ESG round-up: HESTA calls on C-suite to support Australia’s Just Transition

The latest developments in sustainable finance: Meketa withdraws from NZICI, Norway's sovereign wealth fund adopts net-zero target.

Debby Blakey, CEO of HESTA, has written to all ASX300 board chairs and CEOs asking how they plan to tackle long-term systemic risks, including climate change, social inequality and biodiversity. The company is asking C-suite and board members of ASX300 companies to respond ambitiously to these challenges to help in the transition to a more sustainable and equitable economy for HESTA members and all Australians.

Staying in Australia, the Australasian Centre for Corporate Responsibility has withdrawn its shareholder resolution to Origin Energy after the company succumbed to investor pressure and agreed to include a 1.5C climate change sensitivity analysis in its 2023 financial statements.

Finally, the IIGCC has highlighted three key policies which could help Australia’s transition to net-zero by unlocking capital from investors for climate solutions. These include reducing emissions and limiting global warming above 1.5C; undertaking transformational adaptation and resilience to limit climate damage from current and committed climate change; and ensuring financial flows in the economy to support these objectives.

Meketa is “temporarily withdrawing” from the Net Zero Investment Consultants Initiative (NZICI), after joining as a founding member last September. In a statement to Capital Monitor, the US-based consultant said: “Meketa will seek to adopt NZICI’s global reporting framework at a more appropriate time.” Pressure is mounting on GFANZ after Australian and Austrian pensions funds Cbus Super and Bundespensionskasse AG left the Net-Zero Asset Owner Alliance. The Financial Times has also reported that US banks – including Morgan Stanley, JPMorgan and Bank of America – are threatening to leave Net-Zero Banking Alliance.

In other GFANZ news, the Net-Zero Asset Owner Alliance (AOA) has called on policymakers to do more to facilitate the scaling of blended finance structures. The group laid out five recommendations urgently needed to “incentivise and utilise blended finance structures at scale” which are necessary, they argued, if the world is to achieve international climate and sustainable development goals. The recommendations included a renewed call for access to emerging markets credit risk data.

Norway’s trillion-dollar sovereign wealth fund has formally adopted a net-zero target following assent by the country’s parliament. Despite being considered a global ESG pioneer, GPFG is one of the few sustainability-focused major asset owners which had not previously pledged to decarbonise its portfolio. The fund is managed by the Norges Bank Investment Management (NBIM) but overall responsibility for it falls under the Norwegian government. Any changes to the mandate, such as the introduction of a climate target, must be signed off by lawmakers via a “white paper”, which is debated every spring. The changes to its mandate mean the fund will begin stress-testing its holdings against a 1.5C scenario and adopt a “long-term goal” of investing only in net-zero companies and disclosing its exposure to green companies.

The World Benchmarking Alliance has launched a coalition to address the ethical risks of artificial intelligence. Lead investors Fidelity International and Boston Common Asset Management are among the 39 supporting members, which collectively have $6.3 trillion of assets under management. The coalition is looking to highlight the importance of responsible and ethical AI, increase understanding of best practice, and improve tech companies’ commitment to ethical AI.

An expert advisory group convened by the European Commission to look at scaling up sustainable finance in low and middle-income countries met in Brussels for the first time this week. The High-Level Expert Group has been tasked with providing recommendations to the commission on how to increase funding from the private sector in EU partner countries. The 20 members of the group include representatives from banks, insurers, asset managers, data providers and corporates, as well as academics and standard setters. Twenty representatives from European development finance institutions and multilateral development banks, as well as international organisations, have been appointed as observers. The group is expected to deliver its recommendations in mid-2023.

A Redington survey has found that asset managers are still struggling to provide examples of tangible action on sustainability issues. The study found 43 percent of managers are unable to provide an example of a sell decision driven by ESG in the last 12 months, with only 57 percent of those surveyed possessing an exit strategy to respond to negative ESG performance. The annual sustainable investment survey reflects the responses from 122 managers.

Mondelēz International has commissioned a third-party racial equity audit following a vote by the Shareholder Association for Research and Education that was supported by 47 percent of shareholders. WilmerHale LLP will conduct the audit, which will consider the input from a range of stakeholders and cover the US and Canadian aspects of the business.