Daily ESG Briefing: Concerns around Paris-alignment methodologies

The latest developments in sustainable finance

Neither the Science Based Targets Initiative, Paris Agreement Capital Transition Assessment nor Barclays’ BlueTrack currently include or recommend a 1.5C compatible scenario, and rely on inevitable simplifications and assumptions, according to analysis by ShareAction. The report, which aims to establish best practice recommendations for the Paris-alignment of bank portfolios, also found that the Paris-alignment methodologies do not differentiate carbon intensive assets from a broader ESG perspective, treating, for example, a barrel of oil sourced from the Arctic as any other.

Germany's DZ Bank has revised its financing exclusion criteria following engagement from Bank für Kirche und Caritas and a number of other Church banks. As a result of discussions ongoing since 2017, DZ Bank will no longer finance coal-fired power plants or thermal coal, and exclude indirect financing of companies involved in nuclear weapons and arms transactions with countries that have significant human rights violations.

The UK’s Work and Pensions Select Committee has launched an inquiry into the Government’s approach to ensuring pension schemes consider climate risk, and the role they can play in meeting emissions targets. The Committee has opened a consultation on the inquiry and is seeking to hear views on a number of questions including international reporting standards and pension scheme contributions to COP26.

Insurer Liberty Mutual will not be filing an environmental impact assessment for the Baralaba South coal project, as it weighs alternatives for the proposed mine. The firm’s membership of the PRI was put under review four months after joining, after climate campaigners complained about the project. 

The UN has launched an AI-powered tool to allow countries to measure the contributions of nature to their economic prosperity. The ‘ARIES for SEEA Explorer’ tool is aimed to help nations apply SEEA, the new international standard for natural capital accounting. The ecosystem accounts produced by countries under the standard will track the extent, condition and services provided by natural ecosystems.

A coalition of Credit Suisse shareholders including Amundi, BMO Global Asset Management and Actiam have called on the bank to tighten its restrictions on coal financing. While Credit Suisse committed in June to phase out funding or underwriting for companies with a coal share of more than 25% and no credible transition plan, the investors said that it had not disclosed what it considered to be “credible” and said they required “firm” steps to cut coal lending.

The UK Sustainable Investment and Finance Association (UKSIF) has told RI its members raised concerns that an “over-reliance on offsets can make it harder for investors to see the trajectory a company is taking to help inform their capital allocation decisions”, during the consultation process for UKSIF’s recently launched Policy Vision. UKSIF, whose more than 260 members represent £10tn in assets under management, also added that members noted “the UK’s National Infrastructure Bank should not look to fund projects relying significantly on offsets; for example a gas plant making significant use of CCS technology to capture emissions should not be financed by the bank”. 

The Reserve Bank of India has joined 90 other central banks and regulators as a member of the Network for Greening the Financial System. The network aims to share best practice, contribute to the development of climate risk management in the financial sector and mobilise mainstream finance towards a sustainable economy.