Friday, October 16, 2020

GREEN CAPITALI$M

LGIM to publish list of climate laggards

climate_change_investmentLegal & General Investment Management says it will hold a “far more extensive” number of companies to account over climate change. 

Climate ratings for over 1,000 companies in key sectors will be made publicly available under a ‘traffic light’ system on the fund manager’s website.

The selected companies are responsible for over 60% of the greenhouse gas emissions from listed companies, according to the UK-based fund manager. 

Businesses that fall short of LGIM’s minimum climate risk standards, such as by lacking comprehensive emissions disclosure, will be subject to a vote against and potential divestment from select funds.

Michelle Scrimgeour, LGIM’s CEO and member of UK Government’s COP26 Business Leaders Group, said: “As governments around the world are set to announce new and ambitious climate policies ahead of next year’s COP26 conference, investors must also step up.”

In a statement coinciding with the release of LGIM’s annual ‘Climate Impact Pledge’, the asset manager said it intends to “ratchet up” the stringency of both its standards and sanctions over time.


Asset managers call on companies to cut down on carbon emissions

carbon_emissions_investmentHigh carbon emitting companies have been called on by investment management firms to commit to a net zero future by setting science-based targets.

Over 1,800 companies responsible for 25% of global emissions – including Tesla and mining giant Rio Tinto – have been singled out and asked to set a 1.5°C carbon reduction target to achieve this goal.

Coordinated by non-profit sustainability action group CDP, the financial institutions calling for action include Amundi, Legal & General Investment Management, and Nikko Asset Management. Together, the group represents $20 trillion (€17 trillion) of assets. 

The carbon emitting companies in question represent 40% of MSCI’s flagship global equity index. Previous research by CDP has suggested that companies see $1 trillion at risk from climate change, putting investments in jeopardy.


Emily Kreps, global director of capital markets at CDP, said: “Climate change presents material risks to investments, and companies that are failing to set targets grounded in science risk losing out – and causing greater damage to the world economy.”

Amundi’s director of the institutional and corporate clients division and ESG, Jean-Jacques Barberis, added: “Limiting global warming requires collective response; corporate actions and investors’ mobilisation to decarbonise portfolios go hand-in-hand.”

While companies can set science-based targets at any point throughout the year, investors will be engaging with companies until May 2021, when the impact of this campaign will be evaluated.



Third of firms not engaging on climate change, report finds

Climate_changeMore than a third of asset managers are not engaging with the issue of climate change, a report has claimed.

Research conducted by the UK-based investment consultancy Redington found that more than a third (39%) of asset managers were, when asked, unable to provide an example of a climate change related engagement effort.

The research also found that less than two thirds (62%) of asset management firms have an ESG engagement policy in place.

In addition, despite three quarters (76%) of managers surveyed saying they consider climate related risks and opportunities only 60% could provide an example of when climate change factors have actually influenced their buying or selling decisions.

Nick Samuels, head of manager research at Redington, said the discrepancy highlights the fact that, despite engagement seemingly increasing, this is not yet translating into concrete and consistent portfolio decisions.

Samuels said: “Climate change is a widespread and global problem, impacting all sectors of the economy in one way or another.

“We would expect all our managers, regardless of asset class, to have at least one, if not several, examples of climate change related engagements with their portfolio companies."

The firm interviewed a total of 104 managers from across the world, representing over $10 trillion in combined assets under management.


Green finance for SMEs to offer “higher yields” for institutions

Green_energyAmundi is jointly backing a programme to help smaller and medium-sized businesses access green finance and says the debt investments involved will lead to higher yields for investors.

The Paris-based asset manager is partnering with the European Investment Bank (EIB), which issued the world’s first green bond in 2007.

Amundi says the partnership will enable smaller companies to access green finance in contrast to the growing green bond market, which has mainly developed by way of issuances from sovereign, quasi-sovereign and large corporate issuers.  

The Green Credit Continuum investment programme, as it is called, has three components:

  • The creation of a diversified fund that will invest in green high yield corporate bonds, green private debt and green securitised debt.
  • In parallel, a scientific committee of green finance experts will be formed to define and promote environmental guidelines for these three markets in line with international best practice and legislation derived from the European Commission action plan on financing sustainable growth.
  • A green deal network will be put in place to source deals and projects.

The goal of the agreement is to create several funds based on this model and to help establish market standards. It aims to raise €1 billion within three years, including a €60 million initial commitment by the EIB.

Ambroise Fayolle, EIB vice-president said a “significant financing gap persists and huge potential is still waiting to be tapped in some green debt segments”.

Amundi chief executive Yves Perrier, said: “[The programme] offers a particularly innovative investment solution to institutional investors wishing to help finance the energy transition and diversify their sources of yield in a low interest rate environment.”

He said the programme would combating global warming.

Amundi and the EIB said to meet its climate commitments under the Paris Agreement and finance the associated energy transition, Europe is missing an estimated €180 billion in financing a year until 2030. To reach this level of investment, green finance “must mobilise all of the debt capital markets”.


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