ESG round-up: UK government to expand nuclear in new energy strategy

The latest developments in sustainable finance: UK gender pay gap is highest in construction; Montreal new centre for ISSB; EQT launches sustainability committee.

The UK government has launched a new energy strategy aimed at boosting “long-term energy independence, security and prosperity” following a turbulent rise in energy prices. The strategy sets out plans to expand nuclear, wind, solar, hydrogen, oil and gas, including delivering the equivalent of one nuclear reactor a year. Nuclear energy will represent up to around 25% of projected electricity demand.

A new government body, Great British Nuclear, will be set up immediately to bring forward new projects and a £120 million ($157 million; €147 million) Future Nuclear Enabling Fund will also be launched this month. A licensing round for new North Sea oil and gas projects will take place in the autumn and the government also plans to cut approval times for new offshore wind farms from four years to one year. The new strategy will create 480,000 jobs by 2030, according to government estimates.

Women in the UK are still paid on average 10 percent less than their male colleagues, according to the UK government’s gender pay gap reporting mechanism. Analysis by the Chartered Institute of Personnel and Development (CIPD) found that the construction sector had the largest gender median pay gap, with women paid £0.76 for every £1 earned by men. In the financial and insurance sector, women’s pay is on average £0.88 for every £1 earned by a male colleague. Sectors including human health and social work activities, arts and entertainment, recreation, and transportation and storage show the smallest gender pay gaps. Recent reporting has been affected by the covid-19 crisis, as no filing was required for the financial year 2019-20 and last year’s deadline was postponed to October. Gender pay gap reporting has been mandatory in Britain since 2017 for companies and organisations with 250 or more employees.

The IFRS Foundation and Chartered Professional Accountants of Canada have announced the formation of an International Sustainability Standards Board centre in Montreal. The facility will host key functions on behalf of the ISSB and co-ordinate activity across the Americas. The ISSB, which was launched at COP26 in Glasgow last year, is set to operate a multi-location model to work on comparable global standards for reporting on environmental, social and governance matters. Frankfurt will be the organisation’s co-ordination hub for activities in the Europe, Middle East and Africa region. Arrangements for the Asia-Oceania region are progressing.

Six global banks will partner with RMI’s Center for Climate-Aligned Finance to help decarbonise the aviation sector through the formation of the Aviation Climate-Aligned Finance Working Group. Bank of America, BNP Paribas, Citi, Crédit Agricole CIB, Societe Generale and Standard Chartered are working together to develop a climate-aligned finance framework. They will aim to annually assess and disclose, consistent with the UN-convened Net-Zero Banking Alliance, the degree to which the greenhouse gas emissions from the aircraft, airlines and lessors that the banks finance are in line with 1.5C climate targets. The working group aims to establish a framework before the end of 2022.

Private equity company EQT has established a sustainability committee, following the firm’s commitment to set science-based targets in 2021. The committee will provide a platform for debate on EQT’s sustainability agenda and hold quarterly meetings between management and the board to discuss the firm’s sustainability strategy. The committee will also welcome external thought leaders across different areas to enrich EQT’s approach towards accelerating specific sustainability themes. Nicola Kimm, board member at EQT since 2020, will chair the committee.

The 2° Investing Initiative (2DII) has updated its Financial Green Market Sentiment Indexes (GMSI) – Europe. The GMSI was developed to track corporate and financial institution sentiment around the green recovery from covid. It is modelled on the Purchasing Managers’ Index, forecasting indicators that track market sentiment around economic growth. The Financial GMSI for power has changed ranking, suggesting that market sentiment is moving in favour of the green recovery, whereas for oil and gas, the index has remained constant. According to 2DII, this demonstrates that financial trends remain favourable to a green recovery despite volatility in oil and gas markets.

The Institutional Investors Group on Climate Change (IIGCC) has published a new report that aims to support investors in understanding how to contribute to the $126 trillion of investment in climate solutions required to meet the goals of the Paris Agreement. The report includes 10 priority technologies needed to meet the record investment in climate solutions required by 2050 and underscores areas where investor engagement is needed to help corporates prioritise investments.

Different methodologies and metrics for translating real economy investment needs into investment benchmarks for portfolio construction are also discussed. IIGCC is working with FTSE Russell to apply the outlined investment trajectories and metrics to the listed equity market.

Another report published by the UN-convened Net-Zero Asset Owner Alliance discusses a forward-looking, systematic stewardship approach for investors that seeks to mitigate the existential risk of climate change. This stewardship approach focuses on how investors can leverage multiple tools of engagement to support changes to economic realities that align with a transition to a 1.5C future and can catalyse systemic decarbonisation of the real economy. The Net-Zero Asset Owner Alliance holds more than $10.4 trillion of combined capital and consists of 71 members across the globe.