In the Loop: Net zero final call, CA100+ gaps, and ESG as a term

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Net zero survey: last call

Source: Getty

Our net zero stocktake survey has already attracted some fascinating responses from an even split of asset owners and asset managers. It has also prompted some more sceptical voices to reach out independently to share some of their doubts (see our story from last week).

We look forward to sharing the full results with you soon, but to whet your appetite here are some of the comments already submitted to the survey, which closes today.

“It’s good that RI is doing this survey, because gearing your portfolio such that it truly contributes to the Paris-agreement goals is still very difficult and not spoken about enough,” said one larger asset manager. “Most strategies focus primarily on portfolio reduction, which is not the right focus.”

One North American asset owner urged that the “dream of 1.5C” be abandoned, arguing that it is “holding us back from taking necessary action”.

“We should be doing everything we can to make the investments needed to limit warming to as close to 2C as possible, even if they are not compatible with a 1.5 scenario,” they wrote.

An Oceania asset owner, which is in the process of establishing a net-zero ambition, candidly told RI that “risk-adjusted returns will be prioritised over emissions reductions if a trade-off is required. Our mandate is very clearly focused on delivery of best returns.”

If you would like to participate in the anonymous survey, please fill it in here.

Quote of the week

“We need to have the grown-up conversation about what we do with the Scope 3 data we do have. On the one hand, it’s too important to ignore, and on the other hand, it’s still too messy for portfolio attribution or for us to stick it into an investment product”

FTSE Russell’s Jaakko Kooroshy gives RI his candid view on Scope 3 data

The week in RI

This week, we kicked off our five-part Scope 3 series. Our first deep dive covered how asset owners are grappling with the challenges and limitations of Scope 3, followed by a closer look at how corporates are addressing the topic.

Data is, of course, key to Scope 3 progress, and our senior reporter Khalid Azizuddin looked into how machine learning – among other things – could help improve Scope 3 data usability for investors. Look out for our final two pieces on assurance and regulation next week.

Also this week, the latest ShareAction Voting Matters report revealed a gulf between US and EU-based investors on ESG proposals. Looking at the voting of big Net Zero Asset Managers initiative members, the report showed that 11 of the largest signatories supported less than half of the 114 environmental proposals assessed in the report.

Finally, we also reported on different investor views on what biodiversity standards should entail, and whether they should go further than the Taskforce on Nature-related Financial Disclosures.

Mind the CA100+ gap

We reported this week that Climate Action 100+ had fulfilled a key transparency ask by making public a significant number of voluntary disclosures from its members about the companies they are leading engagement on.

The vast majority of firms being targeted by the initiative now have at least one lead investor listed.

However, there are still gaps, with almost half of the investor members on the global steering committee yet to disclose through CA100+.

BNP Paribas Asset Management, Mexico’s Afore SURA, CalSTRS, Phoenix Group, GAM Investments and Australian Super all disclose at least one company they are leading on, as does current chair Generali Insurance Asset Management.

But the Queensland Investment Corporation, CalPERS and Franklin Templeton have not yet disclosed.

Fidelity International and Sumitomo Mitsui Trust Asset Management have not yet disclosed on the CA100+ website, but RI research has uncovered the disclosure of leads either previously via CA100+ or in stewardship reporting.

There are good reasons for not naming firms that an investor is engaging with – companies themselves prefer privacy, it is not standard practice in some jurisdictions, and the act of naming a firm can form part of an investor’s escalation policy.

That said, given repeated complaints about the poor progress of companies against the CA100+ benchmark, investors need to weigh up the impact of not being transparent.

To ESG or not to ESG – is that a question?

Source: Getty

“ESG as a label has become too polarised and reached [its] expiry date,” Herman Bril, head of sustainability and climate innovation at Canada’s public sector pension fund PSP Investments, wrote on LinkedIn this week.

The new focus, he suggested, should be “more on resilience, which is broader and captures adaptability in a complex and uncertain world”.

Bril is not alone – the conversation around whether ESG is a useful term appears to be resurfacing.

Echoing similar concerns, Harvard Law School professor Stephen Davis recently wrote in a journal that the term ESG “has become a lightning rod for ideologues while losing meaning for many others – even as the substance of what it stands for is more vital than ever”.

The corporate governance expert suggests a shift to a new term like “360° investing”, which he believes better captures and returns to the original thinking behind “ESG” when it was coined in 2005.

We would be very interested to hear our readers’ thoughts on this. Please get in touch with the editorial team at edit@responsible-investor.com


Today’s letter was prepared by the RI editorial team.