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ESG Briefing, April 24: Wells Fargo announces $200bn in sustainable financing

The round-up of the latest ESG developments

Environmental

Wells Fargo & Company will provide $200bn in financing to sustainable businesses and projects by 2030, CEO Tim Sloan announced last week. More than $100bn will be focused on supporting the transition to a low-carbon economy by funding clean technologies and energy, green bonds, and alternative transportation. The remainder will support companies and projects focused on environment-driven activities such as sustainable agriculture, recycling, and conservation. The company also detailed its commitment to transparency around its sustainable financing accounting and inclusion practices, annual impact reporting, and reporting on its progress implementing the SDG and TCFD recommendations. Mindy Lubber, CEO and President of Ceres, said: “Wells Fargo’s new commitments add to the growing momentum by the financial sector to commit hundreds of billions of dollars in clean energy investments and to improve transparency through greater disclosure of climate-related risks and opportunities.”
A delegation of Indigenous women from across North America last week urged European banks and accountants to withdraw funding from extractive industries that wreak havoc on the environment and threaten their way of life, according to media reports. The Indigenous Women’s Divestment Delegation will come to Europe to engage with political leaders, representatives of financial and insurance institutions, and civil society groups, calling for “immediate movement towards fossil fuel divestment, and a transition to a just, clean energy future”. Facilitated by the Women’s Earth and Climate Action Network (WECAN) International, the move is intended to draw attention to what the delegation and their allies deem “destructive projects”, such as Energy Transfer Partners’ Dakota Access and Bayou Bridge Pipelines, Kinder Morgan’s TransMountain Pipeline and Enbridge’s Line 3 Pipeline.
HSBC will no longer finance new tar sands activities and coal power plants globally, with the exception of Indonesia, Bangladesh and Vietnam. The move, announced in the bank’s new Energy Policy, would see it excluded from financing the Keystone XL and Line 3 Expansion pipelines. Joining BNP Paribas, Natixis, Axa, ING and AP7, the policy makes HSBC the latest international financier to position itself against the contentious pipeline projects. Responsible investment charity ShareAction has outlined serious concerns about the exclusion of the three South-East Asian countries from HSBC’s new policy, as most of the bank’s coal finance is based in those countries. The charity has, however, praised the bank’s progress in acknowledging the negative climate impact and financial risks associated with financing climate-exposed sectors. Katie Kedward, project officer at ShareAction, who raised the issue with the bank’s board at its AGM, said: “HSBC’s climate commitments here should not go uncelebrated, given how much they financed coal power last year. However, we were disappointed to see the South East Asian countries excluded from HSBC’s new coal policy, which feels a little less like climate leadership, and a little more like business as usual. We’re urging them to close this loophole now.”
Legal & General Investment Management (LGIM) is to crack down on firms that behave unsustainably, with plans to name and shame as well as divest from offenders. Helena Morrissey, LGIM’s head of personal investing, says the worst performers have taken no notice of LGIM’s efforts to encourage firms to make improvements on sustainability. Firms that have made progress will be “named and famed”. Morrissey said: “We work with 90 or so of the world’s largest companies across six sectors whose actions we think will have the biggest implications for climate change in the future.”
Clean energy consultancy Mercom Capital Group has released a report on funding and mergers and acquisitions (M&A) activity for the battery storage, smart grid, and energy efficiency sectors for the first quarter of 2018. The three sectors had $472m in VC funding during this period. Click here for the full report.According to a new report, 89% of fund managers expect oil company valuations to drop as a result of energy transition risks, up from 46% of fund managers in 2017. The UKSIF and the Climate Change Collaboration report ‘Not long now’, which launches tomorrow (April 25) at the London Stock Exchange for Ownership Day, is based on a survey of 30 fund managers. Over half of respondents (54%) said the reputational risks of integrated oil companies are already negatively impacting their valuation. The report recommends that fund managers develop products, including active and passive fossil-free products, to manage and mitigate climate-related financial risks and access opportunities from the transition, and that asset owners assess the climate-related risk of investments, review and agree the options to manage these risks, and request new or amended climate resilient products. Click here to read the report.
The Global Catholic Climate Movement announced on that 33 Catholic financial institutions have committed to some sort of fossil fuel divestment. 11 of them stated that they are already fossil free and that they will avoid any fossil fuel investment in the future. 16 of them committed to full divestment from existing fossil fuel investments, especially those in the “The Carbon Underground 200” ranked by Fossil Free Indexes. Four committed to divesting partially (i.e. only in specific asset classes) while two committed to divesting from coal only. No granular data was disclosed on the amounts this combined divestment pledge could represent.

Social

UK social investor Social and Sustainable Capital (SASC) has more than doubled its investments over the last 12 months, according to its recently published 2018 Impact Report. The report shows record growth for its investment portfolio over the last year, with investment volumes more than doubling to just over £11m and a further eight investments made into UK charities and social enterprises. Key investments include £500,000 loans to The Cornerstone Partnership, the nationwide social enterprise supporting people that come into contact with the care system, and to HCT Group, one of the largest social enterprises in the UK providing community transport services.

Six Dutch financial heavyweights, representing €500m in AUM, are behind a new initiative scrutinising the ‘living wage’ practices of companies in the clothing sector, focusing on their supply-chains. The Platform Living Wage Financials, which is backed by ASN Bank, Achmea, Triodos, a.s.r., NN, and MN, is set to launch this September. The group will collaborate to develop a company rating methodology, engage with companies, and raise awareness of the issues amongst stakeholders.

The US SIF Foundation has released a guide for financial advisors on how to incorporate and deepen sustainable, responsible and impact investing within their practice. Prepared with insights from financial advisors and other industry professionals, the 2018 Financial Advisor Roadmap also explains the business case for responsible investing and includes sample investment policy statements and resources on impact measurement and management. George Gay, CEO of First Affirmative Financial Network, commended the guide, saying: “Sustainable, responsible and impact investing is here to stay, and financial advisors who aren’t able to discuss it with prospective clients are missing out on business opportunities.” To access the Financial Advisor Roadmap, click here .

Governance

European fund industry body EFAMA, the European Fund and Asset Management Association, has “substantially” updated its governance guidance to align it with the EU’s revised Shareholder Rights Directive. The EFAMA Stewardship Code – formerly the EFAMA ‘Code for external governance’ – “aims to be a European reference document, notably for asset managers seeking to comply with the revised Shareholder Rights Directive (in particular article 3g regarding engagement policy)”. Peter de Proft, EFAMA’s Director General, told RI “the language used has been updated to bring it in line with revised Shareholder Rights Directive and current terminology”, adding: “The scope of what is covered in the engagement with investee companies has also been updated and amended to include, amongst others, environmental and social concerns”.