ESG round-up: UK pension funds turn attention to EM climate transition with new collaboration

The latest developments in sustainable finance: Most pension funds 'do not believe net-zero commitments are achievable', UK government plans legislation to block Israel boycotts.

A dozen UK pension schemes, convened by the Church of England Pensions Board, have committed to jointly explore how they can support the climate transition in emerging markets. The intervention was agreed on Thursday at an investor roundtable attended by the UK’s pensions minister, Guy Opperman. The investors, representing £400 billion ($488 billion; €468 billion) in assets, include the likes of Railpen, Brunel, Border to Coast, NEST and Legal & General’s workplace pension plan. “I look forward to working closely together to assess how we can further unleash the productive power of UK pensions in support of the climate transition in emerging economies, while also delivering sustainable returns for members,” Opperman said. 

Most pension funds do not believe net-zero commitments are achievable under current conditions, a new survey carried out on behalf of German asset manager DWS has revealed. The survey found that more than half of the 50 funds polled – located across North America, Europe and Australasia – have or are embedding a net-zero strategy into their portfolios, but a greater proportion – 60 percent – said their net-zero aims “will not be met under current conditions”. 

The UK government has announced further plans for a law to prevent public investment bodies from divesting from Israel and other countries “inconsistent with official UK foreign policy” as part of a wider ban on public bodies boycotting foreign states and territories. A previous ban on LGPS schemes divesting from foreign countries was overturned after the government lost a case in the Supreme Court brought by the Palestine Solidarity Campaign. In its reasoning for introducing the law, the government said: “There are concerns that such boycotts may legitimise and drive antisemitism, as these types of campaigns overwhelmingly target Israel. Such campaigns result in undue politicisation of public institutions.”

Influential proxy adviser Glass Lewis is recommending shareholders vote against the re-election of Amazon director Judith McGrath. The chair of the online giant’s leadership development and compensation committee is the subject of a campaign led by the Comptrollers of New York State and City and the Treasurer of Illinois, who want to oust her over Amazon’s failures to protect employees. “Glass Lewis’ recommendation to shareholders to express dissatisfaction with the company’s response to human capital management issues by voting against a key director responsible for oversight shows broad and growing support for our proposal,” said NYC Comptroller Brad Lander. 

The London Stock Exchange has launched a consultation on market rules for a voluntary carbon market solution. The initiative was announced during the COP26 conference in Glasgow last year.  

The Responsible Investment Association Australasia (RIAA) has established a permanent base in New Zealand, its CEO Simon O’Connor has revealed on LinkedIn. The new outpost will “allow us to continue to strengthen our ability to serve our more than 80 NZ members and engage even more deeply in this busy, fast-moving market”, he wrote. 

Indian financial regulator the Securities and Exchange Board of India has appointed an advisory committee to study proposals for ESG regulations. These include sector-specific corporate sustainability disclosures, standardising ‘G’ performance criteria as input into ESG and credit ratings, enhanced disclosure rules for ESG ratings providers and ESG disclosure requirements for all mutual funds. The committee comprises senior corporate leaders, accounting firms and regulators.

US-based manager AQR has proposed a new method to assess an organisation’s exposure to climate risks, which it says is more reliable than measuring Scope 1 to 3 emissions. The approach focuses on sizing climate exposures of a company’s customers and suppliers, meaning that a conventionally green company – which has a small Scope 1 to 3 emissions profile – could be considered as heavily exposed to climate risks if it is dependent on carbon-intensive sectors such as oil companies for the bulk of its revenue. The method requires customers’ and suppliers’ Scope 1 and 2 data, which as AQR notes is more readily available and accurate than Scope 3 data.

Sustainability consultancy ERM has separately partnered with Initiative Climate International, a private equity climate initiative, to launch a new standard for measuring emissions across the private equity sector. The standard offers guidance on calculating Scope 1 to 3 emissions of a GP and each portfolio company, attributing emissions to GPs and LPs, and aggregating emissions at fund level. “When it comes to measuring and reporting financed emissions, the private equity asset class remains a distance behind public markets,” said PRI private equity head Peter Dunbar. “This excellent guidance will equip private equity ESG professionals with a blueprint based on pre-existing global standards.”