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Daily ESG Briefing: EU could tighten conflict of interest rules in fall-out from BlackRock banking mandate

The latest developments in sustainable finance

The European Commission is considering tightening its laws around conflicts of interest in response to criticisms by the EU Ombudsman over its appointment of BlackRock as an advisor on developing sustainability rules for banks. In its response to the Ombudsman, published on Sunday, the Commission said that it is “reflecting” on whether to propose amendments to EU law governing public procurement, including, potentially, the obligation for tenderers to disclose conflicting interests. Last November, the Ombudsman ruled that the Commission did not sufficiently consider conflicts of interest when appointing the investment behemoth as an advisor, but stopped short of calling it maladministration. BlackRock’s appointment by the Commission, last April, prompted a backlash from MEPs and civil society, who pointed to the investment firm’s stakes in both banks and fossil fuels.

Impact investor Lightrock has taken a 10% stake in South Pole, the climate advisory and carbon offsetting firm, for a “mid-sized, double digit million Euro investment”. Lightrock has offices in Brazil, Kenya, the UK, Switzerland and India, and is backed by private banking group LGT (formerly the Liechtenstein Global Trust) and the Princely House of Liechtenstein. Altogether it has around $1bn invested, and is a direct investor in more than 60 firms. South Pole, founded in 2006, specialises in developing carbon offsetting projects in sectors like sustainable agriculture, forest conservation and renewables. Clients have included Nestlé, L'Oréal, and Tetra Pak, which help finance the projects in order to describe themselves as Net Zero. 

Barclays has pulled out of its role as lead underwriter for a controversial bond offering to build prisons in the US after campaigners accused it of breaking its commitment to no longer finance private prisons. Keybanc Capital Markets, also involved in the offering, told Bloomberg that it had “resigned” from the transaction. Barclays said in a statement: “While our objective was to enable the state to improve its facilities, we recognise that this is a complex and important issue. In light of the feedback that we have heard, we will continue to review our policies”.

UK public sector pension pool Border to Coast is backing a new ESG disclosures framework from investment consultant Albourne, aimed at alternatives including hedge funds and private markets. The initiative uses the Principles for Responsible Investment’s recommended ‘due diligence questions’ and will score investment managers out of 100 based on their policy and governance, investment process and monitoring, and reporting.

ESG-inclusive commodity trading platform Xpansiv has announced the first trades of its nature-based global emissions offset. Trading of the offsets from accredited agriculture, forestry and other land use projects reached 131,215 tonnes of CO2, at a price ranging from $4 to $5 a tonne.

State Street will include Trucost’s environmental data on its reporting and analytics platforms. State Street clients, which it says run between them more than $40tn, will have access to carbon footprinting and TCFD data as part of the new strategic partnership with Trucost, which is owned by S&P.