The taxonomy is designed to simplify the ESG disclosure process and improve comparability between companies for investors. The consultation ends on April 22nd. SASB has also announced that it will use SDL’s ‘Tridion’ system to improve its content management and publication system.

The financial advice arm of Quilter has introduced ESG assessments for 65 investment portfolios from 18 asset managers. The funds will be given two scores from research house Square Mile: one will look at ESG integration at a firm level, while the other will assess it for the portfolio.  

Mark Carney’s Taskforce on Scaling Voluntary Carbon Markets has entered its development and implementation phase, and has formed an advisory board and three working groups. The board consists of individuals from civil society, academia and investor alliances, and will provide input to the three working groups, which were set up to cover governance, legal principles and contracts, and credit level integrity.