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ESG Daily Briefing: Investment giants pledge to create matchmaking platforms and risk sharing tools to advance SDGs

The latest developments in sustainable finance

A $16trn group of “business giants” including Allianz, Pimco, Bank of America, Santander, CalPERS and Swedish Investors for Sustainable Development have partnered with former Bank of England Governor Mark Carney and UN Secretary General António Guterres to make a number of high-level commitments. The announcement by the Global Investors for Sustainable Development Alliance commits to help keep the Sustainable Development Goals (SDGs) on track despite the COVID crisis. Alliance members, who were represented by their CEOs, pledged to integrate the goals into their core business models and “establish scalable innovative financing and investment vehicles to advance the SDGs, including through COVID-19 bonds, risk-sharing tools, joint investment and business matchmaking platforms”.

The current outperformance of active ESG strategies could prove unsustainable if managers fail to identify specific areas where they can generate persistently superior performance, warn equity analysts at Jefferies. There has been evidence that ESG strategies have outperformed in recent months, and the COVID crisis may prompt further growth in interest in sustainability, but a “race to win ESG” could give rise to greenwashing, a note said.

HSBC Global Research has focused in on the trend for pharmaceutical companies to make charitable donations to help patients in the US fund their medication, in return for big tax breaks and higher sales of their products. As well as charitable donations being eligible for up to 60% tax relief, “co-pay charities” are often run in-house and therefore “help sales of that pharmaceutical company’s products that those with a co-pay could otherwise substitute for a cheaper alternative”, says HSBC. “Assuming the average co-pay is 20% of the cost of a drug, the $13bn donated by pharmaceutical companies to in-house charities would have supported sales of c.$65bn – around 20% of all US drug sales in 2018,” it added.  

Japan's Government Pension Investment Fund and Kommunalbanken Norway have partnered up on green bonds, as part of a bigger initiative by the Japanese investment titan to promote and develop sustainable capital markets. GPIF has already formed similar partnerships with other European municipal funding bodies, including Kommuninvest in Sweden, to invest in their green bonds.

Research from 2° Investing Initiative and the Institutional Investors Group on Climate Change, Changing Gear: Alignment of major auto manufacturers with the goals of the Paris Agreement, reveals that – based on the production plans of the 14 biggest global car companies – Daimler and Geely were the only ones ensuring a portion of their plans are partially aligned with a 2°C scenario.  The organisations will be using the report to inform investors and emphasise the implementation of net zero business strategies and planning targets.

MP Pension has divested 24 oil companies, amounting to almost kr900m ($133.9m) in assets, from its portfolio. This the latest exclusion by the Danish pension fund, worth kr128.4bn – it divested kr644m from the 10 biggest oil companies in its portfolio in 2019. As well as no longer investing in bonds and shares issued by coal and tar sands companies, MP Pension has joined the Race to Zero initiative and will set sub-targets for 2025 and 2030.