Daily ESG Briefing: US regulator shelves ban on banks’ ESG exclusions

The latest developments in sustainable finance

US regulator the Office of the Comptroller of the Currency (OCC) has put the brakes on a controversial plan to stop banks from introducing exclusion policies for sectors such as arms or oil. The so-called ‘fair access’ rule was kicked-off by the Trump Administration, but the OCC has now said it will postpone its introduction until a full-time Biden-appointed comptroller could review it.

“It will be difficult for net-zero committed institutions to justify holding Oil & Gas issuers in net-zero portfolios”, according to research by HSBC Global Research. The global bank’s independent research house warns that as a result of net-zero commitments oil & gas bonds could face a “similar trajectory in the next five years to tobacco bonds over the last five years”.  Since 2019, 159 institutions representing over $11trn in assets have signed up to go tobacco free, contributing to underperformance of tobacco bonds “of 71bp over five years” said the report, warning that a “shrinking investor base” may have a similar impact on oil & gas bonds. As of December, 30 institutions representing $9trn in assets have made a 2050 net zero commitment.

The Investment Consultants Sustainability Working Group has launched a new trustee guide for assessing consultants’ climate competency. The guide is a response to the 2020 Pensions Climate Risk Industry Group consultation, which recommended that UK pension scheme trustees require their investment consultants and asset managers to demonstrate climate competence. 

The European Investment Bank illegally avoided environmental scrutiny of its financing decisions, according to a ruling by the EU Court of Justice. The case was brought by NGO ClientEarth after the bank refused a request for an internal review of a €60m loan for a biomass power plant in Spain. 

Pressure is increasing on the two remaining European banks accused of financing the trade of oil extracted from the Ecuadorian Amazon, following announcements by Credit Suisse, BNP Paribas and ING that they will cease such activities. Campaigners have turned their attention to Natixis and UBS, the two banks not to have exited the space. Natixis said that it “proactively” screened transactions for potential environmental risks, and that it had declined to finance any new clients since mid-2020. UBS said that it was maintaining dialogue with advocacy groups and that it declined transactions where the origin of the oil breached their standards.

Rabobank is to launch an agroforestry initiative aimed at sequestering CO2 while improving farming practices in developing countries. The project will allow farmers to sell the CO2 that has been sequestered by planting trees on their land to corporations, in order to offset their emissions. A pilot phase of the project has already led to 50,000 trees being planted and Rabobank aims to sequester 150mt of carbon annually by 2025.

Investor communications provider Broadridge has launched an ESG Advisory Service in partnership with sustainable investment research and advisory services provider Third Economy.