GREEN CAPITALI$M
Jamie Dimon takes a stand by signing JPMorgan up as the first big bank to reveal a key clean energy metric to investors
Amanda Gerut
Mon, March 4, 2024 a
Cyril Marcilhacy/Bloomberg-Getty Images
The dean of Wall Street CEOs is green. JPMorgan Chase today struck an agreement with three New York City pension funds with investments in the bank valued at $478 million to disclose the ratio of its clean energy to fossil fuel financing. According to the NYC funds, the metric will give investors a more comprehensive view as to how the bank is progressing on its net-zero emissions goals and whether it is ratcheting up its clean-energy financing activities over time.
JPMorgan’s settlement with the three NYC funds, which manage a combined $193 billion in assets, will result in the withdrawal of their shareholder proposal, which they have levied against six major banks. It makes JPMorgan the first of these banks to strike a deal with investors. The others—Bank of America, Citigroup, Goldman Sachs, Morgan Stanley, and Royal Bank of Canada—still have proposals pending and the NYC Comptroller’s office has been engaging with them. The pension funds in January announced that they were launching the drive to prod the banks to offer up more data on their climate transition commitments.
Bloomberg New Energy Finance research found that in order for average global temperature increases to remain below 1.5 degrees Celsius, which is optimum, the ratio of investments in low-carbon energy to fossil fuels needs to reach a minimum of 4 to 1 by 2030. From there, the ratio needs to increase to 6 to 10 in the subsequent decade, and 10 to 1 afterward. In 2021, Bloomberg research found that for every dollar spent supporting fossil fuels, 0.8 supported low-carbon energy. JPMorgan’s estimated ratio was 0.7.
A JPMorgan spokesperson said it would take time to figure out how best to disclose the metric investors are asking for.
“We found common ground with the NYC Comptroller on disclosing a clean energy financing ratio with an understanding that it is going to take us some time and resources to develop a decision useful approach,” said a spokesperson in a statement to Fortune. “We will engage with NYC and our shareholders to provide the market more clarity and transparency about our activities and what financing the transition truly looks like.”
The bank in 2021 announced a $1 trillion target to finance initiatives to help foster the transition to a low-carbon economy. However, the funds pointed out in their proposal that JPMorgan offers more financing to fossil fuels than other banks, ponying up $434 billion since 2016, despite a commitment to achieving net-zero emissions by 2050, said the NYC funds.
The move comes just weeks after J.P. Morgan Asset Management and State Street were roundly criticized for leaving the Climate Action 100+, a coalition of investors focused on working collaboratively to target the companies that are also the heaviest emitters of greenhouse gasses. Since then, Pacific Investment Management Company (Pimco) announced that it would also depart the group, bringing the total assets under management that have departed to $19 trillion. (BlackRock shifted its participation in C100+ to BlackRock International.)
The asset management firms pointed to their independence in withdrawing from C100+, noting that the group was previously focused on agitating for clearer disclosure and not seeking specific action from. That strategy is set to change with the second phase strategy this year. It also coincides with a movement toward anti-ESG proposals and rhetoric that have led conservative groups and politicians to criticize financial services firms for catering to “wokeness” to the detriment of financial returns.
A Climate Action spokesperson told Fortune that antitrust laws aren’t meant to stop investors or companies from working together on goals found not to be anti-competitive “that they have each independently decided is in their interest.”
The group cited an analysis from the Columbia Center on Sustainable Investment that found that antitrust law was having a chilling effect on “necessary private-sector action to address climate and other sustainability-related challenges.”
The Wall Street Journal reported this week that BlackRock has abandoned the term “ESG” from its public statements and that CEO Larry Fink isn’t using it in his annual letters anymore. Instead, “transition investing” is the new work-around for talking about ESG, the Journal reported.
Still, regardless of the words companies use to discuss it, investors—particularly pension funds—remain focused on climate-change risk and engaging with companies on their net-zero commitments. In 2023, there were a record 643 environmental or social related shareholder proposals filed at public companies, a high-water mark that is expected to persist in 2024, according to a report from investor advisory firm Institutional Shareholder Services.
Climate change-related issues are expected to generate the most proposals from shareholders to companies, the ISS report found, and some investors are asking financial services firms to report any misalignment between client greenhouse gas emissions and 2030 net-zero targets.
This story was originally featured on Fortune.com
Amanda Gerut
Mon, March 4, 2024 a
Cyril Marcilhacy/Bloomberg-Getty Images
The dean of Wall Street CEOs is green. JPMorgan Chase today struck an agreement with three New York City pension funds with investments in the bank valued at $478 million to disclose the ratio of its clean energy to fossil fuel financing. According to the NYC funds, the metric will give investors a more comprehensive view as to how the bank is progressing on its net-zero emissions goals and whether it is ratcheting up its clean-energy financing activities over time.
JPMorgan’s settlement with the three NYC funds, which manage a combined $193 billion in assets, will result in the withdrawal of their shareholder proposal, which they have levied against six major banks. It makes JPMorgan the first of these banks to strike a deal with investors. The others—Bank of America, Citigroup, Goldman Sachs, Morgan Stanley, and Royal Bank of Canada—still have proposals pending and the NYC Comptroller’s office has been engaging with them. The pension funds in January announced that they were launching the drive to prod the banks to offer up more data on their climate transition commitments.
Bloomberg New Energy Finance research found that in order for average global temperature increases to remain below 1.5 degrees Celsius, which is optimum, the ratio of investments in low-carbon energy to fossil fuels needs to reach a minimum of 4 to 1 by 2030. From there, the ratio needs to increase to 6 to 10 in the subsequent decade, and 10 to 1 afterward. In 2021, Bloomberg research found that for every dollar spent supporting fossil fuels, 0.8 supported low-carbon energy. JPMorgan’s estimated ratio was 0.7.
A JPMorgan spokesperson said it would take time to figure out how best to disclose the metric investors are asking for.
“We found common ground with the NYC Comptroller on disclosing a clean energy financing ratio with an understanding that it is going to take us some time and resources to develop a decision useful approach,” said a spokesperson in a statement to Fortune. “We will engage with NYC and our shareholders to provide the market more clarity and transparency about our activities and what financing the transition truly looks like.”
The bank in 2021 announced a $1 trillion target to finance initiatives to help foster the transition to a low-carbon economy. However, the funds pointed out in their proposal that JPMorgan offers more financing to fossil fuels than other banks, ponying up $434 billion since 2016, despite a commitment to achieving net-zero emissions by 2050, said the NYC funds.
The move comes just weeks after J.P. Morgan Asset Management and State Street were roundly criticized for leaving the Climate Action 100+, a coalition of investors focused on working collaboratively to target the companies that are also the heaviest emitters of greenhouse gasses. Since then, Pacific Investment Management Company (Pimco) announced that it would also depart the group, bringing the total assets under management that have departed to $19 trillion. (BlackRock shifted its participation in C100+ to BlackRock International.)
The asset management firms pointed to their independence in withdrawing from C100+, noting that the group was previously focused on agitating for clearer disclosure and not seeking specific action from. That strategy is set to change with the second phase strategy this year. It also coincides with a movement toward anti-ESG proposals and rhetoric that have led conservative groups and politicians to criticize financial services firms for catering to “wokeness” to the detriment of financial returns.
A Climate Action spokesperson told Fortune that antitrust laws aren’t meant to stop investors or companies from working together on goals found not to be anti-competitive “that they have each independently decided is in their interest.”
The group cited an analysis from the Columbia Center on Sustainable Investment that found that antitrust law was having a chilling effect on “necessary private-sector action to address climate and other sustainability-related challenges.”
The Wall Street Journal reported this week that BlackRock has abandoned the term “ESG” from its public statements and that CEO Larry Fink isn’t using it in his annual letters anymore. Instead, “transition investing” is the new work-around for talking about ESG, the Journal reported.
Still, regardless of the words companies use to discuss it, investors—particularly pension funds—remain focused on climate-change risk and engaging with companies on their net-zero commitments. In 2023, there were a record 643 environmental or social related shareholder proposals filed at public companies, a high-water mark that is expected to persist in 2024, according to a report from investor advisory firm Institutional Shareholder Services.
Climate change-related issues are expected to generate the most proposals from shareholders to companies, the ISS report found, and some investors are asking financial services firms to report any misalignment between client greenhouse gas emissions and 2030 net-zero targets.
This story was originally featured on Fortune.com
Michael Bow
Mon, 4 March 2024
Since taking the helm in July 2020, Dame Amanda Blanc has streamlined Aviva by selling eight non-core businesses and recouping around £8bn - Anna Gordon/EyeVine
Aviva is returning to Lloyd’s of London for the first time in more than two decades as threats such as climate change and cybercrime boost demand for speciality insurance.
The insurance giant has agreed to buy Lloyd’s insurance platform Probitas for £242m, giving it a lucrative foothold in the booming commercial insurance sector.
Founded in 1688, Lloyd’s is the world’s largest and oldest insurance hub – boasting a network of more than 380 brokers and 77 underwriting syndicates.
Probitas is a speciality property and casualty insurer and also offers insurance in emerging sectors such as renewables.
Though small, the takeover will allow Aviva to diversify away from home and motor insurance products, and gain exposure to higher margins and faster growth.
“This acquisition is another step in our strategy to invest in Aviva’s future profitable growth,” said Aviva chief executive Dame Amanda Blanc.
“Aviva’s presence in the Lloyd’s market opens up new opportunities to accelerate growth in our capital-light General Insurance business.”
The takeover marks Aviva’s return to the London market for the first time since the turn of the millennium.
Lloyd's boasts a network of more than 380 brokers and 77 underwriting syndicates - Eddie Mulholland
Aviva, then known as Norwich Union, quit Lloyd’s in 2000 after selling Marlborough Underwriting Agency to Warren Buffett’s Berkshire Hathaway.
The 2000 exit coincided with a merger between Norwich Union and CGU, which created Aviva.
Aviva is planning to retain the Probitas branding and management team once the deal is completed later this year.
Probitas, which is 49.9pc owned by Saudi Arabian insurer Saudi RE, has been in sale talks with the FTSE 100 group for more than a year.
Aviva had reportedly been considering creating a Lloyd’s start-up but it has now decided to acquire a business off the shelf.
Probitas chief executive Ash Bathia said linking up with Aviva would help build “one of the most successful and profitable franchises in the Lloyd’s market”.
The Probitas acquisition also marks part of a broader shift by Dame Amanda to diversify Aviva away from traditional consumer products like car insurance.
Since taking the helm in July 2020, she has streamlined Aviva by selling eight non-core businesses and recouping around £8bn – £5bn of which has been returned to shareholders.
Probitas joins a number of other bolt-on acquisitions for Aviva, including Succession Wealth and AIG’s UK protection business.
The strategy has pleased long-suffering shareholders, who suffered years of dismal performance under former chief executives Andrew Moss, Mark Wilson and Maurice Tulloch.
Shares have risen 60pc since Dame Amanda took over.
Her decision to trim Aviva’s sprawling empire also saw off activist shareholder Cevian Capital, which exited its stake last year.
Probitas is set to join Aviva’s global corporate and speciality division, which already provides commercial insurance.
The Lloyd’s deal will add an extra distribution channel, and other opportunities to grow the division.
The latest acquisition won the support of City analysts, who said Aviva had struck the £242m deal at the right time.
“Lloyd’s is a good market to be in,” said Abid Hussain, an insurance analyst from Panmure Gordon. “We are going to see pricing power coming through to prime insurers and it diversifies Aviva away from their other lines of business. It ticks all the boxes.”
Analysts at Bank of America also hailed the deal, saying Probitas’ business “aligned with Aviva’s existing operations” stretching across the UK, Ireland and Canada.
The fresh foray into the Lloyd’s market will help Aviva tap into a recent boom in Leadenhall Street.
Rising risks like climate change and cyber threats have triggered a surge in large global companies buying ever more complex insurance products, driving up premiums and margins.
Lloyd’s chief executive John Neal has predicted Lloyd’s current underwriting figures of £47bn could double over the next decade due to demand wrought by climate change and cyber attacks.
“The Lloyd’s market is quite different now than it was 20 years ago,” said Mr Hussain from Panmure Gordon. “It runs in cycles and has entered a favourable underwriting cycle so from a timing perspective it’s a good entry point.”
Around 60pc of Probitas’s book is property and casualty insurance, with finance, construction and cyber also key to its offering, meaning it is exposed to the rising tide of specialist demand at Lloyd’s.
Lloyd’s observers say the underwriter is a relatively small player in the market, meaning Aviva is dipping its toe in the water rather than wading in.
“This isn’t like the Man City takeover, and materially changing the Premier League,” said one industry observer. “What they are not intending is for it to be a game changer.”
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