Daily ESG Briefing: Few large emitters link executive pay to emissions reduction goals

The latest developments in sustainable finance

Only four of 48 of the largest emitters have linked executive pay to GHG reductions targets, according to initial research findings published by As You Sow. Of the 48 companies examined by As You Sow, only AES, Ameren, Marathon Petroleum and Southern Company explicitly linked a fixed percentage of executive pay to specific GHG reduction goals, while American Electric Power, Chevron, Duke Energy, Lockheed Martin and Raytheon made “generalised” links to long term reduction goals or non-specific climate-related goals. Only two of the companies had integrated emission reductions into their long-term incentive pay structures. However, As You Sow said that “the tide appears to be turning” due to shareholder pressure, with a number of proxy statements from firms indicating the adoption of new policies for the future.

The New York Federal Reserve has proposed a stress testing framework to assess the resilience of banks to climate risk. A report published yesterday lays out a procedure for identifying portfolio assets at risk from climate-related events, and then calculates the capital shortfall should these events occur. The model is then applied to the 27 largest banks in the world. In 2020, when energy prices collapsed, the paper says that the “expected amount of capital that Citigroup would need to raise under the climate stress scenario to restore a prudential capital ratio increased by $73 billion”.

Glass Lewis has recommended that investors vote against BHP’s climate transition plan, citing concerns over its scope. According to a report seen by the Financial Times, Glass Lewis said “we are not convinced that support for this resolution is warranted at this time”, and said that BHP’s targets did not appear to have been certified by the Science Based Targets Initiative, as well as describing its scope 3 targets as “somewhat limited”.

The Australasian Centre for Corporate Responsibility has launched a new research group, which it says will offer in-depth climate analysis of international listed companies. The group will analyse company climate commitments, and assess whether they are on track to meet them, beginning with Royal Dutch Shell.

South Korea’s central bank has said that it will increase its ESG focus in the management of its foreign currency holdings, a move that it said would decrease reputational risk. The bank, which has already invested $7.12bn in foreign currency ESG bonds and equity, will begin to apply negative screening using the MSCI ESG screened indexes, and will consider establishing an in-house system over the next 2-3 years. 

Generation Investment Management has made a $600m investment in UK-based green energy provider Octopus Energy. The deal, which values the firm at $4.6bn post-deal, will see Generation’s long-term equity strategy take a 13% stake in the company. Octopus said it would use the proceeds of the deal to “turbo boost” its mission. 

Nomura has committed to align its activities to the Paris Agreement, and joined the Net-Zero Banking Alliance. The bank said it aimed to reach Net Zero for its own operations by 2030, and from its financed emissions by 2050, and will release sector-based 2030 and 2050 targets for priority sectors within 18 months.

Airlines and shipping are the industries which will see the most negative credit effects from proposed EU carbon legislation, according to a new report from Moody’s. Emissions trading systems, fossil fuel taxes and an increasing need to use sustainable fuels mean that the two industries face “triple whammy”, Moody’s said.