Daily ESG Briefing: UK regulator kicks off climate change review

The latest developments in sustainable finance

UK regulator the Financial Reporting Council has begun a review into how companies and auditors handle climate change. It will look at assessment and reporting, to ensure that current requirements are being met, and will consider how to improve the quality of information being provided to investors. The assessment will include analysing a sample of company reports and accounts across different industries, evaluating the quality of disclosures under the UK’s new Corporate Governance Code, and highlighting examples of good practice. “The FRC will also consider how investors are addressing the climate challenge in the stewardship of their investments and in their response to systemic and market risks when it monitors the first reports under the new Stewardship Code, which will be issued from the beginning of 2021,” the FRC added in a statement.

Australian insurer QBE says it will expand its climate scenario analysis in 2020, having conducted TCFD-based assessments last year for the first time. Testing the impact of hurricanes in North America and tropical cyclones in Australia – two if its biggest weather-related risks – it concluded that its existing portfolio was unlikely to see a material increase in claims in a 2-3°C scenario to 2050. However, it found that claim costs could shoot up by more than 50% after 2050. The firm said it will broaden out its assessments, using alternative emissions trajectories and weather events.

Allianz Global Investors says it participated in 9,532 shareholder meetings last year – nearly 1,000 more than in 2018 – and opposed 24% of resolutions. It voted against 93% of pay-related proposals in Hong Kong in 2019 and more than half of all director-related proposals in Italy. For a full breakdown, see here. https://us.allianzgi.com/en-us/advisors/our-firm/newsroom/press-releases/allianzgi-voting-at-agms

Ilmarinen, the largest Finnish pension insurer, aims to gradually reduce the carbon footprint of its €48bn investment portfolio and achieve carbon neutrality by 2035 – in line with Finland’s national-level target. This will be done by introducing a 30% threshold on revenue derived from carbon-intensive activities for portfolio companies which will gradually be reduced to 15% by 2025. Mikko Mursula, an Ilmarinen Vice President, said that the fund intends to “make real emissions reduction” as divestment “has no effect on actual emissions”.

The UK’s Department of Work and Pensions (DWP), the government department responsible for setting pensions policy, has requested The Pensions Regulator (TPR) to report on how workplace pension schemes will be financially impacted by climate change and the Regulator’s approach to managing them. This is to be set out in a forthcoming report due by December 2021. TPR is a non-governmental public body sponsored by the DWP.

Charles Stanley Direct, a retail investment platform, has found that nearly half of UK investors surveyed expect to increase their ESG investments portfolio over the next three years, with 17% of investors aiming to do so significantly. Notably, ESG investing is more popular among younger respondents: 64% of investors under 44 said they invested sustainably, but only 31% among those aged 45-54 and 15% among 55-year-olds and over.