ESG round-up: Church of England pulls plug on Big Oil

The Church of England Pensions Board and Church Commissioners for England is set to axe all remaining oil and gas majors from its £3.2 billion pension fund ($4.1bn, €3.7bn) and £10.3 billion endowment. This will include Shell, BP, Exxon and eight other companies. It follows a 2018 vote by the church’s decision-making body, which greenlit the divestment of fossil-fuel companies that were not aligned to the Paris agreement’s timeline by 2023. A broader exclusion of all oil and gas exploration, production and refining companies will follow by the end of the year. The pension board formerly led on a high-profile engagement effort with Shell, on behalf of CA100+, and is set to launch a new climate plan later this year that will have a “refreshed focus”.

ShareAction has produced a toolkit to enhance ethnicity pay gap reporting in the FTSE 100. The resource aims to encourage and support investors to address ethnicity pay inequity across their portfolio companies. The NGO has recommended that investors ask for companies to publicly commit to reporting their ethnicity pay gap, as well as provide plans to reduce it, and for asset owners to ask their asset managers to prioritise ethnicity pay gap reporting and specify this in their investment mandates. The UK government published guidance on ethnicity pay gap reporting in April, but disclosure is not mandatory.

More than half of Europe’s largest banks intend to consider nature-related risks within their stress testing and climate scenario analysis exercises in the next two years, according to a survey by European trade body the Association for Financial Markets in Europe (AFME). This will be contingent on the release of nature-inclusive climate scenarios by green central banking group the Network for Greening the Financial System (NGFS), due later this year. Around 87 percent of respondents told the AFME that they conduct internal climate stress testing annually, going beyond the EU’s regulatory requirement to do so once every two years, and consider additional risk types such as reputational risk. Fifteen AFME member banks participated in the survey.

New Zealand’s financial regulator has published climate scenario guidance for the fund management, life insurance and health sectors to support them through upcoming regulation and reporting obligations. Mandatory climate disclosures will be required in New Zealand as of early 2024. The country’s Financial Services Council has also called for applicants to join its climate disclosures focus group, which will discuss climate-related disclosure topics including scenario analysis.

Australia’s senate has agreed to a Green Party amendment to an upcoming law that will require the $136 billion Future Fund to publicly detail its investments every six months, including where funds are invested and how much. Currently, the Australian sovereign wealth fund has no obligation currently forcing them to disclose any of their investments. Commenting on the news, the CEO of Responsible Investment Association Australasia, Simon O’Connor, said: “The Australian investment industry is moving rapidly towards an environment requiring greater disclosures on portfolio holdings, so we see that it would be appropriate for the Future Fund to follow suit and also lift their standards of disclosure and transparency in line with the emerging market expectations.”

The Official Monetary and Financial Institutions Forum (OMFIF) has called for tougher scrutiny of sustainability-linked loans (SLL) across the APAC region. SLL issuance in APAC grew to nearly $60 billion in 2022 from around $33 billion in 2021, according to data from Moody’s. OMFIF acknowledged the importance of SLLs for supporting Asia’s sustainable transition, but warned that greenwashing “presents a real threat” to the growth of the SLL market, with concerns that targets are often not credible. The organisation has asked for greater transparency, clear rules and standards for external reviews, and for regulators to be prepared to call out misconduct in the SLL market and hold external reviewers, lenders or borrowers to account.

A group of environmental NGOs have launched a Southeast Asia climate and nature-based solutions (NbS) coalition. Members of the coalition include Conservation International, the Nature Conservancy, IDH – the Sustainable Trade Initiative, Birdlife International, Wildlife Conservation Society, Mandai Nature, World Resources Institute Indonesia and WWF-Singapore. The NbS tool aims to lower the barrier to entry for frontline organisations to access climate finance from NbS projects, as well as to support investors to channel funds to FO-led projects.

Global ESG regulation has increased by 155 percent in the last 10 years, according to data from ESG Book. The sustainability data firm – which covers more than 2,400 ESG regulations across 80 jurisdictions – found 1,255 ESG policy interventions have been introduced since 2011. The majority of regulations are spread across four main themes: climate, human rights, biodiversity, and diversity and inclusion.