Sustainable Finance Briefing
24th February 2021
Legislation & Regulation
Initiatives & Partnerships
Sustainability in Practice
Products & Investments
Sustainable Finance Trends
Legislation & Regulation
Institutional investors concerned about EU sustainability governance rules

Institutional investors have expressed concern about the EU’s plans to introduce sustainability governance rules for companies. The European Sustainable Investment Forum says a legal framework for supply chain due diligence regarding human rights and environmental issues must be proportionate, arguing that smaller companies have a smaller impact than large corporate groups. The European Fund and Asset Management Association has called for reduced reporting requirements for small and medium-sized companies.

Best source: Investments & Pensions Europe (registration required)
Dutch and French central banks call on ECB to take emissions data into account for bond holdings

The governors of the Dutch and French central banks have called on the European Central Bank to start decarbonising its corporate bond holdings. Banque de France governor François Villeroy de Galhau says the ECB should vary the volume of bonds it buys and the value of collateral that it accepts according to the extent of corporate issuers' alignment with global warming reduction targets. De Nederlandsche Bank governor Klaas Knot says monetary policy instruments could be amended to incorporate a climate change mandate.

Best source: Financial Times (subscription required)
Commission’s green taxonomy delayed by disagreement between EU member states

Following resistance from member states, the finalisation of the European Commission's sustainable finance taxonomy proposal has been delayed until late April. Ongoing debate about the plan is focused on whether certain economic activities should be classified as green, with some countries pushing for the inclusion of natural gas and biofuels as sustainable energy sources. Once it is finalised, the taxonomy will determine how the EU and private investors will allocate funds to projects and businesses promoting a low-carbon transition.

Best source: Reuters
ESMA calls for EU legislation on ESG ratings and assessment tools

The European Securities and Markets Authority has written to European financial services commissioner Mairead McGuinness suggesting that legislation is required on ESG ratings and assessment tools, following similar requests from Dutch and French national regulators. ESMA chairman Steven Maijoor says legislation is necessary to avoid the risk of capital misallocation, mis-selling and greenwashing.

Best source: Investments & Pensions Europe (registration required)
Initiatives & Partnerships
Net zero investor alliance calls for climate mitigation blended finance vehicles

The Net-Zero Asset Owner Alliance has called on asset managers to create blended finance vehicles to enable increased investment in climate mitigation and related business models. It has requested proposals for vehicles that de-risk investments in solutions and market segments that currently do not have the appropriate risk-return profiles for institutional investors.

Best source: Investments & Pensions Europe (registration required)
Britain’s Investor Forum calls for mandatory AGM climate votes

The UK's Investor Forum has called for mandatory votes at annual shareholders' meetings on corporate efforts to curb climate change. The group of investors, which between them oversee more than £20trn in assets and include Schroders, UBS and BlackRock, says annual non-binding shareholder votes would help identify which companies are doing well and which are not.

Best source: Reuters
More than 100 institutional investors set deadline for mining industry reforms

More than 100 institutional investors, including the UK's Church of England Pensions Board and the Council on Ethics of the Swedish National Pension Funds, have called on mining companies to introduce reforms by 2030 to avoid disasters where tailings dams fail, such as the dam collapse at Brumandinho in Brazil, which killed 270 people. The Mining & Tailings Safety Initiative group holds $20trn in assets under management and has committed to further engagement with mining groups.

Best source: Investments & Pensions Europe (registration required)
Climate Action 100+ reports rise in corporate net zero targets

Climate Action 100+ says that half the companies it monitors have announced targets to reach net zero greenhouse gas emissions by 2050, although only 10% of companies include Scope 3 indirect emissions in their targets. The number of institutional investors signed up to Climate Action 100+ rose by 46% during 2020.

Best source: Corporate Secretary
Sustainability in Practice
France’s central bank to divest all coal-related investments by 2024

Governor François Villeroy de Galhau says the Banque de France will this year divest the shares of all companies in which its own funds and retirement scheme have invested that derive more than 2% of their revenue from coal, and to sell any coal-related holdings by 2024. The central bank has deployed a responsible investment strategy for its own €8bn of investments since 2018 and, since last year, the pension scheme's €14bn in assets, excluding companies that earn more than 10% of revenue from coal. It will also limit holdings relating to oil and gas in line with the Paris Aligned Benchmark.

Best source: Banque de France (in French)
See also: Les Echos (subscription required, in French)
European banks halt Ecuador crude oil trade financing

Credit Suisse, ING and BNP Paribas have stopped financing trade in Ecuador's crude oil, following a report by Canadian environmental group and Amazon Watch claiming that their financing of oil exports to US refineries contributes to the destruction of rainforest, land rights violations and oil spills. Natixis, UBS and Rabobank were also named in the report as financing Ecuador's oil trade.

Best source: Reuters
Japanese and Dutch pension funds accused of financing meatpackers’ Amazon deforestation

Three of the largest Dutch and Japanese pension funds have invested a combined $571m in Brazilian meatpacking companies, part of an industry contributing to significant deforestation in the Amazon region. The total amount invested by Algemeen Burgerlijk Pensioenfonds, Pensioenfonds Zorg en Welzijn and Japan's Government Pension Investment Fund is more than Brazil's government allocated to the Environment Ministry in its 2021 budget. The fund managers have defended their investment, arguing that their financial stake enables them to push for change in the meatpackers' business practices.

Best source: Mongabay
Aviva Investors to engage with portfolio companies on climate transition

Aviva Investors has launched a climate engagement escalation programme under which it will engage with 30 companies that it has identified as systemically important carbon emitters. The asset manager is calling on companies to target net zero scope 3 emissions by 2050 and to publish roadmaps indicating how they will achieve their targets. Aviva Investors says it may divest from oil, gas, metals and mining companies that do not engage or abide by the targets they agree.

Best source: Aviva Investors
BlackRock calls on oil companies to publish carbon emissions

BlackRock has called on oil companies and other major producers of greenhouse gases to publish their carbon emissions and establish targets to reduce them. All stocks held by BlackRock in its portfolios will have to disclose their scope 1 and 2 direct emissions, and the asset manager says fossil fuel extractors should also publish scope 3 emissions data covering the combustion of their products.

Best source: The Guardian
Products & Investments
Macquarie raises €1.6bn for fund investing in renewable energy

Macquarie Infrastructure and Real Assets has exceeded its funding target by raising €1.6bn for investment in renewable energy projects by the Macquarie Green Investment Group Renewable Energy Fund 2. The fund, which will invest in wind and solar power projects in western Europe, the US, Canada, Mexico, Japan, Taiwan, Australia and New Zealand, received commitments from 32 investors including private and local government pension schemes, insurers and sovereign wealth funds.

Best source:
IKEA foundation seeds $250m sustainable equity fund

The €11bn IMAS foundation, which invests money from the charitable arm of Swedish furniture retailer IKEA, has committed $250m to seed a sustainable equity fund run by investment boutique Osmosis. The resource efficiency strategy will not invest in fossil fuels and will focus on companies that reduce carbon emissions and water consumption.

Best source: Financial Times (subscription required)
Nordea AM to soft-close €6bn green fund

Nordea Asset Management is soft-closing its Global Climate and Environment Fund, which has more than doubled in size over the past year and grown by 500% in two years, reaching €6bn at the end of January. The fund was launched more than 12 years ago, and is run by Nordea’s fundamental equities team.

Best source: Institutional Asset Manager
Ossiam launches biodiversity ETF targeting food industry

Natixis Investment Managers' Paris-based affiliate and smart beta specialist Ossiam has launched the Food for Biodiversity exchange-traded fund, which aims to tackle biodiversity destruction using an active quantitative strategy. It will use data from Iceberg Data Lab to assess the material impact of food companies, their suppliers and customers.

Best source: Citywire
Sustainable Finance Trends
More than 250 European fund strategies switched to ESG factors last year

A total of 253 European-domiciled funds switched their strategies or investment profiles to include environmental, social responsibility and governance factors in 2020, according to Morningstar. With a further 505 new funds launched in Europe during the year, total ESG assets set a new record of €1.1trn by year-end. Index funds experienced significant growth, accounting for 22.5% of the total market by the end of 2020 after an 84% year-on-year increase in inflows in the fourth quarter.

Best source: Financial Times (subscription required)
Global sustainable fund assets reach $1.65trn: Morningstar

Global sustainable fund assets under management reached a record $1.652trn at the end of December, according to Morningstar. Assets were up 29% in the fourth quarter from the previous three months, while inflows were 88% higher in the quarter at $152.3bn, of which Europe provided €233bn, or 79.3%. The European market accounted for 81.3% of the total global assets at the end of 2020 and 77% of the 4,123 sustainable funds worldwide. BlackRock was the top sustainable fund provider in Europe, distantly followed by France's Amundi, in a year that saw a record 505 new fund launches across the continent, while a further 253 existing funds were reorientated to sustainability strategies.

Best source: ESG Clarity
See also: Investment Week
See also: Morningstar
Luxembourg launches sustainable finance strategy

Luxembourg has unveiled its sustainable finance strategy, based on the sustainable finance roadmap document published in 2018. Developed with the United Nations Environmental Programme, it offers recommendations on how the grand duchy can contribute toward meeting the Paris Agreement objectives. Luxembourg for Finance and the High Council for Sustainable Development have established the Luxembourg Sustainable Finance Initiative, a not-for-profit body that helped design the strategy and is responsible for implementing it.

Best source: Wort (in German)
See also: Delano
See also: Luxembourg Sustainable Finance Initiative
European central banks to adopt climate change strategies for non-monetary policy portfolios

The 19 national central banks in the Eurosystem have agreed to apply common sustainable and responsible investment principles to their euro-denominated portfolios that are not used for monetary policy measures. Several eurozone central banks already apply ESG policies to their pension schemes and other investment portfolios. The common stance follows the recommendations of the Network for Greening the Financial System.

Best source: European Central Bank