Return to search

Daily ESG Briefing: Morgan Stanley develops firm-wide US climate scenario

The latest developments in sustainable finance

Morgan Stanley said it is now “developing an enterprise-wide transition risk scenario” that will examine the impacts of a comprehensive political and policy response to address climate change in the US. The scenario includes the potential adoption of a carbon tax, expanded renewable energy subsidies and restrictions on fossil fuel developments, the bank said in its new TCFD report, adding that is has informally engaged leading economists and climate experts from Columbia University, the University of Maryland, the University of Michigan, Purdue University and the Center for Climate and Energy Solutions.

According to MSCI, there are currently 54 directors serving on the boards of US companies that are in place despite failing to gain majority shareholder support in annual elections – an increase of 35% compared to 2016. The presence of such “‘zombie directors”, is highly correlated with shareholder dissatisfaction regarding pay practices and poor corporate governance performance, said MSCI.

Illinois Treasurer Michael Frerichs has launched a campaign to encourage Russell 3000 companies to disclose the racial and gender composition of their boards. Members of the initiative – which include the Treasurers of New York City, Vermont, Connecticut and Pennsylvania, in addition to Boston Trust Walden, Pax World Funds and Wespath – say that they will consider voting against nominating committees with no reported racial/ethnic diversity in their proxy statements.

Conservationists have raised the alarm over plans to open a new oil and gas field in the Okavango region of Namibia and Botswana, home to “one of the planet’s most diverse ecosystems” which also include the largest herd of African elephants left on Earth. TSX-listed firm Recon Africa, which holds the license for the territory, told shareholders that it planned to drill “hundreds of wells” in the area. The firm has said that it is “confident” it would be able to tie-up with major oil and gas companies such as Exxon or Total if early drill tests prove productive.

Nordic Prime Ministers today announced their intent to encourage Nordic institutional investors to scale-up green finance and investments by 2030. The call came at an N8 meeting chaired by Prime Minister of Denmark Mette Frederiksen, with Nordic pension fund CEOs in attendance.

Banks' ability to carry out regulatory stress tests for climate change would be much improved by the standardisation of corporates' ESG risk disclosures, according to Fitch Ratings. In Banks Need Harmonised ESG Disclosures for Climate Stress Tests, the credit rating agency called for a common sustainability standard, ideally under a single authority or industry body.

Several Mizuho Bank veterans have collaborated to launch a specialist boutique, Victory Hill Capital Group, that will invest in global energy infrastructure closely aligned to the UN Sustainable Development Goals. The founders are Anthony Catachanas, who will serve as chief executive officer, co-chief investment officers Richard Lum and Eduardo Monteiro, as well as chief financial officer Michael Egan. David Short will serve as head of renewable energy, while Navin Chauhan will be head of business development.

Insurance: Lloyd’s of London syndicate, Apollo, has dropped the Adani Carmichael coal project in Australia after pressure from climate campaigners; the insurer confirmed that it will not provide cover for Adani’s coal mine, rail project, or coal port after their current construction terminates in September 2021. 

A growing pool of allocators and investors believe that consideration of ESG factors can provide better risk-adjusted returns over the long term, with 88% of asset owners surveyed by Cerulli Associates placing at least moderate importance on asset managers having ESG capabilities. The findings come in the research and consulting firm’s U.S. Environmental, Social, and Governance Investing 2020: Shifting Environmental and Social Systems Push Asset Managers to Get More Responsible.

Asset management consultant Alpha FMC has launched a dedicated ESG and Responsible Investment practice comprising 20+ ESG practitioners.

A BNP Paribas Corporate and Institutional Banking survey of 53 hedge funds, with combined assets under management of over half a trillion dollars, has found that 40% include ESG considerations in their investment process due to client demand and investor requirements; the survey also highlighted that said the majority of the above funds will integrate ESG no later than 2022. 

While much attention has been placed on the ‘E’ aspect of ESG, ‘S’, which includes human rights, has not been afforded the same; this is despite human rights being a key topic linked to fiduciary duty, risk mitigation, and the opportunity for better financial performance. That’s the findings of a report commissioned by Luxembourg for Finance, and jointly conducted by Finance & Human Rights in Luxembourg and the Geneva Centre for Business and Human Rights in Switzerland. 

France has launched the Sustainable Finance Observatory to enhance the transparency, monitoring, and evaluation of commitments towards carbon neutrality by 2050 from financial actors in the country.