ESG round-up: PFZW dumps nearly €500m O&G shares over climate

The latest developments in sustainable finance: Kentucky officers warn against ESG investment practices; UOB commits to net zero

Dutch pension fund PFZW has divested €470m worth of oil and gas shares after the companies indicated they had not plans to reduce emissions. The asset owner, which is the second largest Dutch pension fund, said it will continue to invest in oil and gas companies as long as they aligned to the Paris Agreement’s climate goals by next year. It is currently engaging with 13 oil and gas majors, including Shell, on the topic.

The Swiss Federal Council has published a report on Switzerland’s and the Swiss National Bank’s (SNB) sustainability goals, telling the SNB governing board to only consider climate, environmental and other sustainability factors when they affect price stability. The Federal Council said that expanding SNB’s mandate to include climate goals would lead to conflict with its price stability goal. It adds that climate change should be primarily the government’s responsibility and that the SNB contribution should come from a focus on price stability.

Kentucky state treasurer Allison Ball and attorney general Daniel Cameron have written to the Kentucky Teachers’ Retirement System and the Kentucky Public Pension Authority requesting information on the role of ESG investment practices in the management of the state’s public retirement systems. Ball said “it is important their investments are maximised, not politicised”. In their letter, the officers expressed their concern that ESG investment practices are violating fiduciary duties and asked the agencies to ensure that ESG factors are not impacting investment decisions.

ISSB chair Emmanuel Faber has suggested that banks may have to significantly ramp up their ESG manpower to comply with regulations in the coming years. Speaking at an ISSB meeting on climate resilience yesterday, the former Danone head recounted an anecdote in which a banker complained that their bank only has three people to do all the ESG work, to which he replied, “it’s quite clear that if you don’t get 30 people in three years time, you won’t be able to do what even the banking supervision is asking you. At the ISSB board meeting it was also unanimously confirmed that companies will be required to use climate-related scenario analysis to inform their resilience analysis.

The United Overseas Bank has made a net-zero 2050 commitment and joined the Net-Zero Banking Alliance. The bank’s commitment covers six sectors: power, automotive, oil and gas, real estate, construction and steel. UOB has also pledged to halt financing for the thermal coal industry by 2039.

The London Pensions Fund Authority has launched a net zero plan with a commitment to reduce Scope 1 and 2 emissions by 75 percent by 2030. The £7.6 billion fund has set six goals covering the portfolio, assets, and operations, in line with the Paris Aligned Investment Initiative. These include reducing Scope 1 and 2 emissions, maintaining a portfolio consistent with the Paris Agreement, investing in assets that help the global economy transition to net zero, financing companies aligned to net zero, pressuring firms to launch net zero plans, and reducing emission from the running of the fund.

A KPMG survey has found that 80 percent of the largest global companies are reporting with the Global Reporting Initiative. The survey examined 250 of the world’s biggest companies (G250) and the top 100 businesses in 58 countries on their sustainability reporting and disclosure practices. The findings showed that 76 percent of the G250 now adopt the GRI Standards for reporting, up by five percentage points from 2021. The research also found that 68 percent of the top 100 national businesses use GRI. While carbon reduction was widely disclosed by companies, fewer than half of them reported on biodiversity.

The UN Environment Programme has published its annual emissions gap report. The findings show that the pledges made at Glasgow’s COP26 have made a “negligible” difference to predicted 2030 emissions and that there is no credible pathway to reaching the 1.5C Paris goal. The current policies point to a 2.8C temperature rise by the end of the century. The research found that an immediate system upheaval is needed to deliver on net-zero 2030 goals, such as cutting 45 percent of greenhouse gas emissions.

Japanese financial regulator the Financial Services Agency has created a working group to expand impact investment in the country, issue guidance and account for global trends on the topic. Appointees include major financial institutions such as Sumitomo Mitsui, Nomura and the country’s influential business lobby Keidanren. A framework on impact investing has previously been developed by the Japanese Ministry of the Environment in partnership with other government agencies.

Companies are improving as climate policy advocates but aren’t holding their trade associations accountable for obstructing climate action, according to research from sustainability non-profit Ceres. As investor demand for climate-related policy engagement practices has mounted, publicly traded companies have increasingly lobbied for policies that will help the US achieve its commitments under the Paris Agreement. Only eight percent of S&P 100 companies have publicly assessed the climate policies of organisations such as the US Chamber of Commerce and the Business Roundtable. Only five percent have publicly acknowledged the organisations’ history of obstruction, with a mere 3 percent disclosing action they have taken to try to change their trade groups’ positions.

The Autorité des marchés financiers and the Autorité de contrôle prudentiel et de résolution have published their third report assessing the climate commitments of French financial institutions. They are calling on the financial groups to strengthen the management of their climate commitments through an appropriate governance framework. The two authorities have said that fossil fuel financing monitoring needs further clarification. They added that periodic checks should be improved and that there need to be more intermediate objectives.