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Daily ESG Briefing: Big Four will face votes against reappointment if climate is ignored in financial statements, warn investors

The latest developments in sustainable finance

Investors representing more than $4.5trn have written to the ‘Big Four’ audit firms – PWC, Deloitte, KPMG and EY – calling on them to “sound the alarm” when company financial statements ignore the need for a climate transition. The signatories, which include Aegon Asset Management, AkademikerPension, Aviva investors, PKA and the Church of England Pensions Board, warned that auditors who fail to respond to their call for net zero aligned audits should expect votes against their reappointment from next year. 

UK local government pension pool Brunel has transitioned £3bn of its passive funds to a new series of Paris-aligned benchmarks developed in partnership with FTSE Russell. Last month, Avon Pension Fund – one of Brunel’s members – announced it would move £780m over to the strategy. Now, four other clients are taking part in the shift, with the Environment Agency Pension Fund committing £300m. The funds, managed by Legal & General Investment Management, will seek to reduce portfolio emissions by 50% by 2030, and integrate metrics from the Transition Pathway Initiative, as well as limiting the weighting of banking constituents due to their role in financing large emitters.

Meanwhile, FTSE Russell’s parent company, the London Stock Exchange Group, is working with the Japan Exchange Group to develop Climate Transition Benchmarks covering Japan’s equity market. The indices will adhere to the EU’s new climate benchmark methodology. 

Foundations and philanthropic investors will join the governments of the UK, Norway, Germany, the US and the Netherlands in investing $1.7bn to help Indigenous and local communities protect tropical forests. The pledge, made yesterday at COP26, seeks to help tackle climate change, biodiversity loss and pandemic risk. Signatories include the Ford Foundation, the Children's Investment Fund Foundation, the Christensen Fund, the David & Lucile Packard Foundation, Sobrato Philanthropies, Good Energies Foundation, Oak Foundation and the William & Flora Hewlett Foundation. Nine other donors, including Arcadia, the Bezos Earth Fund and Bloomberg Philanthropies, are participating via the Protecting our Planet Challenge initiative, launched in September.  

Triodos Bank has announced a commitment to hit net zero by 2035, and will set a science-based target for its investment and loan portfolio. All investments across public and public markets will be aligned with the target, with a particular focus on improving energy efficiency in the residential homes whose mortgages make up 21% of Triodos' portfolio. The bank, which has €22.7bn assets under management, is already a member of the Net Zero Banking Alliance and was a founding member of the Partnership for Carbon Accounting Financials. 

The UN has announced the formation of a new African Green Finance Coalition, which will be formally launched at next year's COP27 in Cairo. The coalition is an updated version of an existing grouping co-convened by Kenya and Mali to facilitate bids for the Green Climate Fund, with Kenya's Ministry of Finance working with FSD Africa to develop a platform for the coalition and provide assessments of African countries' progress on green finance legislation and regulation. The UN said that the coalition would be a signal that Africa “is not willing to be just the victim of climate change but that it is determined to take its destiny in its own hands”.