Daily ESG Briefing: Engine No.1 dismisses ESG scores as ‘little more than emojis’

The latest developments in sustainable finance

Activist investor Engine No.1 has described ESG scores as “little more than emojis” in a paper outlining its investment philosophy, published yesterday. The firm, which shot to prominence earlier this year when it successfully took on Exxon’s board over its ability to manage the climate transition, said such scores and rankings “in effect constitute little more than emojis and are as difficult to incorporate into spreadsheets or algorithms”. Third-party assessments and voluntary disclosure has generated inconsistent data that “often omits the most material information – and it is, therefore, of limited financial value to investors,” it continued. “We need to expand the reporting metrics and standards to include more rigorous scientific and engineering principles, grounded in robust and representative data science and analysis.”

France’s Caisse des Dépôts has publicly endorsed the Global Reporting Initiative’s (GRI) work on creating EU-wide sustainability reporting standards. GRI is working with the European Financial Reporting Advisory Group to advise EU regulators on how new disclosure standards should look. The French public investor, and a long-standing responsible investor, said its support “directly stems from the necessity to increase the quality of ESG corporate data on which responsible investors rely for analysing and transforming business models”. 

Proxy advisor Glass Lewis has launched an ‘active ownership engagement solution’ through which institutional investors can “leverage” the firm’s existing ESG engagement relationships and data. Glass Lewis said it engages with more than 1,000 listed companies, with a focus on transparency and disclosure, climate change, board diversity and remuneration. “With the new offering, investors will be able to track progress on key material ESG issues, including those that have received significant dissenting votes at shareholder meetings,” it said in a statement. 

Carbon Tracker’s sister think tank, Industry Tracker, has released research claiming that the European steel industry has less than 26% of its carbon budget remaining. According to the findings, the industry’s existing assets alone could release 2.3bn tonnes of CO2 during their lifetime. The total 2050 carbon budget for the industry is 3bn, based on the Net Zero scenario from the International Energy Agency. The report assesses how 10 major steel companies in Europe, including ArcelorMittal, Tata Steel, Thyssenkrupp and SSAB, are set to achieve Net Zero – based on their current assets and interim targets. Eight of the firms have climate targets, but most of their decarbonisation plans are scheduled after 2030, “when they are at high risk of missing the window for investing in vital new technologies, according to Industry Tracker. 

MSCI has launched an Implied Temperature Rise product, which it claims offers data to help investors assess how some 10,000 listed companies are aligning with global climate targets, and how strong their commitments are.

Real estate investor and developer Lamington Group has committed to Net Zero by 2030, with a ‘roadmap’ aligned with the Science Based Target Initiative. As part of the pledge, Lamington has said its new hotel developments will adhere to an in-house Net Zero building specification “focused on the critical need to reduce embodied carbon throughout the design stage and achieve operational net zero throughout the building’s lifetime”.