Daily ESG Briefing: US Congress sees proposals for Fed mandate to cover climate

The latest developments in sustainable finance

Democrats in the US Congress have proposed that public US firms be required to disclose their exposure to climate risks and that the management of climate-related financial risks should be put under the purview of the Federal Reserve, including carrying out climate stress tests. The proposals were made as part of a comprehensive plan to bring down the US’s greenhouse gas emissions to zero by 2050, which also includes a net zero requirement for all electric utilities by 2040 and ending the manufacture of combustion-engine based cars by 2035.

German insurance company Talanx has dropped its support for the controversial Canadian Trans Mountain pipeline over its environmental impact. The project, criticised by indigenous groups and Dr Kirsten Zickfeld, lead author of the IPCC’s report Global Warming of 1.5ºC, would run from Alberta’s oil sands to the shores of Vancouver. Munich Re, another German insurance firm, has also signalled it will also drop the project after unveiling a new oil sands policy earlier this year.

In an open letter to the EU Commission, the CEO Initiative for Europe's Recovery, Reform and Resilience, which represents multinational companies across different sectors that generate more than €600bn in revenues, has come out in support of the EU’s Green Deal. Signatories include Volkswagen, E.ON SE, SAP.SE, and Siemens AG. In its statement, the coalition explained: “We are convinced that only an environmentally compatible, sustainable orientation of our companies will create the basis for our economic success and future prosperity.”

A new report by the UN Environment Programme, UNEP Finance Initiative, Global Canopy 2020, and Natural Capital Finance Alliance, lays the groundwork for financial institutions to set biodiversity-related targets aligned with international policy. The Beyond ‘Business as Usual’: Biodiversity Targets and Finance emphasises, amongst other recommendations, the need for financial institutions to increase their contributions so that they support the targets that will be set by the Convention on Biological Diversity (CBD) next year. The report is part of a larger research project, commissioned by the Swiss Federal Office for Environment to enhance the ENCORE tool.

In wake of covid-19, the social bond market has soared by 43% to €66bn in less than three months, according to NN Investment Partners. The majority of the proceeds have been used to support micro, small and medium-sized enterprises, with a focus on the preservation of jobs during the coronavirus crisis. Notes have predominantly been euro-denominated, with a few USD and Japanese yen deals. 

Investor coalition FAIRR has warned of the material climate impacts on the meat industry, including an $11bn carbon tax bill. In The Livestock Levy: Update report, the NGO describes growing momentum to include farm animal emissions in carbon pricing and other tax regimes. To assist investors, FAIRR has re-released its Coller FAIRR Climate Risk Tool which enables users to price the cost of carbon taxes on agricultural emissions into their valuations of major meat companies.