ESG round-up: UBS to pay $850,000 settlement to issuer after Texas blacklisting

The latest developments in sustainable finance: US big six directors linked to polluting firms; AIIB issues climate adaptation bond.

UBS has agreed to pay Texas’s Normangee Independent School District a settlement of $850,000 after it was kicked off a bond deal last year due to being placed on the state’s list of fossil fuel boycotters. The bank had said it was not boycotting energy companies when it entered the contract to underwrite $18.6 million of bonds to be issued by the district, but was subsequently placed on the list between the deal being sold and the transaction closing. Normangee was forced to resell the bonds at a higher interest rate. The settlement covers the losses incurred, Paxton said in a statement.

A spokesperson for UBS said the bank “recognised the challenging circumstances in which Normangee ISD was placed and is pleased to support the school district following its bond reissuance. UBS does not boycott the energy industry, as we actively work with energy companies on an ongoing basis.”

Around 80 percent of board members at America’s top six banks have been linked to polluting firms – including major fossil fuel giants – according to analysis by DeSmog. The research showed that four in five board members at Bank of America, Citi, Goldman Sachs, JP Morgan Chase, Morgan Stanley and Wells Fargo hold or have held roles at oil and gas firms, investment companies financing polluting sectors, or trade associations that openly lobby against climate action. The proportion of directors linked to these industries is the same as in 2021, despite several new appointments.

The Principles for Responsible Investment will open its reporting window for 2023 on 14 June. The window will be open for 12 weeks, closing on 6 September. The reporting framework, updated and streamlined by the organisation this year, will be available for signatories to use. On 24 May, the PRI will also publish new and updated guidance on the reporting framework modules, assessment methodology and logic guide. New documents include guidance on the minimum requirements in the 2023 reporting framework as well as guidance on human rights-relevant indicators and how they correspond to the UN guiding principles on business and human rights. Signatories of the Net Zero Asset Owner Alliance (NZAOA) and Net Zero Asset Managers initiative (NZAM) will also be provided with a guidance document for reporting on the respective initiatives’ commitments.

A group of investors, comprising Storebrand Asset Management, Man Group, Corporate Action Japan and the Australiasian Centre for Corporate Responsibility (ACCR), have successfully engaged Nippon Steel to align its activity with decarbonisation targets of the company. In a meeting last Wednesday, Nippon Steel pledged to start studies to shift from a blast furnace steelmaking process to an electric arc furnace steelmaking process, with the Kyushu Works steel plant in Yawata and the Setouchi Works steel plant in Hirohata identified as candidate sites. The co-engagement group also welcomed Nippon Steel’s statement that a stable supply of green hydrogen and green power is needed as a key input to achieve its target of carbon neutrality.

The Asian Infrastructure Investment Bank (AIIB) has issued its first climate adaptation bond targeting resilience infrastructure. The bond has been issued under the AIIB sustainable development bond framework. The five-year bond raised AUD500 million, and the proceeds will be allocated to projects that have an estimated climate adaptation finance portion of 20 percent or greater of the total project financing. The bond fulfils the AIIB’s commitment at COP27 to issue a bond focusing on climate resilience and mobilise finance for climate adaptation. The multilateral development bank is targeting 50 percent climate finance by 2025, which in 2022 the bank exceeded by approving 56 percent in climate finance.

Staying with bonds, gender-focused bonds account for nearly 2 percent of all listed GSSS bonds, according to a market study by the Luxembourg Stock Exchange (LuxSE). The research analysed 169 listed green, social, sustainability and sustainability-linked bonds that allocate all or a portion of their proceeds to financing gender equality progress or projects.

Ceres has welcomed the proposal of two US Environmental Protection Agency (EPA) standards that have the potential to significantly reduce power plant emissions across the country. The standards would avoid around 600 million metric tonnes of carbon dioxide emissions by 2042, as well as deliver on the Biden administration’s commitment to decarbonise the power sector by 2035. The EPA’s clean air act section standard would address new and reconstructed gas and coal-fuelled power plants, making it possible to lower their emissions by as much as 90 percent. The second standard would address existing power plants, which account for up to 25 percent of the nation’s greenhouse gas emissions.

Cazenove Capital has written to asset managers on its approved funds list, which collectively manage £30 trillion in assets, setting out what it believes to be best practice in relation to voting. The wealth management firm outlined that it expects managers to publish voting polices and voting records in an accessible and timely manner; commit to voting on resolutions at all AGMs; publicly pre-declare voting intentions for important or more controversial ESG shareholder resolutions; use votes to support environmental and social shareholder resolutions; use voting as a form of escalation where companies are failing to make sufficient progress on ESG issues; and use voting against company directors as a form of escalation for climate laggard companies. The letter will be followed in the coming months by Cazenove’s annual manager questionnaire on how asset managers are integrating ESG considerations into their investment processes and the action they have taken.

Robeco has closed its mining engagement programme with 90 percent of engagements ending successfully. The initiative – named the “Lifecycle Management of Mining” – was launched in 2020, focusing on the role of sustainable metals and minerals in the energy transition. Almost all the companies the manager engaged with across the three years have strengthened their water management policies and improved their water use efficiency and recycling. They have also pledged to uphold the Global Industry Standard on Tailings Management to avoid a recurrence of past tailing dam breaches. At the start of this year, Robeco also co-launched Mining 2030, an investor initiative calling for sustainability standards to be raised by the end of the decade.