ESG round-up: IIGCC weighs in on net-zero benchmarks

The Institutional Investors Group on Climate Change (IIGCC) has produced a guide for index providers on enhancing the quality of net-zero benchmarks. The guide outlines five key principles to consider: prioritising real-world emissions reductions; ensuring transparency of benchmark rules and their consequences; incorporating a sectoral and regional based approach; prioritising publicly available data and integrating alternative alignment metrics; and facilitating engagement to improve issuer behaviour.

The IIGCC engaged with eight index providers, including Bloomberg, FTSE Russell, MSCI and S&P Global, on the topic as well as the advantages, disadvantages and consequences of EU climate benchmark regulation. On the latter, it said that “while the EU climate benchmarks regulation has provided a step in the right direction, they do not meet the full ambitions of an investor targeting net zero”. “In practice, benchmarks implementing the regulations have a tendency to comply with emission reduction targets through capital reallocation, achieving emissions reductions by reducing the weight of the highest emitting sectors relative to others,” it added.

One fifth of investors backed the refined Follow This climate proposal at Shell on Tuesday, according to preliminary results. Last year, support for the Dutch climate activist’s broader Paris-aligned emission reductions resolution fell 10 percentage points to 20 percent at the oil major. The 2023 proposal focused on 2030 emission reduction targets but did not garner more support, despite more vocal support from big investors ahead of the meeting. Shell’s own climate plan fared no better compared with last year, once again attracting 80 percent support. Like many other high-profile AGMs, Shell’s was disrupted by climate protesters and the company’s chair also faced a several questions from institutional investors, including representatives of Dutch manager MN and the Church of England Pensions Board, who are the current and former Climate Action 100+ co-leads on the company, respectively.

Swiss Re has become the fourth member to leave the Net Zero Insurance Alliance (NZIA) following the departure of Munich Re, Zurich and Hannover Re. In an announcement on Monday, the reinsurance giant withdrew its support from the UN-backed group, which is part of the Glasgow Financial Alliance for Net Zero (GFANZ). Like the other re/insurer leavers, Swiss Re said that its commitment to its sustainability strategy remains unchanged.

Finance for Biodiversity (FfB) Foundation has added 15 new signatories to its pledge, bringing the total to 140 signatories with around €19.7 trillion in assets. Some of the new signatories include Dutch pension fund ABP, Climate Asset Management, Phoenix Group and Swiss Life Asset Managers France.

State Street Global Advisers has announced that it will offer proxy voting choices to more investors, including those owning its US ETFs and mutual funds. The current programme will expand to provide investors in all US institutional index equity funds offered by the firm in the US a range of voting policies, it said.

The UN Pension Fund will support the development of sustainability financial reporting, having recently joined the Investor Advisory Group (IIAG) of the IFRS Foundation’s International Sustainability Standards Board (ISSB). The IIAG’s goal is to provide strategic guidance on developing IFRS Sustainability Disclosure Standards and to help ensure that the investor perspective is articulated clearly and is considered in standard-setting process. The UN Pension Fund has also joined the IFRS Sustainability Alliance, a global membership programme for sustainability standards.

Only 27 percent of Indian businesses say they are well-prepared to meet ESG requirements, according to a Deloitte survey. The largest 150 Indian listed companies will face mandatory requirements to obtain “reasonable assurance” for their corporate sustainability reports from 2023-24. However, according to the research, fewer than half of the businesses said they are well informed of the ESG reporting mechanisms and regulations in India. While there is a knowledge gap, almost 68 percent have formally integrated ESG strategies into their organisations and more than 80 percent of companies produce sustainability reports.

ClientEarth has been granted a hearing at the High Court to request the reconsideration of the dismissal of a lawsuit against Shell’s board of directors of climate risk mismanagement. The case – originally filed in February – challenged Shell’s directors over their alleged failure to prepare for the energy transition. The High Court of England and Wales refused permission for the lawsuit to proceed earlier this month.

G7 leaders have said they are committed to accelerating work on the Sustainable Development Goals (SDGs), recognising the links between reducing poverty and tackling the climate and nature crisis. In response, UK sustainable finance at independent climate change think tank E3G said that Japan’s resistance to phasing out coal power generation and Germany’s insistence on more public investment in gas “undercut the G7’s leadership”. It also called for G7 countries to commit to working closely with the International Sustainability Standards Board (ISSB) to achieve the global interoperability of standards.

Only 6 percent of European financial services companies have board-level expertise in biodiversity, according to EY’s European Financial Services Boardroom Monitor. Nine percent of European insurers and 8 percent of European banks have board-level biodiversity expertise. Overall, 80 percent of board members with expertise in biodiversity are women.

Staying with EY, the South African branch of the company has announced the acquisition of EBS Advisory to progress its mergers and acquisitions (M&A) sustainability and ESG advisory services across Africa.