ESG round-up: European investors back climate lawsuit against Shell

The latest developments in sustainable finance: Investors call for say-on-climate vote; EIB’s CAB attracts record interest from investors.

Big European institutional investors are supporting a pioneering climate risk lawsuit against Shell, alleging that the oil major’s board has failed to manage the “material and foreseeable risks” posed to the company by climate change. The legal action, which is backed by UK pension funds Nest and London CIV and Swedish national pension fund AP3, was filed in the UK’s High Court by environmental law firm ClientEarth on Wednesday. ClientEarth announced that it had started the action in March, less than a year after Shell lost a landmark ruling in the Netherlands, in which a Dutch court ordered the company to reduce its emissions. The new action asks the High Court for an order requiring Shell’s board to adopt a strategy to manage climate risk in line with its duties under the Companies Act, and in compliance with the Dutch court judgment.

A spokesperson for Shell told Responsible Investor: “We do not accept ClientEarth’s allegations. Our directors have complied with their legal duties and have, at all times, acted in the best interests of the company.” She added that Shell believes its climate targets are aligned with the more ambitious goal of the Paris Agreement.

Investors including the Local Authority Pension Fund Forum, CCLA and Sarasin & Partners have called on FTSE-listed companies to introduce a shareholder vote on their climate action plans. The group wrote to the companies asking them to introduce say-on-climate votes ahead of the 2023 AGM season. They also requested companies disclose their 1.5C-aligned transition plans and allow investor oversight on these plans.

The European Investment Bank has issued the largest US dollar-denominated supranational green bond. The 10-year Global Climate Awareness Bond (CAB) also attracted record demand for a supranational deal, with orders topping $19.6 billion. Proceeds from CABs are allocated to EIB’s lending activities contributing to climate change mitigation and aligned with evolving EU sustainable finance legislation.

Australia has introduced a law requiring companies with more than 100 employees to report on their gender pay gap. The Workplace Gender Equality Amendment Bill will come into force this year, with reporting on gender pay gaps beginning in 2024. Prime minister Anthony Albanese said the law had been put in place due to a lack of transparency around the gender pay gap in workplaces. Data collected by the Workplace Gender Equality Agency last year found that the finance sector was one of the worst offenders in Australia for the gender pay gap. On average, women were paid 22.8 percent less than their male colleagues, with the financial and insurance sector reporting a 28.6 percent pay gap.

Most UK pension funds are not using the Task Force on Climate-Related Financial Disclosures (TCFD) to inform their climate investment strategies, according to research from Pensions for Purpose. The paper, which was supported by Redington, found that challenges around unreliable or limited data, the credibility of carbon offsets, and inconsistent metrics between asset classes are persistent issues for pension funds.

A public comment period for a draft mining standard is underway in the latest addition to a growing suite of sector standards from Global Reporting Initiative (GRI). The standard, which has been developed by a multi-stakeholder expert group, has identified 25 topics that capture the full range of impacts for mining organisations, including environmental, social and economic issues. The draft features three new topics to the GRI Standards – tailings facilities and hazardous waste streams, artisanal and small-scale mining, and operating in conflict zones – as well as expectations for site-level reporting. The standard will apply to all organisations engaged in mining and quarrying with the exception of coal, oil and gas, for which there are existing standards. The draft is open for consultation until 30 April.

Intercontinental Exchange (ICE) has expanded its ESG company data in the Asia-Pacific region, offering global coverage of 16,000 companies across 105 countries. The data covers the most broadly tracked global and regional indices, including the most widely used benchmarks in the region such as Nikkei 225, ASX300, Topix 1000 and Shenzhen 300. In January, ICE also expanded its global corporate emissions and targets data to cover more than 600,000 fixed-income securities. This expansion resulted from the integration of climate data provided by Urgentem, which was acquired by ICE last June.

The Securities and Exchange Commission’s division of examinations has outlined its priorities for 2023. On ESG, the division plans to continue its focus on ESG-related advisory services and fund offerings, including assessing whether funds are operating in the manner laid out in their disclosures. The division will also assess whether ESG products are appropriately labelled and whether recommendations for these products have been made in investors’ best interest.

MSCI has launched an ESG tool for companies to analyse their sustainability strategy and compare it with competitors. MSCI Corporate Sustainability Insights will streamline data on company ESG ratings, controversies and SDGs, offer views into their risk exposure and alignment with global temperature goals, identify potential disclosure gaps in carbon-related commitments, and offer insight into climate-related risks and opportunities compared with industry peers and based on the recommendation from the TCFD. The tool is available to companies tracked by MSCI ESG Research.