Daily ESG Briefing: UK consultants tell asset managers what they need to disclose on ESG

The latest developments in sustainable finance

The UK Investment Consultants Sustainability Working Group has published 12 ESG-related metrics for public equity and bonds asset managers to report on. Amongst the indicators are those already required as part of Task Force on Climate-related Financial Disclosures, as well as wider social and governance factors. Launched last year, the group aims to support and accelerate sustainable investment initiatives in the UK.  

The Basel Committee on Banking Supervision has put out a consultation suggesting that banks should identify and quantify climate-related financial risks and incorporate those assessed as material over relevant time horizons into their internal capital and liquidity adequacy assessment processes. Open to comment until 16th February 2022, the consultation seeks to promote a principles-based approach to improve banks' risk management practices and supervisory practices related to climate-related financial risks. 

The financial sector could face additional losses of $150bn per year if climate action by companies is delayed beyond 2026, according to a report by the Oxford Sustainable Finance Group and 2° Investing Initiative. The Cost for the Financial Sector if Firms Delay Climate Action is part of a collaboration between the pair called the Climate Stress-Testing and Scenarios Project. The findings are based on listed companies in power generation, oil & gas, coal production and the automotive industry. 

More than a third of asset owners surveyed by Cerulli Associates said Diversity & Inclusion is the most important criteria used to evaluate managers on ESG offerings. The results come as Redington concluded in separate research that the majority of alternative and multi-asset managers are not considering diversity metrics such as gender when researching potential investments.  

Polluting projects are “unlikely to be found compatible with state-aid rules” in the EU, according to a draft update to rules in the bloc, seen by the Financial Times. In addition, the Commission will apparently specifically consider negative externalities as a criterion for refusing to grant the approval of state aid to a company.  

The Chilean capital markets regulator has laid out its expectations for incorporating sustainability and corporate governance issues into the annual reports of banks, insurers, fund managers and stock exchanges. The announcement, made last week, explained: “The objective is for these entities to report the policies, practices and goals adopted in ESG matters. This given the growing relevance that the dissemination of information regarding these policies, practices and goals has acquired at the local and international level.” 

The Securities and Exchange Board of India has extended the comment deadline on the proposed introduction of disclosure norms for ESG Mutual Fund Schemes until December 1st. The market regulator published the document for the introduction of disclosure standards on October 26th, with an original close of November 16th.