Daily ESG Briefing: Investors mobilise over climate plans of world’s biggest chemical companies

The latest developments in sustainable finance

Investors with $3.2tn of combined assets under management – including EOS at Federated Hermes, EdenTree Investment Management, NN Investment Partners and Sarasin & Partners – are working with campaign group ShareAction on climate-related shareholder engagement with the chemicals sector. Target companies under the project are expected to include ASF, Covestro, Croda International, LydondellBasell Industries, L'Air Liquide and Solvay. “Chemicals are responsible for 5.8% of global emissions, but shareholder engagement with the sector is only in its infancy,” said ShareAction in a statement, which was issued alongside new research on the transition plans of chemical companies. Climate Action 100+, the main channel through which investors engage with companies on climate, has only seven chemical companies on its 167-strong focus list. “And just two of those – Air Liquide and LyondellBasell Industries – saw any public discussion of climate change at their AGMs this year,” said ShareAction. 

US-based financial software and services firm SS&C Technologies Holdings has partnered with Sustainalytics on a new platform to help asset managers monitor and report on ESG exposure in their portfolios. The platform has already been taken up by private equity real estate specialists Paloma Partners, according to a statement. 

Researchers at Oxford University and University College Cork have warned that nearly half of European power companies could see declines in credit ratings if they don’t close their carbon emitting power plants early, with lost cashflows caused by stranded assets estimated at €114bn. Analysis of 29 companies in the sector found that 14 could face questions about their ability to pay interest payments on loans if they don’t deal with polluting plants within the next five years. “Reduced profits from stranded fossil fuel assets will create pressure on debt repayments and have wider implications for pensions, jobs and asset owners further up the investment chain,” said Dr Conor Hickey, lead author and Research Fellow at Oxford’s Environmental Change Institute. “This study quantifies the issue and offers a framework for investor and policy engagement.”

Social audit firms must be held legally accountable for human rights harm linked to audit failings in supply chains, said the Business & Human Rights Resource Centre in a new briefing. It looked at legal and contractual reforms needed in order for workers to hold social audit firms reliable for negative human rights impacts and identified possible legal avenues to do so under existing laws. Furthermore, it emphasised the importance of human rights due diligence, saying social audits should not be equated to such due diligence.

More than two-thirds of investors are planning “substantially higher investments” in conservation in 2021 compared with 2020, according to a survey by the Coalition for Private Investment Conservation (CPIC), led by South Pole, the Cornell Atkinson Center for Sustainability and IUCN. The research says the volume of conservation finance seeking returns – as opposed to relying on grants and philanthropic funding – is projected to grow significantly this year. Some 92% of the conservation investments analysed were targeting market-rate returns rather than concessionary returns, it added. However, it noted respondents still believe there is a lack of bankable deals, that deals are too small and that measurement of conservation impacts is challenging and costly.   

Arizona’s Treasurer Kimberly Yee has said state funds will divest from Unilever, citing the decision by its subsidiary Ben & Jerry’s to withdraw sales from the West Bank at the end of 2022. Yee said the decision is in violation of Arizona law, which states that a public entity or fund may not invest in a company engaged in boycotting Israel. Arizona has reduced its investment in Unilever to $50m from $143m in June and will reduce it to zero from 21 September, Yee said. Ben & Jerry’s has said it is not boycotting Israel but will stay in the country through a different arrangement. A spokesperson for Unilever told RI last month: “Unilever has a strong and longstanding commitment to our business in Israel. Ben & Jerry’s has also made it clear that although the brand will not be present in the West Bank from 2023, it will remain in Israel through a different business arrangement. We have welcomed this decision to stay in Israel emphatically, and have been seeking to handle this matter in as respectful and sensitive a way as possible.”