ESG round-up: West Virginia blacklists US banking giants over fossil fuel boycotts

The latest developments in sustainable finance: IIGCC analysis finds banks a long way from 1.5C, CofE says ISSB standards won't meet investor needs.

West Virginia state treasurer Riley Moore has banned BlackRock, Goldman Sachs, JPMorgan Chase, Morgan Stanley and Wells Fargo from entering into state banking contracts with his office. The move follows the passage of Senate Bill 262, which allows Moore to create a “Restricted Financial Institution List” consisting of financial institutions that have been identified – via public statements or information published by the financial institutions – as refusing to deal with or terminating business activities with coal, oil or natural gas companies “without a reasonable business purpose”. A spokesperson for Wells Fargo said the bank valued its relationship with the state and its West Virginia-based clients and that it disagreed with the decision. Goldman Sachs and JP Morgan declined to comment. None of the other banks on the list had responded to a request for comment at the time of publication.

The banking sector has a long way to go to align with a 1.5C pathway, new analysis by the IIGCC and Transition Pathway Initiative has found. The two organisations published a pilot assessment framework for the sector and assessed 27 banks against the indicators. While the assessed institutions performed well on climate governance, no bank has published a position statement on Paris-aligned lobbying and none comprehensively incorporates material climate matters in their financial accounts. Natasha Landell-Mills, head of stewardship at Sarasin & Partners, said the results showed “banks still have a long way to go to ensure they are the catalysts for climate action that we need them to be. The level of urgency must ratchet up”.

The International Sustainability Standards Board’s draft standards will not meet investors’ needs and are “likely to exacerbate the lack of attention paid to sustainability issues in the investment system”, the Church of England Pension Board has stated in its response to the consultation by the global corporate sustainability standards body. The faith investor’s chief responsible investment officer, Adam Matthews, called on the ISSB to shift its “narrow” focus on enterprise value to one “where the significance or scale of social and environmental impacts is a critical determinant on what is reported (even if the company does not consider the issue to be financially material)”.

Meanwhile the UN-convened Net-Zero Asset Owner Alliance has called on the ISSB to include additional disclosure requirements around transition plans in its draft climate disclosure standards, such as requiring details on “alignment of engagement activities”. The investor body also requested in its response to the consultation that ISSB remove or define the word “significant” in relation climate-related risks as it is “at risk of being open to interpretation and inconsistently applied”.

And the board of global regulatory body IOSCO has agreed criteria it will use to decide on whether to endorse the ISSB standards. In a press release published on Wednesday, welcoming the strong stakeholder engagement on the drafts, the Madrid-based body said it would use the framework laid out last month, which includes requirements that the standards should meet “key attributes” such as the assumption of an investor orientation focused on “enterprise value creation” and also the accommodation of “dynamic materiality by updating standards and guidance over time to reflect developments in stakeholder views, regulations, investor preferences and evolving scientific knowledge on sustainability matters”.

NN Investment Partners did not support any climate plan put forward this year by oil and gas companies. The Dutch investment manager, which was acquired by Goldman Sachs in April, yesterday released an updated voting policy on climate, revealing that it had also started targeting executives’ pay where climate goals were deemed insufficient.

The Investor Coalition for Equal Votes (ICEV), the $1 trillion group founded by UK fund Railpen and the Council of Institutional Investors, has pushed UK regulator the Financial Conduct Authority to maintain current listing protections around dual class share structures when devising any “single segment regime”, a concept which is being considered to help the UK develop the flexibility to attract high-growth and innovative companies. ICEV advocates for the existing “one share, one vote” listing requirement to be maintained, noting that “the UK’s ‘USP’ as a destination for global capital is in large part the robust investor protections and historically high standards of corporate governance”.

Republican SEC commissioners Hester Peirce and Mark Uyeda have written to the Financial Accounting Foundation, the US body that oversees standard setters the Financial Accounting Standards Board (FASB) and the Governmental Accounting Standards Board (GASB), warning them that introducing ESG-related standards “would undermine the integrity of current accounting standards” and its role as a “guardian of the independence of those standards”.