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ESG Briefing: A European Climate Law, 36% returns on GPFG’s environment-related equity, Africa’s largest green bond and more

The latest developments in sustainable finance

The European Commission has drafted a European Climate Law that comprises the political will towards climate neutrality outlined in its European Green Deal. The Climate Law is the legal translation of our political commitment, and sets us irreversibly on the path to a more sustainable future,” EC’s President Ursula von der Leyen said. Under the ordinary legislative procedure, the legislative proposal has been submitted to the European Parliament, the Council, the Economic and Social Committee and the Committee of the Regions for further consideration. 

The GPFG’s environment-related equity mandates returned 35.8% in 2019. The environmental-related mandates are exclusively managed internally. The return on the benchmark equity index in the same period was 25.7%. At year-end 2019, the Bank had invested NOK 62.3bn in environment related equity mandates and NOK 17.1bn in green bonds. The green bonds returned 3.0%. Norges Bank Investment Management invests in three main areas of environmental activity. Companies must have at least 20% of their business in one of these defined environmental categories to be included in the Bank’s environmental investment universe. The environmental categories the Bank includes in the environmental investment universe are: i) low emission energy and alternative fuels, ii) clean energy and energy efficiency and iii) natural resource management. 

NBIM also called on companies to up the ante in ESG disclosures. NBIM’s CEO, Yngve Slyngstad, said: “In recent years, we have requested companies to go from words to numbers in their sustainability reporting. We wish to see more relevant and comparable reporting from companies, so that we, as an investor, can analyse the companies’ exposure to sustainability risks”. NBIM mentioned the Global Reporting Initiative’s standards as a tool to report ESG issues. GRI responded that its recently launched tax transparency standard can also help to capture the tax responsibility NBIM expects from companies.   

Africa’s largest green bond issuance has been entirely bought by the World Bank Group’s International Finance Corporation. The South African Standard Bank Group issued a $200m 10-year bond placed on the London Stock Exchange on March 2, which is also considered South Africa’s first offshore green bond issuance. The IFC estimate that projects funded by this green bond could reduce greenhouse gas emissions by 742,000 tons per year, or nearly 3.7 million tons over a five-year period. Listed in Johannesburg’s and the Namibian stock exchanges, the Standard Bank Group is the largest African bank by assets and has presence in 20 African countries. Commercial banks currently provide 45 percent of South Africa’s financing for renewable energy and energy-efficient projects, the IFC said.

New research from the newly merged Federated Hermes and Beyond Ratings, the Paris-based ESG sovereign ratings firm bought by the London Stock Exchange Group last year, has found a strong correlation between ESG factors and CDS spreads in developed markets. The report, Pricing ESG risk in sovereign credit, part II, builds on an earlier study and establishes that the highly significant relationship between ESG scores and CDS spreads documented initially is clearly driven mainly by developed markets, though ESG scores do have an impact on emerging market credit spread. The results were found by analysing five-year CDS spreads and ESG scores from 28 DMs and 31 EMs during 2009-2018.

Biodiversity data provider Iceberg Data Lab has merged with I Care & Consult, the Paris-based environmental strategy advisory firm that counts former general manager of French reserve fund FRR, Antoine de Salins, among its associate directors. Under the name Iceberg Data Lab, the new “strategic partners” said they will begin with accelerating their biodiversity data services. The first step is part of a wider plan to provide financial institutions with data and indicators covering all the environmental issues in the EU’s Sustainable Finance Action Plan – climate, biodiversity, pollution and circular economy. At the closing of the acquisition, I Care & Consult will become a shareholder of Iceberg Data Lab, which will remain independent and controlled by its management team.