Daily ESG Briefing: APG tells South Korea its coal plans are a “significant risk factor”

The latest developments in sustainable finance

Dutch pension investor APG Asset Management has written to the South Korean government warning that its failure to scrap planned coal plants constitutes a “significant risk factor” to its Korean investments. Park Yoo-kyung, APG’s Head of Responsible Investment and Governance for Asia Pacific, sent the letter to the co-chairs of the Commission on 2050 Carbon Neutrality – one of whom is the South Korean Prime Minister – warning that “in the face of the climate crisis, coal-fired power plants will inevitably plague the Korean economy and the future of mankind […] Korea’s greenhouse gas emissions will pose a significant burden on not only the private-sector participants but also other domestic businesses in the export-driven country”. In February, the asset manager divested from Korea Electric Power Corp after it was unable to convince the majority government-owned company to halt planned coal plants in Indonesia and Vietnam.

Climate Action 100+ investors have set out their expectations for the decarbonisation of the steel industry, in the investor group’s latest global sector strategy. The strategy, published by the Institutional Investor Group on Climate Change, one of the CA100+ founding networks, outlines priority actions for individual firms, the sector as a whole and investors, including setting short-, mid- and long-term targets and investigating the feasibility of emerging technologies such as hydrogen-based steel production and carbon capture. CA100+ plans to release sector strategies for a number of other target sectors in the coming months.

ESG risks were cited in 72% of Moody’s public sector rating actions in 2020, the credit ratings agency has said – a significant increase on 48% in 2019. In the almost 5,600 public sector rating actions carried out by Moody’s, social risk was the most common factor mentioned, appearing in 57% of ratings, followed by governance at 43% and environment at 5%. In a separate report, Moody’s said a third of emerging-market sovereigns, including Egypt, Pakistan and Jordan, faced water management risk, and that sovereigns with weaker institutional capacity to manage this risk will face mounting credit pressure.

US firms are increasingly reporting on climate change, with 59% of companies increasing their disclosure since the SEC issued guidance in 2010, according to a new survey from the US Chamber of Commerce. While 63% of surveyed firms were “communicating with their shareholders regarding the evolving risk of climate change”, and 46% had stepped up their reporting after shareholder engagement, firms were still wary of mandatory disclosures. Almost three quarters supported phasing in mandatory disclosures, with 84% supporting a flexible approach, and saying that SEC rules should reflect differences in industries.

ISS has launched a survey of climate-related policies among institutional investors, which it says will be used to inform its voting policy on climate issues. The survey closes on 20 August.

Derivatives marketplace CME Group has launched Nature-Based Global Emissions Offset futures built around eligible voluntary offsets from agriculture, forestry and other land use projects, as well as Climate, Community, and Biodiversity accreditation. Since the start of August, 1,315 total contracts have traded and 10 firms have participated, including Andurand Capital Management, Hartree Partners, Macquarie Group and Vitol.