ESG round-up: Hannover Re exits Net-Zero Insurance Alliance

The latest developments in sustainable finance: MAS launches net-zero plan; European Parliament adopts deforestation law; ISSB to request feedback on its upcoming priorities.

Hannover Re has become the third insurer to leave the Net-Zero Insurance Alliance (NZIA) following the departure of Munich Re and Zurich. In an announcement on Wednesday, the company withdrew its support from the UN-backed group, which is part of the Glasgow Financial Alliance for Net Zero (GFANZ). The insurer said it “remains committed to its sustainability strategy, the associated goals, and its support for the Paris Agreement, and aims to achieve full climate neutrality by 2050 at the latest”. NZIA declined to comment on the departure.

The Monetary Authority of Singapore (MAS) has launched a Finance for Net Zero action plan. The guidance sets out MAS’s strategies for mobilising finance to Asia’s net-zero transition and decarbonisation activities in Singapore, expanding the scope of the country’s net-zero plan launched in 2019 to include transition finance. The action plan looks to achieve four goals including better data and disclosure, engaging the financial sector on climate risk, supporting financial institutions’ adoption of credible transition plans and promoting credible green and transition financing solutions. MAS has also been working on a code of conduct which will require ESG ratings and data product providers to disclose how transition risks are factored into their products. A public consultation will be launched in the second half of the year.

UK pension pool Brunel Pension Partnership has revealed that it too will vote against BP’s chair over the oil major’s decision to change its decarbonisation strategy without consulting shareholders. It follows the announcement by fellow pool LGPS Central earlier this week. Faith Ward, Brunel’s chief responsible investment officer, said: “There was no shareholder engagement regarding the reductions in commitments relating to oil and gas production – a material change to the plan presented to shareholders in 2022, and one that seriously imperils BP’s credibility as a company that will deliver on its promises.”

On Wednesday, the European Parliament adopted a landmark law to fight deforestation. The regulation will prevent the import and sale of products linked to deforestation and forest degradation, including coffee, timber, palm oil, cattle, soy, rubber and cocoa and their derived products. The council of member states will have to approve the text before it is implemented.

When MEPs reached a preliminary deal with EU governments on the law in December, the commission said that “no later than two years after entry into force” it will assess the need to oblige EU financial institutions to only provide financial services to their customers if they assess that there is “only a negligible risk” that these services do not lead to deforestation.

The International Sustainability Standards Board (ISSB) plans to publish a request for information about its agenda priorities next month with a comment period of 120 days. The ISSB is seeking feedback on its priorities for the next two years, having identified four key projects: biodiversity, ecosystems, human capital and human rights and integration in reporting. The initiative is also working to make targeted amendments to the SASB standards to ensure references within the standards are internationally applicable. It will open a 90-day consultation on the proposed revisions next month.

A coalition of 192 investors with $1.3 trillion in assets has called on apparel companies sourcing from Bangladesh and Pakistan to improve the implementation of human rights due diligence in line with the UN Guiding Principles on Business and Human Rights. The move comes just before the 10th anniversary of the collapse of a factory in the Rana Plaza which killed more than 1,000 and injured more than 2,500 people. The investors have also urged companies to sign the International Accord and Pakistan Accord, which pledge to reform the sector and create safer factories.

A £400 billion ($497 billion; €454 billion) investor coalition led by UK pension manager Railpen has launched guidance for companies on how to take an impactful approach to including the worker voice at board level, including the potential use of workforce directors. The guidance was created as a response to requests from some of Railpen’s portfolio companies for the investor perspective on workforce directors specifically. It focuses on the role, recruitment, retention and reporting of workforce directors. The coalition includes Border to Coast, Brunel Pension Partnership, the Church of England Pension Board and Rathbone Greenbank Investments.

NGO Amazon Watch has supported the production of a due diligence toolkit for investors to address the investment and systemic risk of failing to consider Indigenous human rights. The first part of the toolkit covers fundamentals to provide an overview on the rights of Indigenous peoples, and the second part addresses how to implement due diligence into policies and management systems, as well as tools for identifying potential Indigenous rights impacts, including data sources, due diligence questions and red flags in company practices.

A group of 26 investors with $3 trillion in assets has called on food and drinks giant Nestlé to commit to making food healthier and more affordable. The investors – coordinated by NGO ShareAction – have asked the company to set targets to fulfil its ambition of being at the forefront of the industry for providing an accessible balanced diet for people around the world. In response to requests issued last year, Nestlé reported on the healthiness of sales globally and on the 13 key markets using government-endorsed nutrient profiling models in March.

The Law Society has issued guidance on climate change to enable law firms in England and Wales to refuse to act for polluters if the client’s activities prevent progress toward net zero, or clash with the firm’s stance on climate change. The first part of the guidelines explains how to manage businesses in a way which is consistent with the transition to net zero. The second half provides resources for solicitors on how climate change risks and climate legal risks may impact client advice and issues which may be relevant when considering the solicitor-client relationship in the context of climate change. The Law Society is the professional association representing solicitors in England and Wales.

Following requests from a group of investors with $130 trillion in assets, CDP has launched an environmental disclosure system for reporting on plastics. Companies have been asked to disclose on the most problematic plastics production and use. Last year, several large companies including Amazon, ExxonMobil and McDonalds faced shareholder petitions asking for more disclosures on efforts to reduce their plastic waste.

Staying with CDP, the environmental disclosure non-profit has collaborated with Vodafone and Citi to create a programme that provides preferential supply chain financing rates to suppliers of the UK telecoms group that score highly against environmental performance criteria. The framework consists of 12 criteria – relating specifically to emissions in the supply chain – as the basis for a new environmentally-linked supply chain finance programme. It will be opened up to other Vodafone suppliers and their supply chain financing providers later this year.

The UN Environment Programme has published guidance on the significance of the Kunming-Montreal Global Biodiversity Framework (GBF) for investors. It has recommended that investors integrate biodiversity into investment decision-making, and that they assess and disclose nature-related impacts and risks in line with the framework.