ESG round-up: EDF partners with Columbia to scrutinise net-zero initiatives

The latest developments in sustainable finance: PRI releases DE&I due diligence questionnaire; BKC claims engagement success over Namibia UN treaty accession.

The Environmental Defence Fund has announced a partnership with the Columbia Centre on Sustainable Investment to evaluate net-zero finance initiatives. In a statement, the fund said the rapid growth of net-zero initiatives over the past few years demonstrates the enthusiasm of the sector to engage with climate, but “there is little clarity or consensus around whether and to what extent their varied commitments will provide the transparency, credibility, and accountability to achieve their stated goals”. The project will aim to map out major initiatives, explore what Paris alignment requires of market participants and evaluate the roles of national regulation and international guidelines.

The PRI has released a new due diligence questionnaire to help asset owners understand how their managers and consultants approach DE&I issues internally, through investment activities and the manager research process. The PRI suggests that the questionnaire, which asks for details of policies on a number of issues including anti-discrimination and equitable pay, as well as voting records on DE&I proposals, can be used in the RFP process, during manager reviews or as part of ongoing dialogue.

Germany’s Bank für Kirche und Caritas has announced an engagement success after Namibia acceded to the UN Biological Weapons Convention. The bank, a leading member of Shareholders for Change, began dialogue with the country in February 2020 over signing up to the convention. Tommy Piemonte, head of sustainable investment research, said: “This pleasing result has been influenced by a wide variety of actors and developments. As a sustainability investor, we are pleased to have made a supportive contribution here through our persistent and at the same time co-operative engagement.”

US nonprofit the World Resources Institute (WRI) has published a paper looking at how 35 leading ESG passive funds line up against its new Paris-alignment framework. Based on an assessment of the funds’ methodology and investment criteria, the WRI found that none were fully aligned with the WRI’s framework, including five funds with the EU’s Paris Aligned Benchmark label (PAB). On Monday, the Financial Times reported that passively managed index funds have overtaken actively managed funds’ ownership of the US stock market for the first time, with the former accounting for 16 percent of US stock market capitalisation at the back of 2021, compared with 14 percent held by active funds.

A new discussion paper on the circular economy from the Investor Group on Climate Change (IGCC) has suggested that investors should consider integrating questions on the topic in corporate engagement activities. Regenerate and Restore: A Circular Economy Discussion Paper for Investors briefs institutional investors on circular economy fundamentals, including the investment opportunity presented by the concept. The paper will be launched at next week’s IGCC Climate Finance Summit in Sydney.

Taiwanese banks will undergo mandatory climate stress tests for the first time next year, the head of the banking bureau at the country’s financial regulator has said. In an interview with Bloomberg, Roger Lin said that Taiwan’s banking association would develop the methodology, which will be submitted to the regulator for approval in September. Tests will be carried out in the first half of 2023, with results announced in June.

In other banking news, the chair of the European Banking Authority has said it is unlikely that the EU will adjust capital requirements for banks to steer capital towards ESG-friendly industries unless there is a case for genuine risk management. Again speaking to Bloomberg, José Manuel Campa said changes to requirements should only be made “in order to cover potential risks that may arise from this situation”.