ESG round-up: Indonesian financial regulator says coal may fall under green taxonomy

The latest developments in sustainable finance: CA100+ publishes diversified mining net-zero standard; PGGM criticises CA100+ signatories’ voting patterns; Fidelity expands Article 9 fund range.

Indonesian financial regulator OJK has indicated that it may include coal-fired power plants in the country’s green taxonomy. Chairman of the board of commissioners of OJK Mahendra Siregar said he would be revising the green taxonomy rules at a monthly meeting last week. This would match the ASEAN green taxonomy which, unlike the EU taxonomy, which makes exiting coal a prerequisite to access financing, considers active coal plants and those currently being built eligible for green financing, so long as they adhere to a strict phase-out timeline. When the taxonomy was first published in early 2022, it had reserved its green label for only projects sourced from renewable energy.

Climate Action 100+ has published its net-zero standard for diversified mining. The standard, designed to complement the sector neutral CA100+ net zero company benchmark, aims to help investors assess the progress of diversified mining companies as they move towards net zero. It is the product of several consultations with investors, mining companies and stakeholders, with the final consultation having taken place in June. Mining companies that will be assessed with the standard include Anglo American, ANTAM, BHP, Glencore, Grupo México, Rio Tinto, South32, Teck Resources, Vale and Vedanta.

Dutch pension fund PGGM CIO Geraldine Leegwater and responsible investment adviser Colin Tissen have accused CA100+ signatories’ voting patterns of diverging from the Paris Agreement goals. In a letter published in the Financial Times (paywall), they wrote that “to enhance the credibility of their climate stewardship, investors backing CA100+ must explain how their voting can complement such initiatives”. They used the examples of Rio Tinto, Shell and TotalEnergies, which all received more than 80 percent support for their non-Paris aligned transition plans in 2022.

A spokesperson for CA100+ said: “CA100+ recognises that combining dialogue with the use of voting rights can help investors achieve better engagement outcomes. The initiative features votes that are in line with its objectives on its website for investors own consideration, as its signatories are independent fiduciaries responsible for their voting decisions. For its second phase, CA100+ has enhanced transparency and accountability mechanisms, including the expectation that lead investors disclose their voting records on those flagged votes.”

Fidelity International has expanded its fund range to include six extra Article 9 funds. The manager has upgraded four of its sustainable funds from Article 8 to 9, having adapted their strategies to fit with Fidelity’s Article 9 framework. They include the Biodiversity Fund, Climate Solutions Fund, Eurozone Equity Fund and US Equity Fund. Fidelity has also launched two new Article 9 funds, the Sustainable Global Equity Fund, managed by portfolio manager Cornelia Furse and assistant portfolio manager Matt Egerton, and the Sustainable Asian Focus Fund, managed by Mohit Mandhana.

USS and the University of Exeter have developed a range of new climate scenarios in response to concerns over the granularity of information available in current scenarios. It comes after a series of critical reports on current approaches to scenario analysis in recent weeks, two of which were co-authored by the University of Exeter. The initiative has produced four scenarios that take into account potential political and environmental tipping points such as the prospect of a peace deal with Ukraine or its partition, tensions with China and the collapse of deep convection in the Labrador seas (which is responsible for moderating climate and ventilating the ocean with oxygen, sustaining marine life).

The German banking association has warned that the Green Asset Ratio of banks should not be used as the basis of political or regulatory measures because it is unlikely to reflect their actual sustainability profile. In a document published on Monday looking at taxonomy alignment of economic sectors, the Bundesverband Deutscher Banken said that given the exclusion of project financing, SMEs and transition financing, the Green Asset Ratio does not provide an accurate sustainability profile of banks and is not useful as a control figure. It called for the methodology to be expanded and for a principle-based framework to cover transition finance. Under the taxonomy, EU banks must report in January 2024 to what extent their financing activities are taxonomy-aligned.

Allianz has launched its first net-zero transition plan, with 2030 intermediate targets for its core business segments. The German insurance giant is looking to scale its renewable energy and low-carbon technology, targeting a 150 percent growth in revenues from 2022 from transition solutions in commercial insurance portfolio and aiming to provide additional investments of €20 billion by 2030. It has also set goals of carbon emission reduction of 30 percent for retail motor segment and GHG emission intensity reduction of 45 percent in commercial insurance segment by 2030.

Norges Bank Investment Management (NBIM) has announced the closure of its office in Shanghai. Norway’s trillion-dollar sovereign wealth fund said the decision was “driven by operational considerations and does not affect the fund’s investment strategy or our investments in China”. The office was first opened in November 2007 and currently has eight staff. The fund said that its Singapore office “has increasingly served as the hub for the whole of the Asian region and has been built up to take care of all operational functions, including China”. As of end of 2022, NBIM was invested in 850 Chinese companies, with a total value of around $42 billion.

UNDP has published a paper in partnership with the UK’s FCA on embedding social issues in sustainable finance. It aims to tackle inequality and improve a common understanding of the social impacts of a market-based economy. The paper outlines three key recommendations for financial institutions, governments and regulators to support research on the systemic risk of socio-economic inequality, adopt and improve social disclosure standards, and rethink macroeconomic determinants of sustainable finance.