ESG round-up: Carney rejects claims US banks threatened to leave GFANZ

The latest developments in sustainable finance: NBIM responds to amendments to G20 and OECD’s principles; France withdraws from ECT.

Mark Carney has pushed back against claims that JPMorgan, Morgan Stanley and Bank of America had threatened to pull out of the Glasgow Financial Alliance for Net Zero (GFANZ). During an appearance in front of the UK’s Environmental Audit Committee, the former governor of the bank of England and co-chair of GFANZ said none of the lenders had indicated to him that they had any intention of leaving, adding: “I put more weight on conversations I have with CEOs of institutions than unsourced things in the press.” Carney’s rebuff follows reports earlier this year that the banks were considering it due to fear of being sued “over increasingly stringent decarbonisation commitments”. Bank of America, Morgan Stanley and JPMorgan declined to comment.

Norges Bank Investment Management (NBIM) has written to the Organisation for Economic Co-operation and Development (OECD) in response to the proposed revision of the G20 and OECD’s Principles of Corporate Governance. NBIM, which manages the $1.0 trillion Norwegian sovereign wealth fund, welcomed the suggested amendments, including increased transparency of shareholder disclosures and board member nominations, as well as a greater emphasis on sustainability. It has, however, advised that some of the wording be altered to reflect that companies should address all material sustainability risks and opportunity, not just climate change.

France has become the latest country to withdraw from the Energy Charter Treaty (ECT), which protects fossil fuel investors from policy changes. Over the past two months, Poland, Spain and the Netherlands have announced plans to leave the 1994 treaty. The departures will reduce the number of signatories to 49. Following an EU summit in Brussels last week, President Macron said that quitting the ECT was “coherent” with the Paris climate deal. The European Commission has proposed a revision of the ECT, which is expected to be discussed at a meeting in Mongolia in November. The only other country to have left the treaty is Italy, which exited in 2015.

More than 300 financial institutions and multinational firms with $37 trillion in assets are calling on the world’s highest-impact companies to set emissions targets in line with the 1.5C Paris climate goal. CDP has written to more than 1,000 firms, requesting that they set emissions reduction goals approved through the Science-based Targets initiative. Of the companies targeted, 48 percent are based in the APAC region and 23 percent are in the US. The campaign is supported by financial institutions including Allianz Global Investors, AXA Group, Crédit Agricole and UBS, as well as the European Investment Bank.

The London Stock Exchange Group, Islamic Finance Council UK and Global Ethical Finance Initiative (GEFI) have issued a report on green and sustainability sukuk. The research is the first to be published by a high-level working group on the market, which was set up at COP26. Launched at GEFI’s Path to COP28 in Dubai, it examines the potential for Islamic fixed income products to deliver financial returns and finance the SDGs. Global green and sustainability sukuk issuance totalled $4.4 billion in H1 this year, with leading jurisdictions Indonesia and the Gulf Corporation Council making up to 53 percent of total issuance.

SuMi TRUST has published a paper proposing a new model for Japanese corporate governance which will promote sustainability by encouraging companies to focus on ESG. The research by Mizuki Suma is based on the development of corporate governance over the past 15 years. It identifies shareholder participation, corporate sustainability and the deployment of technology as the three main goals of Japanese corporate governance in the new model.

Staying with Japan, members of the Institutional Investors Collective Engagement Forum have written to investee companies to state their position on sustainability issues. The letter urges issuers to clearly outline how their sustainability contribution is impacting corporate value. It also highlights how sustainability and business success are intrinsically linked, noting that investors want to know how companies are dealing with ESG issues that have an impact on corporate management.