ESG round-up: AOA calls for development of net-zero aligned benchmarks

The latest developments in sustainable finance: UK banks asked to stop financing fossil fuels; Aussie super funds given go-ahead for impact investment.

The Net Zero Asset Owner Alliance (AOA) has called on asset owners and index providers to develop and implement net-zero aligned benchmarks. The UN-convened body shared 10 principles it sees as key when designing such indices. These include avoiding mechanical exclusions of high-emitting sectors, using forward-looking indicators, and factoring regional differences.

Sindhu Krishna, head of sustainable investments at Phoenix Group, who worked on the report with David Thompson, CIO at Zurich Insurance, told Responsible Investor: “These principles are things we think you should be considering when you start the journey.” Asset owners have different objectives, different stakeholders, different strategic asset allocations, timeframe, geographic exposures etc, she added, so it’s not a “one size fits all” matter. “We’re not prescribing anything to anybody, we are talking about principles,” she said.

The UK’s five largest retail banks – HSBC, Barclays, Santander, NatWest and Lloyds – have been asked to review their fossil fuel policies by sustainable finance campaign group Make My Money Matter. The group has called on the lenders to stop financing oil, gas and coal expansion in line with guidance from the International Energy Agency. According to ShareAction’s 2022 oil and gas report, since the Paris Agreement was signed, the banks have collectively funnelled $368 billion to the fossil fuel sector and $141 billion towards companies at the forefront of oil and gas expansion.

In a survey of UK bank account holders, the campaign group found that 70 percent believe banks have a responsibility to tackle climate change, with 86 percent stating that they do not think their bank is doing enough. NatWest said that its lending to the oil and gas sector has “reduced significantly” over recent years, with exposure to the sector now making up less than 1 percent of its total lending. The bank has also committed to phase out of financing coal in the UK by October 2024 and globally by 2030. Santander said it aims to reach net zero by 2050 across its lending, advisory and investment activities. RI has reached out to the other banks for comment.

Australia’s prudential regulator APRA has stated in new draft guidance that super funds in the country may pursue “environmental or social impacts” if it is “consistent with the delivery of investment outcomes to members”. It was one of several mentions of ESG in the document on investment governance, which is out for consultation. Simon O’Connor, head of the Responsible Investment Association Australasia (RIAA), said the draft looks like a “strong improvement” at first glance. “It appears to move from a perspective of a trustee being allowed to consider ESG factors, to one whereby the regulator is proposing a responsibility for trustees to demonstrate an understanding of ESG risk factors and opportunities,” he said.

JPMorgan Chase, Goldman Sachs, Groupe BPCE, Commerzbank and DZ Bank have been identified as “laggards” in BankTrack’s fourth global human rights benchmark report. Banks in that category scored three points or less out of the available 14 on the benchmark. They were rated on policy, due diligence, reporting and remedy. The NGO found that 38 of the 50 largest commercial banks are implementing less than half of human rights responsibilities, as laid out in the UNGPs. None of the assessed banks qualified as “leaders” because they failed to meet their responsibilities for many criteria. RI has contacted the banks for comment.

EDF and Crédit Agricole CIB have signed a €1 billion ($1.19 billion; €1.15 billion) financing agreement for a bilateral green loan dedicated to the maintenance of existing power plants in France. The funds will be entirely dedicated to finance investments made for EDF’s nuclear activities. The loan will form part of the Grand Carénage programme, led by EDF, which aims to improve security and increase the operating life of nuclear reactors beyond 40 years. The transaction complies with EDF’s 2022 Green Financing Framework, as well as with the best practices of the Green Loan Principles of the Loan Syndications and Trading Association.

German pension fund AkademikerPension has signed a lawsuit against mining giant Glencore. The company has added its name to the lawsuit alongside Norges Bank, Standard Life, abrdn and HSBC, which sued the company last month following a bribery conviction earlier this year. Glencore declined to comment when contacted by RI.

MSCI has launched a solution to support banks seeking to align with the European Banking Authority’s (EBA) ESG Pillar 3 disclosures. The framework will measure and report on ESG and climate-related risks, as well as support granular reporting required by the EBA’s implementation of technical standards on Pillar 3 disclosures. The solution will also help banks with TCFD reporting and measuring the alignment of financing activities with the EU taxonomy. The EBA ESG Pillar 3 disclosure standards are a mandatory requirement for banks with securities traded on a regulated market of any EU member state.

Pensions and Investment Research Consultants (PIRC) has announced that it is suspending its Twitter account following the company’s recent acquisition by Elon Musk. The statement said: “We have been concerned both by the approach taken to the company’s workforce and the impact that the large-scale reductions in staff may have on content moderation.” The firm added that Twitter does not meet its expectations of companies in its stewardship practices. Asset manager Mirova has also suspended its account, saying that it “will review the situation in the coming weeks”. RI has contacted Twitter for comment.