Daily ESG Briefing: NBIM publishes climate risk reports

The latest developments in sustainable finance

Norges Bank Investment Management (NBIM) has today published two documents on its climate risk strategy. As part of the update, it highlighted it may vote against company boards that fall significantly short of its expectations on climate risk. The first report, Climate change as a financial risk to the fund, analyses the approach and limitations of its use of carbon footprinting and climate scenario analysis. The second report outlines how Norges Banks approaches the investment opportunities and risks associated with climate change. In it, Norges Bank says it plans to increase efforts to promote climate-related reporting from companies, engage with carbon-intensive companies that have not articulated climate plans in line with its expectations and will consider voting against boards that are unresponsive to engagements. The manager of Norway’s $1trn wealth fund is under increasing pressure to take more action on climate change and commit to Net Zero.

The total number of climate change cases filed as of July 2021 has reached over 1,800, up from around 1,650 as at November 2020, according to a climate litigation update by law firm Norton Rose Fulbright. The highest numbers of cases are in the US with 1,390,  Australia with 115 and the UK with 69. Norton Rose says the fossil fuel sector remains the main target of legal action, but “it is conceivable that over time the nature of dependents may become more diverse”. The law firm also predicts human rights will remain an active area of litigation and the start of “greenwashing” claims as companies face scrutiny on publicly announced climate change action targets.  

Australia’s Commonwealth Bank (CBA) will face a shareholder resolution from over 100 shareholders over “failed climate commitments”. The resolution, organised by NGO Market Forces, calls on CBA to no longer fund the expansion of the fossil fuel industry, and to set targets to reduce fossil fuel exposure consistent with Net Zero by 2050. Market Forces said CBA has watered down existing climate commitments by changing a policy on not funding new fossil fuels from applying to all ‘banking and financing activity’ to only applying to project finance.

Nearly eight out of 10 institutional investors expect to have adopted sustainability criteria into investment decision-making processes by 2026, according to a new survey from data provider Coalition Greenwich and AGF Investments. Some 151 institutional investors in North America and Europe were quizzed with 72% saying they adopt some element of sustainability in their investment processes, with approximately two thirds having increased their use of sustainable strategies in the past three years.  

Responsible investment funds under management in Australia and New Zealand certified by the Responsible Investment Association Australia have grown to over $52.8bn as at the end of March 2021. Funds under management have grown 147% over the past 5 years and more than quadrupled over the past 10.

Insurance companies are under increasing pressure to focus on climate-related disclosure, says Kroll Bond Rating Agency (KBRA) in a new report. KBRA points to Lloyd’s of London recently publishing its approach to climate change and the SEC saying it was considering mandatory climate disclosure rules, including industry-specific requirements, including for the insurance sector.