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Daily ESG Briefing: CDPQ’s green investments doubled, Exxon shares cut by 78%

The latest developments in sustainable finance

Caisse de dépôt et placement du Québec (CDPQ), Canada’s second largest pension fund manager, has doubled its “low carbon investment” holdings since 2019, with C$36bn (€23.9bn) now in green investments. In its 2020 Stewardship Investing report, the manager said that it had reduced its equity holdings in Exxon by 78%, and divested from 17 other ‘high-risk’ oil and gas equities, although it had made other fossil fuel investments at the same time. NGO Shift Action said that while CDPQ was the leading pension fund in Canada for climate action, it was “still far behind its international peers”.

The US, EU and UK have all laid out their official climate pledges this week, setting the stage for sweeping green policy reforms in major markets. The latest announcement came today from President Joe Biden, who announced the US plans to achieve a 50-52% reduction from 2005 levels in economy-wide net greenhouse gas pollution by 2030, as part of its Nationally Determined Contribution (NDC). Yesterday, the EU committed to cutting carbon emissions by at least 55% by 2030, compared with 1990 levels, with a new Climate Law. Finally, with the most ambitious figure, UK Prime Minister Boris Johnson announced a new target to reduce national emissions by 78% by 2035 –  building on the UK’s NDC, which promises emissions reduction of 68% by 2030, compared to 1990 levels.

The International Capital Markets Association has published a consultation paper on the role of repurchase agreements and collateral in sustainable finance. The paper looks at the possibilities of combining Repo with green and sustainable collateral, cash proceeds, and between green and sustainable counterparties. The consultation is open until the 28th of May.

Standard Ethics has downgraded JP Morgan Chase’s sustainability rating over its involvement in the controversial European Super League. The bank, which had a significant role in financing the league, has been downgraded from EE- (Adequate) to E+ (Non-compliant). Standard Ethics said that it judges “both the orientations shown by the football clubs involved in the project and those of the US Bank to be contrary to Sustainability best practices”.

2 Degrees Investing Initiative and the French Ecological Transition Agency are consulting on a new climate impact management system aimed at financial institutions. The model uses seven steps to promote maximum contributions to decarbonisation. The consultation is open until June and interested parties are invited to both provide feedback and take part in testing the framework.

A third of businesses have, or plan to introduce, an internal carbon price – an increase of 80% over the last five years. Research by CDP found that 2,000 of the 6,000 businesses surveyed (representing more than $27tn in market capitalisation) are using a carbon price, or will implement one within two years. The average price per tonne was $25, with average prices in Asia and Europe reaching $28. However, CDP said that with prices in the EU Emissions Trading Scheme reaching $44 a tonne, “it is clear that corporations need to up the carbon prices they are currently accounting for internally”. At the time of publication,the EU was anticipated to announce new targets for its carbon market for 2030, which could potentially push the price of carbon allowances up further in Europe. 

Los Angeles city council has voted to endorse the fossil fuel non-proliferation treaty, becoming the first US city to do so. The treaty, which aims to stop expansion of fossil fuel production and phase out its production, has backers including Carbon Tracker founder Mark Campanale and Friends of the Earth. It has also been endorsed by the cities of Vancouver and Barcelona. 

Ørsted and Danish pension fund ATP have partnered to submit a bid in the upcoming tender for the €28bn ‘North Sea energy island’ project, which is expected to host 200 offshore wind turbines. 

The global economy will lose up to 18% of GDP if no action is taken on climate change, according to the results of Swiss Re Institutes’s stress-test. The Institute conducted analysis on a number of scenarios, and found that a 2°C increase in global temperatures would cause an 11% drop in GDP, while meeting the targets of the Paris Agreement would lead to a 4% decline. In the worst scenario, China would lose nearly 24% of its GDP, with the US and Europe losing 10% and 11%, respectively.