ESG round-up: Biden blocks anti-ESG bill with first veto

The latest developments in sustainable finance: Texas blacklists HSBC for energy policy; investors stepped up decarbonisation in 2022 despite energy crisis, Robeco finds.

President Biden has issued his first veto to block a bill which would have prevented retirement plans from considering ESG factors in investment decisions. In a statement he said: “Retirement plan fiduciaries should be able to consider any factor that maximises financial returns for retirees across the country. That is not controversial – that is common sense.” The decision was condemned by Republican state officials including West Virginia state treasurer Riley Moore.

HSBC has been added to Texas’s blacklist of financial institutions allegedly boycotting fossil fuels. Texas comptroller Glenn Hegar said the UK group’s updated oil and gas energy policy is “a prime example of a broader movement in the financial sector to push a social agenda and prioritise political goals over the economic health of their clients”. He added: “HSBC’s policy clearly makes the firm a suitable candidate for listing under Texas law.”

A spokesperson for the bank said: “HSBC does not consider itself to be a company which ‘boycotts’ financing of energy companies. We seek a balanced approach in the implementation of our net-zero commitment, with the primary aim being to support our customers in the transition from a high-carbon to a low-carbon economy.”

Divestment from carbon-intensive assets has increased despite the strong performance of oil and gas stocks, according to a survey of 300 global investors by Dutch asset manager Robeco. On average, institutional investors divested 13 percent of their portfolios in 2022, up from seven percent the year before. Close to a third of respondents reported that oil and gas firms have become less receptive to engagement amid rising profitability and concerns around energy security. A quarter of investors also revealed that they have “paused or slowed” their portfolio decarbonisation efforts in response to energy prices.

Swiss foundation Ethos has called on Switzerland’s Parliament and Federal Council to strengthen corporate due diligence across the country in response to international regulatory developments. In a letter co-signed by 21 Swiss and international institutional investors representing SFr459 billion ($487 billion, €461 billion) in assets, members for the National Council’s Legal Affairs Committee were asked to adopt legislation on human rights and the environment. The members of the committee are due to discuss the possibility of extending the duty of care for companies based in Switzerland on Thursday.

Staying on Switzerland, Swiss Re has met and exceeded a carbon reduction target two years ahead of schedule. The insurer had planned to slash the carbon intensity of its equity and corporate bond portfolio by 35 percent (relative to 2018) by 2024, but has reported an intensity reduction of 42 percent at the end of 2022. According to Swiss Re, the intensity reduction of both equity and corporate bonds holdings was driven mainly by portfolio rebalancing.

Key barriers to climate adaptation include lack of private sector engagement, insufficient mobilisation of finance, low climate literacy, lack of political commitment, and a low uptake of adaptation science, according to research from the Intergovernmental Panel on Climate Change (IPCC). The report also found that there are widening disparities between the estimated costs of adaptation and financing allocated to the area, the majority of which is coming from public sector sources.

AIB Group has set carbon reduction targets for around €43.5 billion of customer loans, representing 75 percent of its total portfolio. In its sustainability report, the bank also committed to sourcing 100 percent of its energy from renewable sources by 2030, including 80 percent from two new solar farms this year. On social targets, AIB has targeted €800 million in finance for social housing by the end of 2024, with €437 million already allocated.

The European Commission proposed a Net-Zero Industry Act to scale up manufacturing of clean technologies in the EU in preparation for the clean energy transition. The initiative was announced last week by commission president Ursula von der Leyen as a part of the bloc’s green deal industrial plan. The act is designed to strengthen the resilience and competitiveness of net-zero technologies manufactured in the EU, and making the energy system more secure and sustainable. The commission also aims to create better conditions to set up net-zero projects in Europe and attract investments, with a view to boosting the EU’s overall strategic net-zero technologies’ manufacturing capacity to at least 40 percent of the bloc’s deployment needs by 2030.

The UK’s annual women in finance charter report has found that average female representation across signatories increased to 35 percent in 2022 from 33 percent in 2021 and 2020. Around 75 percent of signatories have increased their proportion of women in senior management. For the first time since the charter’s launch in 2016, the top quarter of firms achieved at least 40 percent female representation in senior management.

Ahead of the FCA’s “comply or explain” DE&I disclosures next month, the regulator has published guidance for companies on how to report on gender and ethnicity data. It recommends that companies review their governance arrangements on DE&I targets and reporting, familiarise themselves with their compliance framework, assess existing public narrative reporting on DE&I, establish data collection and reporting procedures, identify any legal barriers to collecting or publishing the data, and – where companies may not meet the targets or have the relevant data – have clear explanations as to why and review the effectiveness of existing board succession and recruitment plans.

Oxford University has launched an annual prize for green finance, with two categories open to both individuals and not-for-profit researchers or research teams. The award – established with an endowment from asset manager Insight Investment – will include a £50,000 prize, as well as a research residency at Oxford. The judging panel, chaired by director of the Oxford Sustainable Finance Group Ben Caldecott, will include Saïd Business School professor Bob Eccles, Ceres CEO Mindy Lubber, IIGCC CEO Stephanie Pfeiffer, and vice-chair of the Central Banks and Supervisors Network for Greening the Financial System Sabine Mauderer.

The first category is for outstanding research on how environmental change influences finance and investment, and how economic and financial systems can contribute to achieving global environmental sustainability. The second is to recognise outstanding service from individuals or not-for-profit organisations who have made a special contribution to the furtherance of greening finance.

McDonald’s Corporation has committed to reporting on the risks posed by switching to reusable packaging in a first-in-sector initiative. In response, US nonprofit As You Sow has withdrawn a shareholder proposal on the topic. The fast food giant currently complies with a new French law requiring all on-site dining to use reusable packaging but had no public plans to expand this to the US. The study will be published at the start of 2024.