ESG round-up: Financial institutions under fire for methane funding footprint

The latest developments in sustainable finance: NZIA launches target-setting protocol; Federal Reserve Board releases details on pilot climate scenario analysis plans.

Forty financial institutions are funding a methane footprint which could exceed 500 Mt CO2e, according to a report by Planet Tracker and Changing Markets Foundation. The research names the top 20 investors and 20 banks currently financing the methane-generating activities of 15 of the leading global meat and dairy companies. Vanguard and BlackRock are named as the investors with the highest methane footprint, while JPMorgan Chase and Morgan Stanley top the list of banks. The report accuses the financial institutions of having “weak or non-existent policy frameworks” on the reduction of methane emissions and recommends that they start disclosing their procedures around agriculture emissions. The named financial institutions had not responded to a request for comment at the time of publication.

The Net-Zero Insurance Alliance (NZIA) has launched its first target-setting protocol at the World Economic Forum meeting in Davos, Switzerland. The new initiative will allow NZIA signatories to independently set science-based, intermediate targets for their respective insurance and reinsurance underwriting portfolios in line with a net-zero transition pathway. Members will be required to set and disclose initial targets by 31 July.

The Federal Reserve Board has provided additional details on how its pilot climate scenario analysis exercise will be conducted and on the risk management practices information that will be gathered during the exercise. The six largest US banks will analyse the impact scenarios for both physical and transition risks related to climate change on specific assets in their portfolios. The board will also collect qualitative and quantitative information over the course of the pilot, including details on governance and risk management practices, measurement methodologies, risk metrics and data challenges to improve the understanding of climate risk-management practices. The board expects to publish insights gained from the pilot at an aggregate level, but no firm-specific information will be released.

Canada’s largest pension funds’ climate plans are not on track to protect beneficiaries’ retirement security while ensuring a safe climate, according to an inaugural climate report by pensions charitable initiative Shift. The research found a high level of inconsistency with the degree of urgency, transparency and ambition of pension fund approaches to managing climate-related risks and opportunities across the sector. The Healthcare of Ontario Pension Plan (HOOP) and Alberta Investment Management Corporation (AIMco) were ranked as the two worst pension funds for climate policies and strategies, while Caisse de dépôt et placement du Québec, Ontario Teachers’ Pension Plan, University Pension Plan and Investment Management Corporation of Ontario emerged as leaders in the space. HOOP and AIMco had not responded to a request for comment at the time of publication.

The Diversity Project has launched a cross-industry initiative to give women the best opportunities to progress and succeed as portfolio managers. The Pathway Programme is spearheaded by Baroness Helena Morrissey, chair of the Diversity Project, and backed by more than 30 member firms. It is the first scheme that has been shaped by the investment industry for the industry, with a bespoke curriculum which will complement the CFA and training. For the first year, 33 firms have collectively selected 60 women interested in pursuing a career in portfolio management.