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Daily ESG Briefing: Central banking body warns of ‘runs on brown assets’

The latest developments in sustainable finance

Influential central banking body the Bank for International Settlements has acknowledged the risk of stranded assets in a report titled Greening (runnable) brown assets with a liquidity backstop. In it, BIS – which coordinates central banks across the globe – recognised that “the momentum toward greening the economy brings with it a number of new transition risks, which, if not properly addressed, may threaten financial stability”. “In particular,” it said, “the expectation that other investors may exclude high carbon corporate emitters from their portfolio creates a risk of runs on brown assets. Understanding and acknowledging this new source of financial instability is essential for government agencies in charge of preserving the soundness of financial systems.”

Dai-ichi Life Insurance has become the 34th member of the UN Net-Zero Asset Owner Alliance. The Japanese company, which is the Alliance’s first member in Asia, manages $379bn, taking the Alliance’s combined assets to $5.5trn. Members of the Alliance commit to having a net-zero portfolio by 2050.

Goldman Sachs has become the latest major US bank to commit to Net Zero by 2050. The bank will set interim targets by the end of 2021, and disclose its progress against them. Wells Fargo is now the only one of the six largest US banks to not set a net-zero target, after Citigroup committed to Net Zero on Monday.

Chinese insurance company Ping An and information and analytics provider FactSet have partnered to provide ESG metrics for Chinese companies. FactSet will work with Ping An’s subsidiary, OneConnect, to incorporate AI-based ESG data, climate risk evaluations assessments and portfolio-level sustainability performance, among others. 

Bloomberg Intelligence’s EU Green Recovery Tracker has identified 11 companies which it says are undervalued against their green growth potential. Its report, entitled Green Recovery Picks: Past the Usual Suspects, looks at companies that could benefit from improved green prospects, but have not yet seen a corresponding increase in their valuation. The report claims that Volkswagen, Alstom, Siemens Gamesa, RWE, Saint Gobain, Vinci, Legrand, Schneider Electric, ITM Power, Neste and Arcelor Mittal have “$430bn and stronger operating profit growth prospects,” but that they are undervalued in comparison.

Spanish bank BBVA has pledged to reduce its exposure to coal-related activities to ‘zero’ and stop financing developed-market companies in the sector by 2030. It promised to have exited all companies in the sector by 2040. 

The Monte dei Paschi di Siena Pension Fund is seeking an ESG adviser. Interested parties should send an expression of interest to fondopensionemps@postacert.gruppo.mps.it by 9am on the 16th of March, after which the fund will prepare a list of parties who will be invited to the selection.