ESG round-up: $8trn investor group calls on chemical firms to phase out ‘forever chemicals’

The latest developments in sustainable finance: study finds 'appropriate' benchmark protects from carbon price risk; Asset owner platform and Qontigo release SDG data tool.

Close to 50 investors, representing $8 trillion in assets under management, have written to the world’s largest chemical producers calling for greater disclosure around their production of harmful substances and for the development of phase-out plans for dangerous “forever chemicals”. It is the second letter on the issue, with the first being sent last December. Since last year’s assessment, US giant DuPont has removed all details of its portfolio from public view, resulting in a bottom place ranking. Six firms, including Germany’s BASF and the Netherland’s DSM, have also stopped publishing phase-out plans, “signalling weakening commitment”. Eugenie Mathieu, earth pillar lead at Aviva Investors, which coordinated the letter with Storebrand Asset Management, told Responsible Investor that engagement groups have not “had a fantastic response from companies”. She added that, while Aviva has not voted against any of the companies on the issue yet, it “will be looking to absolutely incorporate this into voting policy over the coming year”.

Applying an “appropriate sustainable benchmark” for a global equity portfolio could lower the carbon-transition price risk by 70-80 percent, according to research by Dutch investment firm Van Lanschot Kempen. The €96 billion fund also found that a $100 global carbon price increase results in a six to 30 percent fall in global equity valuations, depending on what emissions are considered. A $150 global carbon price increase would result in a 9 percent fall for Scope 1 and 2 emissions and up to 43 percent for Scope 1, 2 and 3.

The Sustainable Development Investments Asset Owner Platform (SDI AOP) and Qontigo have launched a forward-looking dataset that assesses which companies are actively developing solutions needed to achieve the UN Sustainable Development Goals (SDGs). The SDI AOP was launched in 2020 to work with investors to embed the UN SDGs into their investment processes and integrate SDG contributions into portfolio management and reporting, enabling target setting and progress monitoring.

The “free rider” problem was raised as one of the barriers to stewardship in an inaugural study on the issue by Australian responsible investment body RIAA in partnership with KPMG. Interviews with Australasian investors found that one of the “structural barriers” to stewardship is the “asymmetry in the costs and benefits of engagement, where committed investors incur costs while all investors benefit”. The report also found that less than half (46 percent) of investors polled have a “process of following up with underlying managers or products” on their stewardship efforts.