Daily ESG Briefing: MSCI climate award sparks criticism over constituents

The latest developments in sustainable finance

Questions about the underlying methodology of MSCI’s climate indices have been raised on LinkedIn, following the data giant’s recent award of climate index provider of the year. In a widely-responded-to post, Zsolt Lengyel, Chairman of the Institute for European Energy & Climate Policy, said he was “shocked” to find that the MSCI Climate Change Index holds 2,746 stocks in common with the MSCI ACWI universe of 2,852 companies, despite the fact that by MSCI’s own assessment, the vast majority of ACWI companies are not aligned with the Sustainable Development Goals, which includes a goal specifically on climate change.

The Stock Exchange of Thailand has announced a “strategic partnership” with Vigeo Eiris, the Moody’s-owned ESG research house. The move will see Vigeo Eiris provide information on the ESG performance of listed Thai companies via the Exchange’s SETRADE website in a bid to strengthen education on responsible investment in the region. 

Investors have commended FedEx, Nike, Bank of America and Pepsi for using their influence as sponsors to publicly call on Washington D.C’s American football team to drop the racist term “redskins” from its name. Last month, US SRI firms Boston Common, Trillium and Mercy Investment Services, in partnership indigenous peoples groups such as First Peoples Worldwide, wrote to the firms calling on them to terminate their sponsorships with the Washington based NFL team if it did not drop the offensive term. In the wake of the pressure, Washington D.C. Football Team – as the investors refer to it – has announced that it will review its name.

Australian super fund Australian Ethical Investment has reportedly sold its stake in Marsh & McLennan Companies as a result of its subsidiary Marsh’s involvement with the controversial Adani coal mine in central Queensland. The super fund’s Head of Ethics Research, Stuart Palmer, is quoted in the Australian press as saying “Marsh has subsequently failed to provide a clear public commitment not to provide services to support projects of this type in the future”. Australian Ethical has also decided to drop JLT, which was acquired by Marsh last April, as its broker. 

Norway’s Grieg Seafood has issued €94m in green bonds with a novel proviso that US food giant Cargill, including its subsidiary Cargill Aqua Nutrition, be excluded from the use of proceeds until it has “significantly reduced their soy-related deforestation risk in Brazil”. The oversubscribed bond, which was issued last month, carries a quarterly coupon of 3.4 percentage points over three-month interbank rates. DNB Markets and Nordea acted as joint bookrunners and Green Bond Advisors for the bond issue, which has a maturity date of June 2025. CICERO, which provided the second opinion on the issuance, gave it a medium green rating. 

The central banking group, Network for Greening the Financial System, will release two publications on financial risk from climate and the environment later this year, according to comments by green finance heavyweight Dr Ma Jun during a London Climate Action Week discussion last Thursday. Dr Ma, who chairs the NGFS’ supervision workstream, said the reports would provide case studies on models and methodologies to allow banks, asset managers, and insurers to quantify future climate and environmental credit and market risk.

Dr Ma also spoke of the need for green financial incentives. “So far our pricing system is not really working. We need incentives to drive more funds to green, even if they’re not very profitable at this moment.” He said examples could include subsidising interest payments for green loans, or changing risk weightings for clean assets.

Last week, the UK government and the Green Finance Institute launched the first Green Finance Education Charter – a commitment for financial professional bodies to integrate green finance and sustainability into their core curricula, new qualifications, and the continued professional development of their members. Among the 12 initial signatories to the statement are the CFA Society and the respective institutes for chartered banking, insurance, and securities and investment. Plans for the education Charter were originally announced in the UK’s Green Finance Strategy, released last year. 

A group of mayors and local leaders in the UK have called for a Net Zero Development Bank to be established. The organisation, called UK100, said such an institution should be a single gateway for all government financing for the net-zero transition, replace lost funding from the EU, and kickstart local energy schemes which are at too early a stage to be attractive to private finance. UK100 Director Polly Billington also leads the secretariat of the All-Party Parliamentary Group on Sustainable Finance.

There is a “stark disconnect” between the high-profile climate pledges by governments and the “the current state of clean energy technology”, according to the latest report by the International Energy Agency (IEA). The intergovernmental body states in Clean Energy Innovation that “without a major acceleration in clean energy innovation, net-zero emissions targets will not be achievable”.