RI ESG Briefing, April 4: BlackRock’s physical climate risk “thunderbolt” for investors

The latest ESG developments


The BlackRock Investment Institute has released a paper assessing physical climate risks. The paper – Getting physical: assessing climate risks – offers a new set of tools for assessing climate-related risks to portfolios. Environmental law firm ClientEarth said the asset management giant’s recognition of the scale of climate-related financial risks facing “should be a thunderbolt for investors”. It said: “The world’s largest asset manager has now accepted that markets are consistently under-pricing physical climate risks – that means all investors should be taking a careful look at the models they are currently using and recalibrating their expected returns.”

Consumer Watchdog, a US-based campaign group, has presented California Insurance Commissioner Ricardo Lara with a petition calling for emergency regulations requiring insurers to disclose fossil fuel projects they have underwritten. “It’s outrageous that survivors of wildfires and other disasters have to fight with their insurance companies for coverage while insurers are paying out billions to the fossil fuel companies responsible,” said Carmen Balber, executive director of Consumer Watchdog.

Energy Innovation, an energy research firm, has concluded that coal is becoming increasingly expensive in the US compared to cleaner alternatives. In a recently published study, the company says that “local wind and solar could replace approximately 74% of the U.S. coal fleet” at cheaper cost, with the number set to rise to 86% by 2025.


Natural rubber stakeholders including tyre manufacturers, suppliers, vehicle manufacturers and NGOs have convened to launch the General Assembly of the Global Platform for Sustainable Natural Rubber (GPSNR), an independent platform which aims to improve socio-economic and environmental performance within the natural rubber value chain. Immediate priorities include improving human rights protections, preventing land grabbing practices and protecting biodiversity.

Campaign group the WWF has called upon the financial sector to “engage along the palm oil value chain” to address deforestation and other social issues, saying that “divestment is not the answer”. In statement released today, the WWF said: “Palm oil is a critical commodity for global food security, and replacing it with other edible oils will require expanding agricultural land, leading to more deforestation and other habitat loss and exacerbating climate change.”

Europe’s new Pan-European Pension Product (PEPP) will contribute to the EU sustainability agenda in the financial sector “in multiple ways” the EU says: “PEPP providers are encouraged to consider sustainability factors in their investment decisions and risk management systems, in particular taking into account the long-term nature of their investments.”h6. Governance

The Employees Provident Fund, a compulsory pension scheme for the private sector in Malaysia, has become the latest Asian asset owner to sign up to the Principles for Responsible Investment and was included in the signatory list in an update on April 1.

Kommuninvest, the fundraising arm of Swedish local governments, has announced an improved sustainability rating from ISS-oekom of B-, two grades up from its previous assessment. No other financial institution has been rated above B- by ISS-oekom.

The UK government has reportedly ordered an enquiry into the FCA handling of a financial scandal at a City investment firm after it emerged that the regulator was warned about the scandal three years ago but failed to act. In what has been called “one of the biggest financial scandals around”, investment firm London Capital & Finance collapsed after the company channelled £236m (€276m) worth of investor funds into “highly speculative transactions”, taking the rest as commission.

Heidelberg Cement, the German building materials conglomerate, has announced a review of its links to direct and indirect political lobbying through its membership of industry associations. In its latest annual report, the company said that the review would focus specifically on the alignment between lobbying activities and the Parris Accord in addition to the IIGCC (Institutional Investors Group on Climate Change) supported investor expectations on corporate climate lobbying.

“Greenwashing is rampant” was a memorable phrase from a speech at Cambridge University by International Accounting Standards Board Chairman Hans Hoogervorst this week. He address explored what sustainability reporting can and cannot achieve.

Green Century Funds, the US SRI fund group, has welcomed news that Darden Restaurants, a major US restaurant operator, is phasing out the use of “medically important antibiotics” in its chicken supply by 2023. This decision comes after three consecutive years of shareholder resolutions filed by Green Century over antibiotic misuse, with the 2018 resolution receiving support from 40.2% of cast votes.

Research published in Nature Sustainability has found that delivering the majority of the UN Sustainable Development Goals will depend on infrastructure systems although current planning decisions “have the potential to lock-in patterns of unsustainable development for years to come”. According to co-author and Professor of Climate and Environmental Risks at the University of Oxford, Jim Hall: “It is better to build in sustainability from the start – right now – rather than having to apply costly retrofits later.” Link