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Daily ESG Briefing: New research on institutional engagement and downside risk

The latest developments in sustainable finance

New academic research has found evidence that institutional investors’ “successful ESG engagements lead to significant subsequent reductions” in investee firms’ downside risk. ESG Shareholder Engagement and Downside Risk was prepared by leading academics including Andreas Hoepner of University College Dublin and Laura Starks of the University of Texas amongst others.

The Global Investors for Sustainable Development Alliance (GISD) has identified more than 60 measures to accelerate and scale up funding for the United Nations Sustainable Development Goals (SDGs) in a new report. Thirty private-sector CEOs, including the heads of Bank of America, Citi, Santander, Standard Chartered, UBS, and Allianz, have urged the European Commission and global governments to step up the financial sector’s role in financing the SDGs and Paris Agreement in ‘Renewed, Recharged and Reinforced: Urgent actions to harmonize and scale sustainable finance.’

A survey by index firm FTSE Russell has found that 58% of asset owners globally anticipate applying sustainability considerations to smart beta strategies, up from 44% in 2019. It said that the Europe, Middle East and Africa (EMEA) region still leads in sustainable smart beta interest, with North America a “fast follower”. And it said asset owners favour re-weighting based on sustainability criteria over negative screens.

Data provider Refinitiv is expanding the scope of its ‘Enhanced Due Diligence (EDD)’ reports with the inclusion of data from Sigwatch, a UK-based provider of NGO and ESG issue tracking and reputational impact data. The EDD reports provide background checks on companies and investors that require a higher level of scrutiny; the data is particularly useful when assessing global supply chain risk, or when entering higher-risk transactions, for example, IPOs and mergers and acquisitions.

Shareholder advocacy group, Australasian Centre for Corporate Responsibility (ACCR) has filed a resolution to AGL Energy requesting the energy provider bring forward the closures of its coal-fired power stations, Bayswater and Loy Yang A. ACCR has cited AGL’s 2020 scenario analysis, which suggests to meet their goal to limit global warming to 1.5 degrees, the power stations need to be closed by 2036; currently, the scheduled closure of Loy Yang is 2048.

FTI Consulting has launched a new product, ESG Compass; the business advisory firm’s latest offering, takes a research-based approach to assist companies develop informed strategies that balance effective messaging and multi-stakeholder engagement to elevate its ESG profile with investors and meet the sustainability expectations of its stakeholders.