Daily ESG Briefing: Moody’s warns of 10% rise in default risk if climate isn’t dealt with before end of decade

The latest developments in sustainable finance

Moody’s has said that if businesses and policymakers wait until the 2030s to deal with climate change then, by 2050, there will be an average 10% increase in the probability of defaults across all geographies and sectors. The credit ratings agency, which now calls itself “a global integrated risk assessment firm”, made the comments in a new report titled Ready or not? Sector Performance in a Zero-Carbon World, which also analyses the “transition readiness” of the utilities, automotive, airlines, cement, shipping, and oil and gas sectors.

The Science-Based Targets initiative has bagged $37m in grant funding from the Bezos Earth Fund, IKEA Foundation and Laudes Foundation. The money will be used to encourage more companies to sign up to the initiative, which already has more than 2,000 corporate members. The Bezos Earth Fund, a $10bn climate fund created by Amazon boss Jeff Bezos, has awarded the initiative $18m over three year – matched by the IKEA. Laudes Foundation, set up by the Brenninkmeijer family that set up fashion retailer C&A, will donate $1m.

More than half of directors serving on sustainability-related committees at major firms are not “ESG conscious”, according to the latest Sustainability Board Report. The annual study of directors at the world’s 100 largest listed companies identifies 295 that serve on committees that oversee sustainability. Of those, 40% (118) were deemed to be “ESG conscious directors”. Just 8% of board directors have any formal qualifications in ESG or sustainability, or have published research on the topic.

Insurers in the EU could have to gear up for climate stress tests earlier than expected. Petra Hielkema, Chair of the European Insurance and Occupational Pensions Authority (EIOPA), told a conference last week that although the tests are planned to take place by 2024 at the latest “it might be that we want to do this one quicker”. Meanwhile, EIOPA also said last week it said it would deepen its work to integrate ESG risks into the prudential framework of insurers and pension funds.

The Bureau of Investigative Journalism says it has found evidence of HSBC lobbying to water down commitments under the Net Zero Banking Alliance (NZBA), part of the Mark Carney-led GFANZ. It cites an email sent from the office of Noel Quinn, HSBC’s chief executive, to the Alliance saying they should have three years from signing the Net Zero pledge before setting their interim 2030 target, rather than 18 months. Furthermore, the bureau’s investigation says HSBC tried to weaken the commitment by dropping a requirement for science-based targets. HSBC said the email was sent on behalf of the Financial Services Taskforce (FSTF), a group of the world’s largest banks – chaired by Quinn – working together on “meaningful and actionable plans” for a sustainable future. HSBC said it represented the views of the 12 member banks of the FSTF and did not reflect HSBC’s own position.

Standard setter BSI has announced it has worked with the UN-backed Race to Zero campaign to create an initiative to “address the urgent climate challenge through the convening power of standards” and “provide clarity and consistency on Net Zero targets, measurement and reporting”. Its ‘Our 2050 World’ initiative will, for example, work to take forward the London Declaration launched in September, which commits signatories to embed climate considerations into every new standard that is created, including retrospectively adding these requirements into existing standards as they are revised.