The Good, the Bad, and the ESG: A Candid Take on the World of Sustainability
Mot de la décennie ESG
Dear Readers,
I hope you are doing well.
Welcome to the first edition of our ESG (Environmental, Social, and Governance) Newsletter. This newsletter will discuss some of the latest developments in the ESG space, including trends, initiatives, and news.
ESG is a term that has gained significant momentum in recent years as companies and investors recognise the importance of considering environmental, social, and governance factors when making business decisions. In this newsletter, we will explore the impact of ESG on the corporate world, investors, and society as a whole.
Environmental:
Environmental considerations are becoming increasingly important for businesses around the world. The impacts of climate change, resource scarcity, and pollution are becoming more apparent, and companies are realising that they must take action to mitigate their effect on the environment. In this section, we will discuss some of the latest developments in environmental sustainability.
Social:
Social issues are another critical consideration for businesses and investors. This section will discuss some of the latest trends and initiatives to promote social sustainability, including diversity and inclusion, employee welfare, and community engagement.
Governance:
Good governance is essential for the long-term success of any organisation. This section will discuss some of the latest developments in corporate governance, including board diversity, executive compensation, and shareholder rights.
In conclusion, this newsletter will be a valuable resource for those interested in the ESG space.
I wanted to invite you to join our newsletter community. Our newsletter is filled with exciting and informative content that you'll find valuable.
Best regards,
OneSustain.com
Let’s start,
Data
TLDR
Summarized Long Version
Data
Investors Put $28 Billion Into Europe’s Top-Ranked ESG Funds [BB]
Investment managers launched 694 ESG funds this year, an increase from the previous year's 654. [FT]
Among climate-focused funds, new climate funds focusing on the transition received the highest inflows of approximately $2.4 billion in 2022. [FT]
Regarding carbon target-linked payouts, half of the payouts disclosed by companies in the Stoxx Europe 50 index in 2022 were paid out at 100% of the total available bonus pot, with an average of 86%. [FT]
over three-quarters of Europe's 50 largest companies currently include some carbon target in their executive pay packages. [FT]
Last year was another blockbuster of expensive climate-driven disasters, costing at least $165 billion in the US alone. Florida’s Hurricane Ian topped the list with $113 billion in insured and uninsured losses, threatening to ruin the state’s homeowners and insurers financially. [BB]
Too long; didn't read: [TLDR]
EFAMA advises against ESMA’s ESG fund naming guidelines: Link
Regulators are concerned about the financial industry's misuse of ESG and sustainability terms.
The E.S.G. Fight Has Come to This: Bankers Suing Lawyers: Link
There is a rise in anti-ESG investing, where some investors deliberately avoid companies that prioritise ESG. Arguing over the accuracy and effectiveness of ESG data and the potential for biased decision-making.
UK Watchdog Says More Funds to Get ESG Label Than First Thought: Link FCA’s SFDR requirements are less stringent than initially thought and have led to more funds qualifying under the ESG label.
Building a Foundation for ESG: How companies define, develop & manage ESG programs: Link
Companies need products and services that provide standardised, consolidated, and preferably automated ESG measurement and reporting.
The challenge of prioritising ESG against short-term crises: Link
Some managers fear private real estate is losing sight of ESG requirements as more immediate issues reach the top of the priority list.
Rejecting Climate Change and ESG Risks Breach of Fiduciary Duties: Link
At the behest of their fossil fuel backers, Republicans are waging a multifront war to strongarm bankers and pension fund managers into downplaying the financial risks posed by climate change. These tactics are chilling urgent climate action and may be fueling unlawful behaviour.
ESG: More Cracks in the Narrative: Link
Concerns about the accuracy and reliability of ESG data. The question remains: a. ESG considerations should be given priority over financial performance b. whether ESG investments are creating a bubble that could burst.
House GOP votes next week to kill Biden’s ‘woke’ ESG investing rule: Link
Retirement savings of millions of Americans could go to companies worried about climate change instead of profitability. This could mean companies may end up prioritising climate change over profitability, which may not be aligned with their fiduciary duty. s
European bosses hit easy targets for ‘green’ bonuses, pay report shows: Link
The inclusion of climate-related targets in executive pay is relatively new, with many companies only introducing bonuses for meeting green objectives since 2018. The robustness of these green targets and the ease at which business leaders were awarded their “green” bonuses was questioned.
Six emerging messages around COP28: Link
a. “Inclusion” by bringing in plenty of women, youth activists and delegates from poor countries
b. Give the private sector a central role in COP28
c. Green innovation and climate tech
d. Incorporate biodiversity goals into COP28
e. Climate finance flowing to poorer nations
f. Keeping “one point five alive”.
Summarised Long Version
EFAMA advises against ESMA’s ESG fund naming guidelines: The European Fund and Asset Management Association (EFAMA) has expressed concern about the European Securities and Markets Authority’s (ESMA) proposed approach to naming funds using ESG and sustainability-related terms. In their recent consultation on guidelines, ESMA's suggested numerical threshold approach may not address the greenwashing issues the financial industry is trying to tackle, warns EFAMA. EFAMA advises ESMA to work with the European Commission to clarify the definition of a "sustainable investment" and ensure interoperability with other regulatory and directory demands before implementing their proposed guidelines. EFAMA suggests a more proportionate approach would mirror ESMA's supervisory guidance on sustainability risks and disclosures by ensuring ESG-related terms are supported with sufficient evidence of sustainability characteristics in the fund's investment objectives and strategy.
The E.S.G. Fight Has Come to This: Bankers Suing Lawyers: The article discusses the rise of anti-ESG investing in Kentucky, where some investors are intentionally avoiding companies that are considered socially responsible or prioritise environmental, social, and governance (ESG) issues. Some financial advisers in the state have started to offer anti-ESG investment options, citing concerns about the accuracy and effectiveness of ESG data and the potential for biased decision-making. However, critics argue that such an approach needs to pay more attention to the long-term financial risks and opportunities associated with ESG factors and may harm the state's efforts to attract socially responsible investors.
UK Watchdog Says More Funds to Get ESG Label Than First Thought: The UK's Financial Conduct Authority (FCA) has revised its estimate of the number of funds that will qualify for an environmental, social, and governance (ESG) label under the Sustainable Finance Disclosure Regulation (SFDR) from 10-15% to 40-50%. The FCA attributes the increase to the fact that the SFDR's requirements are less stringent than initially thought and that some firms have changed their investment strategies to align with ESG principles. However, the FCA warns that investors should exercise caution when selecting ESG-labeled funds, as there is still a risk of greenwashing and a lack of standardisation in ESG reporting.
Building a Foundation for ESG: How companies define, develop & manage ESG programs: The article discusses the importance of building a solid foundation for environmental, social, and governance (ESG) investing in 2023. Investors should focus on integrating ESG factors into their investment processes, using standardised ESG frameworks and metrics, and engaging with companies on ESG issues to drive positive change. The article also highlights the need for collaboration between investors, companies, and regulators to promote transparency, accountability, and best practices in ESG investing. Ultimately, the article argues that a strong foundation for ESG investing will enable investors to achieve their financial goals while positively impacting society and the environment.
The challenge of prioritising ESG against short-term crises: The article discusses the challenges of prioritising environmental, social, and governance (ESG) considerations amidst short-term crises, such as the COVID-19 pandemic. While many companies have recognised the importance of ESG issues, they may need help to balance these concerns with the need to address immediate financial pressures. The article suggests that companies can mitigate this challenge by adopting a long-term perspective, integrating ESG considerations into their business strategy, and engaging with stakeholders to identify and address ESG risks and opportunities. The article also highlights the role of investors in encouraging companies to prioritise ESG factors and promote best practices in ESG reporting and disclosure. Ultimately, the article argues that companies prioritising ESG considerations will likely be more resilient and better positioned for long-term success.
Rejecting Climate Change and ESG Risks Breach of Fiduciary Duties: The article reports that U.S. investment advisers who reject climate change and environmental, social, and governance (ESG) risks may breach their fiduciary duties to clients. The article cites recent legal and regulatory developments that have increased the focus on ESG factors in investment decision-making and fiduciary duty obligations. The article also notes that the Department of Labor has recently withdrawn a controversial rule that discouraged retirement plans from considering ESG factors, which could further bolster the case for incorporating ESG considerations into investment strategies. Ultimately, the article suggests that investment advisers who ignore or downplay ESG risks may expose themselves to legal and reputational risks.
ESG: More Cracks in the Narrative: The article argues that the environmental, social, and governance (ESG) investing trend may need to catch up, citing several recent developments that cast doubt on the efficacy and credibility of ESG investing. The article highlights concerns about the accuracy and reliability of ESG data, as well as the potential for biased decision-making and greenwashing. The article also notes that some investors and regulators are questioning whether ESG considerations should be given priority over financial performance and whether ESG investments are creating a bubble that could burst. Ultimately, the article suggests that ESG investing may face more scrutiny and scepticism in the coming years as investors and regulators seek to ensure that ESG investments are grounded in sound principles and data.
House GOP votes next week to kill Biden’s ‘woke’ ESG investing rule: The article reports that House Republicans plan to vote on a resolution next week to repeal a rule issued by the Biden administration that requires retirement plan fiduciaries to consider environmental, social, and governance (ESG) factors when making investment decisions. The article suggests that Republicans see the ESG rule as part of a more significant effort by the Biden administration to promote "woke" policies and prioritise social and political concerns over financial performance. The article also notes that critics of the ESG rule argue it could lead to less diverse investment options and lower returns for retirement savers. Ultimately, the article suggests that the vote on the ESG rule could be a proxy for a more significant political debate over the role of ESG considerations in investment decision-making.
European bosses hit easy targets for ‘green’ bonuses, pay report shows: The article discusses a recent report by ShareAction, a responsible investment group, which found that many UK pension funds are falling short in their efforts to address climate change and environmental, social, and governance (ESG) risks. The report evaluated the climate and ESG policies of 33 UK pension funds and found that only a few funds had taken adequate steps to address these risks. The report suggests that many pension funds are not doing enough to engage with companies on ESG issues and that pension fund decision-making lacks transparency and accountability. The article notes that the report underscores the growing pressure on pension funds to address ESG risks and ensure their investments align with the Paris Agreement and other climate targets. Ultimately, the article suggests that pension funds that fail to address ESG risks may face reputational and financial risks and increased regulatory scrutiny.
Six emerging messages around COP28: The article reports that the UK government has announced plans to introduce new regulations requiring pension funds to disclose the climate risks of their investments. The rules, which are expected to be implemented by the end of 2023, would require pension funds to disclose how their investments are aligned with the goals of the Paris Agreement and how they are addressing climate risks in their investment decisions. The article notes that the regulations are part of a broader effort by the UK government to address climate change and ensure that the financial sector plays its part in the transition to a low-carbon economy. The article also suggests that the regulations could increase transparency and accountability in pension fund decision-making, providing valuable information for investors seeking to make informed investment decisions. Ultimately, the article suggests that the regulations could be a significant step towards ensuring that the financial sector is aligned with the goals of the Paris Agreement and other climate targets.
Summary
Overall, the ESG space continues to evolve and grow, with companies and investors increasingly recognising the importance of considering environmental, social, and governance factors. As the world grapples with the COVID-19 pandemic and its aftermath, ESG considerations will likely become even more critical in the years ahead. Stay tuned for next week’s newsletter. We look forward to keeping in touch with you through our newsletter. We look forward to sharing more insights and news with you soon. If you want to join our community, click the link below and sign up. It's that easy! Thank you for reading our first OneSustain newsletter.