ESG round-up: GFANZ members initially ‘hesitant’ over legal risk concerns

The latest developments in sustainable finance: Aviva and WWF propose next steps for UK on climate and nature; UN blended finance fund raises $60m; IDI launch investor database.

Huw van Steenis, a former adviser to Mark Carney, has claimed that some financial institutions were initially “hesitant” to join the Glasgow Financial Alliance for Net Zero (GFANZ) over concerns that it could open them up to legal risks in the event of deviations from climate pledges. The 450-strong GFANZ, which was launched at last year’s COP26, requires member institutions to commit to net zero targets by 2050. Separately, Van Steenis warned that the EU green taxonomy should not be used to “stigmatise” transition finance, which he described as essential to decarbonising at the necessary speed. “If we are creating a system which stigmatises banks that lend to imperfect projects and companies which need a few years to go green, it would be a real shame. At the moment, I do worry that the EU version is too purist and that we need more shades of green,” he said. The comments were made at Bloomberg’s ESG Investment Forum.

WWF and Aviva have called on the UK government to amend the Companies Act, and other relevant regulation, to “ensure that transition planning is embedded across the private sector and … [is] in line with best practice and scientific guidance”. In addition, the two organisations said that the importance of nature-based solutions should be integrated “within UK regulatory and legislative architecture” and in the activities of financial regulators. The statement was made in conjunction with a new paper mapping out the next steps that the UK should take to address climate and nature-related risks.

Human rights research body Inclusive Development International has launched a database which allows users to access details of investments made by 17 development finance institutions and shareholder data for 80 of the world’s largest investment firms. The “Follow the Money” toolkit was developed in partnership with the University of Chicago and aims to track investment and funding flows behind socially harmful projects.

A UN-affiliated blended impact investment fund has received over $60 million in financial commitments from the US, Canada, Sweden, Norway and Luxembourg. The capital will be deployed by the Bamboo-UNCDF Initiative for the Least Developed (BUILD) fund as first-loss financing to absorb early financial losses, guarantee protections against credit losses and senior debt financing. The BUILD fund will invest in SMEs in developing markets and will be open to private investors, although no details were provided on its future launch.