Daily ESG Briefing: ESG scores improving for US corporates, recent net-zero targets add credit pressure on emitters

The average ESG score of US companies rose 3.2% in 2020, according to data by Refinitiv. The average ESG score of 137 US companies with a market cap of at least $5bn rose from 42.8 in 2019 to 44.2 in 2020, its highest level in the past decade.

The German state of Nordrhein Westfalen has said it will use the “fossil free” STOXX ESG Countries World ex Eurozone index in the global equity portfolios of its pension funds. The state is also one of four federal states currently using a custom STOXX ESG index for its Eurozone investments.

The increase in net zero targets from governments and the financial sector is likely to raise the cost of capital and credit risk for carbon-intensive activities, according to a new report from Moody’s. The ratings agency says that it expects pressure will “inexorably rise” for major producers and users of hydrocarbons to implement net zero transition plans.

Dynamic Advisor Solutions has announced the launch of a range of ESG model portfolios across its advisors. The company, which has $3bn assets under advice, will offer a series of ESG portfolios ranging from zero to 100% equity.

Non-profit Forest Trends' Ecosystem Marketplace has launched a new data platform for analysing carbon markets and voluntary offsets. The platform displays pricing and volume data covering over 15,000 offset transactions, and tracks more than 1tn tonnes of offset issuance.

ISS ESG has launched a new product designed to help financial market participants comply with the SFDR, and report on the principal adverse impacts for EU products. The ISS ESG SFDR Principal Adverse Impact Solution will cover all SFDR indicators for 7,000 corporate issuers, with a coverage of 25,000 companies for certain climate and social indicators.

Duke Energy has announced the launch of Duke Energy Sustainable Solutions, a new organisation which will consolidate its renewables products and services. Duke Energy Renewables, REC Solar and Duke Energy One will all fall under the new brand, which will cover 1000 projects across the US with a total capacity of 5.1GW.

The Brazilian central bank has launched a consultation on its regulatory approach to climate risk management, the explicit inclusion of climate change in its regulatory framework and strengthening definitions on ESG issues. Under proposed new risk management rules, “more complex institutions” will be required to carry out climate-related scenario analyses.

Storebrand claims that it has become the fastest growing asset manager in the Nordics and that sustainability is a strong driver of its growth. The Norwegian asset manager’s AUM grew by 15.7% in 2020. At the end of Q1 2021, the asset manager said that 69% of its NOK 987bn (€99bn) AUM was in funds classified under either article 8 or 9 of the SFDR, meaning they either promote environmental or social characteristics or pursue such objectives. NOK 375bn was invested in fossil free funds, a growth of NOK 102bn from the same time last year.

ESG considerations in direct lending are becoming increasingly sophisticated, according to a white paper by Ares. The US-based alternative investment manager said that ESG is progressing from “merely a high-level screening of investments” to a more sophisticated incorporation of ESG considerations in the investment lifecycle. 

The UK’s Public Accounts Committee has criticised the Treasury for being unable to explain how it will manage declining revenues from fossil fuel consumption. In a report on environmental tax measures, the committee said that the government “cannot explain” how it will deal with the loss of revenue from fossil fuel taxes, particularly fuel duty, which were worth £37bn in 2019-20. 

AllianceBernstein and Columbia Climate School have announced a partnership, with the firm becoming the first member of Columbia’s Corporate Affiliate Programme. The three year partnership will see the pair collaborate on research projects focused on the intersection of climate science with investment decisions, as well as long term research into the most significant climate challenges and the net zero transition.