Daily ESG Briefing: Investors engage on facial recognition risks

The latest developments in sustainable finance

An alliance of investors including Aviva and BMO Global Asset Management has committed to an initiative on facial recognition led by Candriam. The $4.5tn group raised concerns that facial recognition technology risks infringing on privacy rights and misidentification is common among certain ethnic groups. Investor signatories will engage with tech companies over their facial recognition activities and human rights policies. Meanwhile, AI firm BSA has called on global governments to introduce mandatory impact assessments for high-risk use of AI technologies by private companies. The firm, which today released its own framework for impact assessments on AI bias against ethnic minorities, said that increasing reliance on AI meant that there was an urgent need to align with best practices for mitigating the risks of AI bias.

The UK's Department for Work and Pensions has released finalised versions of its new regulations for TCFD reporting by pension schemes. Under the regulations, schemes over £5bn will be required to produce a report from October 2021, with schemes over £1bn required to start reporting from October 2022. The DWP said that it planned to extend the measures to smaller schemes by 2024. The finalised version was published following three rounds of consultation which received mixed responses. Respondents to the consultations welcomed the idea of TCFD reporting but raised concerns over lack of clarity in the draft regulations, the potential high cost of complying and lack of institutional expertise among scheme trustees.

Anglo American is de-merging its thermal coal operations into a new company, Thungela Resources, that will be listed in Johannesburg and London this week. Research firm Boatman Capital Research attributed a "zero value" to the new company in a report, warning that its "environmental liabilities could be three times greater than currently reported and are more than the value of the entire company”.  In response, Anglo said in a statement that the provision on Thungela’s balance sheet is “over and above the regulatory guidance applicable to miners in South Africa.” 

The Bank of England has released the scenarios for its biennial climate stress test. The test aims to measure the resilience of the largest banks and insurers as well as the financial system more generally to the physical and transition risks posed by climate change. The three scenarios which financial institutions will be asked to run cover Net Zero transitions beginning in 2021 and 2031, as well as a scenario where no additional climate policies are implemented. The largest UK financial institutions including Barclays, L&G and Aviva have been asked to carry out the tests, the results of which the Bank of England expects to publish in May next year.

Responsibility for tackling modern slavery, enforcing the minimum wage, and protecting agency workers are being brought under a new workers watchdog by the UK Government. This ‘one-stop shop’ approach will replace three existing bodies and “improve enforcement through better coordination and pooling intelligence”. As well as enforcing all existing powers belonging to the three agencies, the new body will have the ability to ensure vulnerable workers get the holiday pay and statutory sick pay they are entitled to – without having to go through a lengthy employment tribunal process.

The cost of carbon in Europe could hit €100 per tonne, according to an expert at SEB Bank. Bjarne Schieldrop, Chief Commodities Analyst at SEB, said in a report published today that while the price of carbon allowances (EUAs) under the EU's Emissions Trading System hadn't sustained last month's all-time high of €56.5/tonne, they remain buoyant enough to discourage companies from switching back to coal. “The big question is whether the EUA price is ready to break free from switching dynamics altogether. If it happened now it could set the EUA price free to rally to  €75/ton and €100/ton,” said Schieldrop.