ESG round-up: ShareAction slams UK government plans for oil and gas licences

Danish pension funds call for financial sector inclusion in CSDDD; majority of SLB issuers 'yet to hit year-end goals'.

ShareAction has condemned plans by the UK government to award new licences for drilling oil and gas in the North Sea. Under the proposals, licences would be awarded annually, whereas under the current system there is no fixed period of time between awards. While the plans do include measures to ensure that domestically produced gas has lower emissions than imported LNG, ShareAction CEO Catherine Howarth said the move “is not the solution to the climate crisis threatening communities in the UK and around the world”.

The government also said it would push ahead with plans to ban public bodies – including LGPS schemes and universities – from “taking account of territorial considerations in a way that indicates moral or political disapproval of foreign state conduct when making procurement and investment decisions”. The bill is mainly targeted at public bodies involved in the Boycott, Divestment and Sanctions movement against Israel, but would apply to other countries as well.

P+, AkademikerPension and AP Pension have called on the Danish government to push for the inclusion of the whole financial sector in trilogue negotiations of the EU’s Corporate Sustainability Due Diligence Directive (CSDDD). In an open letter, the pension funds wrote that for the directive to be impactful “it should seek to level the playing field for all participants in the global economy and be consistent with authoritative international standards, which already expect financial institutions to conduct ongoing due diligence across all business activities”. Last week, Responsible Investor reported that member states remain divided over whether or to what extent the financial sector should be covered.

Around 60 percent of sustainability-linked bond issuers with observation dates at the end of December have yet to meet their targets, according to analysis by Barclays. The UK bank has included data on target achievement in its SLB database for the first time, and found that only 20 percent of issuers have hit their end-2023 targets. It said the situation for the remaining 20 percent of issuers was unclear. Barclays’ database of 216 SLBs also shows that ISS, Sustainalytics and Moody’s have an almost equal market share for second-party opinions, and that the majority of SLBs issued this year have a step-up higher than 25 basis points.

The majority of central banks that integrate ESG factors into their investment portfolios have done so primarily to safeguard their reputation, according to a survey by the World Bank, while risk-return considerations came in third. The findings were included in the fourth annual survey of central bank reserve management by the World Bank, which looked at the practices of 125 institutions worldwide. Seventy-three percent of central banks that adopted ESG policies said it was due to reputation reasons, 61 percent associated it with “generating a positive impact”, while 15 percent cited financial objectives. Around 65 percent of central bank investment strategies applied exclusions, while 12 percent used active stewardship strategies. ESG strategies were more common among institutions in high-income countries (42 percent) compared to middle and lower-income countries (16 percent).

The divergence between US and European investment giants on climate shareholder proposals was highlighted this week by analysis from Follow This. The Dutch NGO revealed that, while Amundi, UBS and Allianz Global Investors backed at least two of its resolutions at oil majors, their US peers BlackRock, State Street, Vanguard and Fidelity voted against all five. Europe’s largest asset manager Amundi was the only one of the 12 investors assessed to support all five resolutions. UBS voted against the one put to BP, and Allianz only supported those put to US giants ExxonMobil and Chevron.

Just 1 percent of companies assessed by the Transition Pathway Initiative Centre have transition plans in which future capital expenditure is aligned with long-term decarbonisation goals. In its analysis of 1,010 firms across 17 sectors, including oil and gas, food and steel, the centre also found that only 2 percent clarify the role that will be played by offsets and/or negative emissions technologies within their transition plans.

Responsible investment funds available to UK investors saw outflows of £544 million – the highest on record – in September, according to data published by the Investment Association (IA). The IA also reported that at end-September, responsible investment funds under management in authorised unit trusts and open-end investment companies stood at £95 billion, accounting for 6.9 percent of overall industry funds under management.

Accountancy Europe, ecoDa and ECIIA have issued a guide to help boards embed ESG into company strategy and business models, and to ensure this is supported by proper governance. The paper sets out practical questions for boards to consider across three themes: business model transformation; aligning governance with sustainability objectives; and sustainability information, reporting and assurance.

AXA Investment Managers cut the carbon intensity of its corporate investment portfolio by 28.7 percent against its baseline year at end-2022, achieving its 2025 target three years early. In the first edition of its public tracker for sustainability goals, the French manager said it was 11 percent of the way towards its goal of ditching all coal investments in OECD countries by 2030 and was engaging 57.4 percent of financed emissions against a target of 70 percent by 2025. 

EIOPA, Europe’s insurance and pensions regulator, has assessed the ESG risks facing insurers to be “stable at medium level” in its quarterly risk dashboard. The regulator noted that the proportion of outstanding green bonds held by insurers had fallen from 6 percent in Q1 to 2 percent in Q2. ESG ratings of insurers, issued by Refinitiv, were “unchanged”, said EIOPA, while their exposure to flooding had slightly increased.

The Hong Kong Stock Exchange (HKEX) has pushed back its proposed adoption of global sustainability disclosure rules by one year to 2025. The exchange had earlier indicated that it would incorporate the rules by January 2024 following the publication of an initial draft by the International Sustainability Standards Board (ISSB) in June. HKEX said the delay would enable it to incorporate implementation and policy recommendations due to be published by the ISSB before the end of the year. Last month, Korean regulators announced a similar delay to 2026.

Singapore’s deputy prime minister and central bank chair Lawrence Wong has signalled that the supervisor will not mirror the European Central Bank’s (ECB) decision to set expectations on how banks should integrate sustainability considerations into their capital-setting process. On Tuesday, Wong said that the Monetary Authority of Singapore (MAS) had already issued guidelines on financial sector transition-planning and emphasised the “importance of international coordination… for any fundamental revisions to the banking capital framework” in response to a parliamentary question on the ECB’s move.

Separately, Wong was reported commenting on a planned pilot scheme to help Singaporean insurers make investments in sustainability-related Asian infrastructure projects. Speaking at the Global Insurance Forum, he said: “As underwriters, the industry can develop insurance solutions for renewable energy infrastructure and emerging technologies with promising decarbonisation potential.” MAS will soon issue a public consultation on the proposed capital treatment for insurers’ investments in infrastructure assets, Wong added.

Meanwhile MAS’s annual survey of Singapore’s asset management sector found that “assets with an ESG overlay” in the city-state shrank slightly to 55 percent in 2022, from 58 percent a year earlier. Wong also launched WTW’s Asia Pacific Climate Risk Centre in Singapore, which will provide advisory services and solutions to accelerate corporate green transitions within carbon-intensive sectors.

A Daoist ESG Investor Hub is set to be established in Hong Kong next year to advise followers of the Chinese indigenous religion on investing in line with Daoist values. The hub will be housed by the University of Hong Kong, with support from the China Daoist Association and UK non-profit FaithInvest. The hub will provide advice on Daoist-consistent investing and develop resources and training on investing in line with ESG principles and the SDGs.