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ESG round-up: Majority of top Article 8 fund holdings have ‘no discernible ESG impact’

The latest developments in sustainable finance: RLAM to abstain on Shell transition plan, IEA says development finance ‘essential’ for ASEAN energy transition.

The majority of the equities that feature most frequently in funds classified as Article 8 under the EU SFDR “have no discernible ESG impact through the products and services sold”, according to new research from Jefferies. Microsoft, Amazon and Alphabet were the most common holdings in Article 8 funds, with Microsoft appearing in 39 percent of funds that apply the label to themselves. Jefferies said its list of most common equities for the category “differs very little from an equivalent list of non-ESG funds and products”, but added that this did not mean the fund providers were not performing well on managing and mitigating ESG factors. The most commonly held firms in Article 9 funds were in very different sectors, with Schneider Electric, ASML Holding and Koninklijke DSM topping the list – although Microsoft was in sixth place.

Royal London Asset Management has announced it will abstain on Shell’s climate transition plan ahead of its AGM next week. Carlota Garcia-Manas, head of engagement at the £164 billion ($205 billion; €194 billion) manager, which owns 0.7 percent of Shell, said that while the oil giant had made considerable progress in its climate efforts, RLAM could not fully support the plan as it stands. She drew attention to Shell’s reliance on nature-based offsets and divestments, as well as strategies to continue oil and gas exploration between now and 2025.

Countries in Southeast Asia need to make major efforts to improve energy efficiency, accelerate renewables growth and switch to low emissions fuels in order to meet their energy security and emissions goals, according to the International Energy Agency. In its 2022 energy outlook for the region, the IEA said that energy investment would need to reach $190 billion a year by 2030 for the region to meet its climate goals, adding that support from international development finance would be “essential”.

Also on Tuesday, Vietnam-focused manager Dragon Capital has called for “much more” private investment in the country to improve the sustainability of its economy. The Vietnamese government has estimated it needs $128 billion from 2021 to 2030 to develop its energy industry. Dragon Capital’s executive chairman Dominic Scriven described support from private investors as “paramount” for the country’s green transition.