Daily ESG Briefing: Moody’s wins UK climate risk modelling mandate

The latest developments in sustainable finance

Pensions advisory firm Isio has appointed Moody’s Analytics to provide climate risk modelling for UK pension schemes. Under new regulations due to come into force before COP26 in November, UK schemes over £1bn are required to produce TCFD reports and carry out scenario analysis. 

The UK’s Green Finance Institute has made 10 recommendations on how the financial sector can improve its performance on biodiversity. In its Nature-positive Pathway for Action in the Finance Sector, the institute suggests that corporate green bond issuers should allocate more proceeds to biodiversity and nature, and that the private sector should throw its weight behind carbon offsetting, and adopt nature-related policies.

Most financial services professionals believe that greenwashing is rife and that their competitors deliberately mislead customers over sustainability. A survey of 550 professionals by research agency iResearch Services found that 52% thought greenwashing was widespread within the industry, with 38% of respondents saying that every single financial services business was operating unethically by claiming to be sustainable. When asked what stopped their organisations from becoming sustainable, 45% cited prohibitive costs, while 36% said that the short-term impacts of Covid and a lack of resources was an issue.

UK banks and asset managers financed 805m tonnes of CO2 in 2019 – almost double the country’s carbon footprint. The research from Greenpeace and WWF, titled The Big Smoke: The global emissions of the UK financial sector, concludes that the City of London would be the world’s 9th largest carbon emitter if it were a country, putting it above Germany. The study is based on 15 banks and the 10 largest reporting asset managers in the UK, using the Partnership for Carbon Accounting Methodology. 

Retail investors don’t trust corporate disclosures and find it difficult to judge companies’ environmental and social performance, according to a poll by Workiva covering the UK, US, Germany and France. 62% of respondents said they found it difficult to judge whether companies were doing the right thing for the environment and society, and only 10% did not find it difficult to trust company disclosures. Nonetheless, 70% of respondents believed companies had a responsibility to display ESG data.