Daily ESG Briefing: Informal EU group on sustainable finance formed

The latest developments in sustainable finance

A group of 12 diverse stakeholders including European fund trade body EFAMA, ShareAction, the Climate Disclosure Standards Board and others have decided to form an “informal group” on Sustainable Finance. Also involved are accountancy bodies ACCA and Accountancy Europe, the Association of German Banks (BdB), law firm Frank Bold, the Institutional Investors Group on Climate Change, fund manager Schroders, and campaign group WWF. The idea is that it will be a “platform for collaboration and coordination” to interact with the EU institutions. BNP Paribas and Candriam are supporting a joint statement on the Non-Financial Reporting Directive, while not being part of the informal group itself. They say they have “different backgrounds, but a common interest in sustainable finance”.

The Ford Foundation has issued a $1bn COVID-19-focussed social bond, the first-ever such offering by a US foundation in the corporate bond market. It was more than five times oversubscribed and offers 30-year and 50-year maturities at a fixed rate of 2.4% and 2.8% per annum respectively. The use of proceeds will be used to support nonprofits hard hit by COVID-19. Social bonds have seen record levels of issuance since the pandemic hit. Morgan Stanley says $32bn of social and sustainability bonds were issued in April 20.

Eighty per cent of German institutional investors now use ESG investment strategies, according to research by asset manager Union Investment, which surveyed 166 institutions. The figure is at a new high, Union said.

MSCI, the index and ESG firm, has launched a solution to help real estate investors assess and manage their exposure to climate change called MSCI Real Estate Climate Value-at-Risk. It follows the launch of MSCI Climate Value-At-Risk (Climate VaR) in February. MSCI said it is closely aligned to the G20’s Financial Stability Board’s Taskforce on Climate-Related Disclosures (TCFD).

ESG research house Vigeo Eiris has launched an enhanced second-party opinion (SPO) service for sustainable bonds. The service will support the integrity of the growing sustainable bond market by providing independent, transparent, and standards-based analysis of the sustainability credentials of bonds, enabling more impactful communications by issuers.

The National Housing Finance and Investment Corporation has finalised the largest social bond from an Australian issuer. Funds raised from the A$562m (€344m) bond will support ten community housing providers across New South Wales, South Australia, Tasmania and Victoria, financing 2,736 properties including 775 new dwellings. 

Private bank Coutts has announced new ESG targets as part of its 2020 Sustainability Report, including a targeted 25 per cent reduction in carbon emissions in its funds and portfolios by 2021. The bank has reduced carbon emissions from its Coutts Invest funds by 23 per cent this year and is aiming to reduce carbon emissions by 50 per cent across its overall holdings by 2030. Coutts has also excluded thermal coal extraction, thermal coal energy generation, tar sand, arctic oil and gas exploration from its direct investments. 

Morgan Stanley has published new research exploring whether ESG scores can help stock picking in the oil & gas sector. According to the company, a long/short strategy based on ESG factors applied to oil & gas companies would have had a positive pay off in the last five years. Morgan Stanley’s latest analysis is based on companies in both the US and European oil & gas sectors but excluded pure-play oilfield service and midstream companies.

The Shareholders for Change (SfC) network has published a new report on engagement with European telecommunication companies. The 18-month engagement focussed on tax-related issues, following previous SfC research which revealed a general lack of tax transparency at major European telecommunication companies. SfC’s new report focuses on Vodafone, Deutsche Telekom, Telecom Italia and Orange and found the companies to be “generally cooperative”. The network believes further steps are needed, however, including the monitoring of profit shifting. 

Luxembourg for Finance has launched a survey on the role played by human rights in the finance industry as well as asking how banks and asset managers address human rights issues. The public-private partnership between the Luxembourg Government and the Luxembourg Financial Industry Federation is conducting the survey in partnership with the University of Geneva. The outcome of the survey will be presented at this year’s Sustainable Finance Forum. The survey is available here.