Daily ESG Briefing: US Treasury tells development banks to ditch fossil fuels and ‘green’ financial partnerships

The latest developments in sustainable finance

The US Department of the Treasury has formally advised Multilateral Development Banks (MDBs) to stop investing in fossil fuel projects. The recommendation was made in official guidance published in response to an Executive Order issued by President Joe Biden earlier this year, which requires all US agencies to develop plans to support its commitment to the Paris Agreement. The guidance advises MDBs to consider fossil fuel investments only where greener options are unfeasible – particularly in developing countries. A statement issued alongside the guidance said that Treasury Secretary Janet Yellen had already asked MDB heads to “prioritise innovation and impact to match the scale of the climate crisis, develop ambitious capital mobilisation rates consistent with broader climate goals, develop targets for green bonds, ‘green’ the partnerships with financial intermediaries, double the current $40bn pledge for private sector financing focused upon climate adaptation, and align policy based operations with climate goals”. The new guidance will help the banks meet these targets, it added.

Danish pension fund Velliv has told RI it will begin engagement with a large, unnamed  oil company over its role in Myanmar. The fund is part of a $3trn investor coalition established earlier this year to engage with portfolio companies on their activities in the country, which was subject to a military coup in February. At the time, Velliv told RI it expected to divest from some firms that would breach its investment criteria over Myanmar. It declined to name the oil company it had selected for engagement. In recent months, France’s Total has faced high-profile criticism for continuing its operations in Myanmar, but has argued that it would be reckless to pull out of the country’s gas fields, because it has a duty to protect local workers and provide energy to communities in Myanmar and neighbouring Thailand.  

The Bank of Ireland has developed an instrument to allow companies to fund large-scale afforestation in the country. Firms that buy credits through the Woodland Nature Credit programme can report on its impacts under the EU’s Taxonomy and the upcoming EU Corporate Sustainability Reporting Directive, according to the central bank.

Up to 81% of Independent Financial Advisors believe that ESG risks are “extremely important” in the construction of client portfolios, according to research by Hymans Robertson Investment Services. In addition, the pensions and investment consultancy firm found that only 6% of advisers thought that ESG considerations should not be made at the expense of returns.

Spanish and Latin American companies are increasingly favouring sustainability over corporate responsibility. A study by the Vienna University of Economics and Business assessed how 68 companies publicised their Corporate Social Responsibility credentials in comparison with their sustainability performance, concluding that the latter is now seen as a more central marketing tool.