RI ESG Briefing, November 6: Norges Bank IM looks at passing emissions costs to customers

The latest ESG market developments.


Norges Bank Investment Management is developing a way to determine how much of a firm’s carbon dioxide emission costs can be passed onto customers, Reuters has reported, as the $975bn Norwegian wealth fund explores how its investment process should respond to rising climate-related costs. The move builds on the firm’s data analytics software, called Angle, that combines trading and earnings data with non-financial data such as carbon emissions, to project a firm’s future earnings. This climate-data push kicked off in 2015, when the Norwegian Parliament ruled the fund should divest from companies that derive 30% or more of its business or activities from thermal coal.

Fossil fuel consumption subsidies jumped by 12% in 2017 to more than $300bn globally, new data published this week by the International Energy Agency (IEA) has reportedly shown. This surge disrupts what had been a trend of dwindling government support for coal, gas and oil, with subsidies having almost halved in the four years preceding 2016, down from a 2012 high of $500bn.

Generali and Vienna Insurance Group (VIG) have signed a €365,000 contract to insure a recently finished coal power plant in the Czech Republic, prompting criticism from NGOs which say the move undermines interaction action against climate change and air pollution. The 660MW coal power plant, operated by Czech majority state-owned power utility CEZ, burns lignite – which is considered to be the dirtiest form of coal. The plant is expected to be functional for 40 years.

ESG considerations enhance alpha and capture many of the risk and return drivers not captured through traditional financial metrics, according to a new whitepaper from PanAgora, the $54bn quant firm. The paper explores the evolution and implications of quant ESG from an investment perspective, answering frequently asked questions asset owners may still have about the practice.

Sustainability consultant DNV GL is to produce two reports on the sustainable blue economy in the Norwegian Arctic, as commissioned by the newly established Center for the Ocean and the Arctic. The reports, due for completion early next year, will focus on the current status of a sustainable blue economy in the Norwegian Arctic, as well as the challenges and opportunities associated with its development.

The International Network of Financial Centres for Sustainability (FC4S) says it has taken an important step towards scaling up climate finance in the Asia-Pacific region with the establishment of the Asia-Pacific Centre at its second meeting this month.

Investors are stunting the growth of the sustainable finance sector through their unwillingness to accept risk associated with green projects, S&P Global Ratings has reportedly warned. The credit rating firm said in a report that a significant amount of available capital is not being invested in sustainable infrastructure, warning this would impede on governments’ abilities to deliver on the SDGs.


The UN-supported Principles of Responsible Investment (PRI) has put out a new report on the role institutional investors can play in addressing the problem of income inequality. The guide looks at three themes material to long-term investors: employee relations and the structure of labour markets; corporate tax policies and practices; and levels of CEO compensation.

US firms aligned with the values of the American public outperformed the market in every quarter since November 2016, a new report from non-profit organisation JUST Capital has found. Companies in the JUST US Large Cap Diversified Index – firms performing above average on the priorities of the American public – were found to cumulatively outperformed the Russell 1000 by 456 basis points (bp), or 215 bp annualized, from November 2016 to September 2018.The Global Sustainability Trust (GST) is looking to raise £200m to address the UN SDGs, with its planned initial public offering (IPO) next month on the London Stock Exchange. The GST will be managed by Aberdeen Standard Investments (ASI), with the portfolio seeking to address the SDGs by investing across ASI’s “impact pillars”, which include circular economy, sustainable energy, and food and agriculture. The GST, which will offer 200 million ordinary shares at an issue price of £1.00 per share, will target a return of 6-8% net total annually.

ASA International, the microfinance institution providing socially responsible loans to low-income female entrepreneurs throughout Asia and Africa, has released its nine-month trading update. It said its overall operating performance “remained strong across all segments during the period, but Outstanding Loan Portfolio and net profits were adversely affected by substantially higher than expected currency depreciation in some major markets”.

The Leichtag Foundation has awarded a $10m “challenge impact investment” to JLens’ Jewish Advocacy Strategy, an investment offering made up of companies aligned with Jewish values, including “religious tolerance and coexistence, social and environmental issues,
and support for Israel”.


Effective from 1 January 2020, the International Accounting Standards Board has updated its definition of materiality as follows: “Information is material if omitting, misstating or obscuring it could reasonably be expected to influence the decisions that the primary users of general purpose financial statements make on the basis of those financial statements, which provide financial information about a specific reporting entity.”

The majority of European fund managers oppose regulation that would force ESG integration, a CFA Institute survey of its member base of 24,000 investment professionals has found. Opposition was particularly widespread among investment professionals in Luxembourg, with 78% of respondents saying they were not in favour, followed by 71% in the UK and 69% in Germany.

Financial advisors are seeing increased interest in responsible investment (RI), with nearly 80% incorporating it into their practices, a survey of more than 600 advisors has found. While more than half (56%) of advisors said RI is driving new business to their practices, only 35% classified themselves as “very well-informed” about it.

The UN Conference on Trade and Development (UNCTAD) has upgraded its Reform Package for the International Investment Regime. It has done so in light of what it calls “ever-increasing numbers of disputes between foreign investors and host countries” and the need
to meet the 2030 Agenda for Sustainable Development.

The UN Sustainable Stock Exchanges initiative has published a report detailing the ways that securities regulators can help promote the SDGs, including: strengthening governance, improving disclosure, and clarifying investors’ duties.

Data firm IHS Markit has announced the launch of a new board mentorship program designed to build the ranks of female candidates for boards of directors. Leading MEP Kay Swinburne will be the first participant and will sit on IHS Markit’s board of directors as a non-voting member.