ESG round-up: NBIM announces plans to start filing climate proposals

The latest developments in sustainable finance: ESMA launches CSA on MiFID II; one to five Article 9 funds underreporting fossil fuel exposure.

The head of Norges Bank Investment Management (NBIM) has warned that Norway’s trillion-dollar sovereign wealth fund will start filing climate-related proposals at companies that are not meeting its expectations this year. Nicolai Tangen wrote in the Financial Times on Monday: “Filing climate-related proposals where companies do not meet our expectations and are clear laggards sends a signal to the board that they need to step up their efforts.”

The European Securities and Markets Authority (ESMA) is launching a common supervisory action (CSA) with national competent authorities (NCA) on the application of Markets in Financial Instruments Directive (MiFID) II disclosure rules regarding marketing communications across the EU. The NCAs will review whether the marketing, including advertising through social media and affiliate collaborations, are “fair, clear and non-misleading”. The CSA will take place over the course of 2023.

One in five Article 9 funds is underreporting exposure to fossil fuels, according to analysis from Clarity AI. The findings are a follow-up to the data provider’s November 2022 study, which showed that Article 9 funds were investing in companies with “undeniable evidence” of violating the UNGC principles, as well as in companies deriving most of their revenue from fossil fuels. When comparing Clarity AI’s data with the European ESG Template from the 83 Article 9 funds that disclose this information, the researchers found that 21 percent of these funds underreport their exposure to fossil fuels. On average their exposure is reported to be 4 percentage points lower than suggested by Clarity AI data, but the gap can be as high as 13 percentage points.

SSE Renewables and APG, acting on behalf of Dutch pension fund ABP, have collaborated to participate in the upcoming 4GW IJmuiden Ver offshore wind farm zone tenders. The four tenders will focus on ecological protection and enhancement in the North Sea, as well as on optimal integration into the Dutch energy system. Criteria and other elements of the procedures are expected to be published in early 2023, with the application window set to be opened in Q4.

Two tools to help investors and companies better understand their impacts and dependencies on nature have been announced at Davos. The first is spearheaded by WWF, while the second has been created by the UN Environment Programme (UNEP) and S&P Global Sustainable1. Alongside launching the Nature Risk Profile, S&P Global Sustainable1 has created a “new knowledge community” for investment managers, insurers, businesses, non-profits and others to collaborate on ways to further develop the methodology to accelerate the shift of capital towards nature-positive outcomes.

ISS ESG has launched a cyber risk score to signal the likelihood of cyber breach on portfolio companies to investors. The tool shows how well a company manages its network security by assessing organisational cyber risk oversight and management through IP and domain-based data collection, as well as firmographic information that includes company size and the industry in which the firm operates. Coverage of the solution is available for S&P 400, S&P 500 and S&P 600 companies. The cyber risk score will also be added to ISS’s benchmark governance research and voting reports for S&P 500 companies in time for the upcoming 2023 proxy season.