ESG round-up: IOSCO to engage on good sustainable finance practices

Investors face 50-60 percent loss under business-as-usual climate scenario, as UK actuarial body warns world is heading towards a “ruin scenario”.

The International Organisation of Securities Commissions (IOSCO) has stated it plans to engage with voluntary standard setting bodies and industry associations operating in financial markets to promote good sustainable finance practices and counter the risk of greenwashing among asset managers and ESG rating and data providers. In a call to action, published this week, the global regulatory body said it plans to engage with the groups to promote the adoption and implementation of good practices, based on IOSCO’s own recommendations, to address greenwashing risk and related investor protection concerns. 

UK actuarial body Institute and Faculty of Actuaries warned this week that under the current targets set out in the Glasgow Pact, global society is heading towards a “ruin scenario”. The report, written in collaboration with The Climate Crisis Advisory Group (CCAG), highlighted that even 1.5°C of warming could cause irreversible changes to the Earth’s climate, “triggering multiple tipping points like Greenland ice sheet collapse or Amazon dieback, which could interact and cascade like dominoes”. Policymakers are called upon by the body to “take a risk management approach to identify, measure and mitigate the effects of further temperature rises”.

The National Bank of Georgia has developed a sustainable finance taxonomy, the first of its kind in the Caucasus. The taxonomy has been developed alongside the International Finance Corporation in partnership with the Austrian Federal Ministry of Finance, the Swiss State Secretariat for Economic Affairs (SECO), and the Sustainable Finance Banking Network. It has been launched with the aim of aligning sustainability goals, preventing greenwashing and increased accountability.

Moody’s Investors Service has published a Second Party Opinion (SPO) on Egypt’s sustainable finance framework, saying that it demonstrates a “significant contribution to sustainability”. The SPO assigned an SQS2 (very good) sustainability quality score to the framework, adding that it is aligned with the core components of well-established frameworks such as the International Capital Market Association’s green and social bond principles. Moody’s Investors has also recently provided SPOs on the green financing frameworks of electric utility company Iberdrola and transport infrastructure constructor Kunming Rail Transit Group. 

The global asset management arm of Royal Bank of Canada has launched a sustainable investment research programme in partnership with the UK’s University of Exeter. The programme will be led by Chendi Zhang, director of the Exeter Sustainable Finance Centre, and will examine how climate risk exposure and sustainable finance affect the risk-return trade-off of assets. RBC Global Asset Management’s funding will be matched by the University of Exeter Business School. The university is currently recruiting a postdoctoral research fellow for the programme. 

Investors could face a 50 percent to 60 percent loss on existing financial assets under a business-as-usual climate scenario, which assumes temperatures rise by 2.7–3.6°C by the end of the century, according to research by the Thinking Ahead Institute. The non-profit thinktank, set up by consultant Willis Towers Watson, also found that investors will only experience a 15 percent loss in a world economy well below 2°C. The group has called on the finance sector to make “bold decisions” to drive climate action.