TBLI Weekly - 11th October, 2022

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TBLI Weekly - October 12th, 2022

Your weekly guide to Sustainable Investment


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The TBLI BETTER WORLD PRIZE is a new initiative to recognize the Best ESG Measurement System.

30 November 2022

 

The TBLI Better World Prize event page is live - sign up to attend for free!

Click here to view it and see all the confirmed organizations and speakers that will be presenting their measurement system

Would you like to apply to present on behalf of your organization and discuss why your system for ESG measurement is the best?
Then Register here

There are no costs involved in this award.

For more info on this initiative click here


 



TBLI Investor Salon - October 18th

On October 18th - the virtual TBLI Investor Salon will be returning showcasing innovative companies that are making an impact.

Are you an investor and would you like to attend? Submit this form to attend the event.*

Exclusive access to investment allocators only.*

Radical Truth - TBLI Podcast


TBLI Talk: Shell: Greenwashing their way to disaster

Caroline Dennett is Director of CLOUT LTD and has 20+ years’ experience as a researcher and insight consultant; she has developed a sensitive understanding of the drivers of human behaviour, motivation and change.

Caroline has gained unique insights into the factors that can make and break positive safety cultures, the role Leadership plays in these dynamics and in driving change.

She recently withdrew her services from Shell because of their lack of leadership in addressing the climate challenge, and zero ambition for a genuinely green future.

Click here to listen to the episode on Anchor.

You can find also find our podcast here:

 

 

Impact funds grow 40% over last two years, hitting $1 trillion

Impact investing has soared 40% over the past two years, according to a fresh analysis, as more money flows into strategies that actively seek to save the planet and its people.

Investor allocations to impact investing, which targets specific environmental, social or governance outcomes instead of just screening for ESG risks, now stands at more than $1 trillion, according to the Global Impact Investing Network.

That growth feeds into a maelstrom of discordant views around ESG that have plunged the once obscure investing idea into a heated political debate. In the U.S., GOP states are now pushing through anti-ESG legislation, putatively to protect returns. But GIIN, which this month took charge of ensuring the industry applies credible standards, says investors are turning to impact strategies precisely because they're a good way to protect returns over time.

"The vast majority of impact investors are seeking risk-adjusted rates of return," Amit Bouri, chief executive of GIIN, said in an interview. "Many of them have fiduciary obligations that require them to do so."

A recent survey by GIIN showed that roughly 90% of investment clients think their financial requirements are either being met or exceeded by impact strategies. Investors committing to following the set of operating principles for the industry manage more than $470 billion in impact assets.

Some of the world's biggest asset managers say that impact investing, done right, can even beat broad market returns.

"We see anything that we offer to our clients and that we've labeled as impact investments as squarely delivering market rate or better types of returns," said Andrew Lee, global head of sustainable and impact investing at UBS Global Wealth Management. He also said that the best returns, when it comes to impact, tend to be in private markets.

But some warn that impact investing may be particularly vulnerable to rising anti-ESG sentiment. A recent paper by NorthPeak Advisory, whose clients are mostly alternative asset managers, concluded that impact investing is the one corner of ESG likely to take a hit as a result of the political debate in the U.S.

At least 18 mostly Republican states have either proposed or enacted some form of anti-ESG legislation, and NorthPeak expects "these acts are very likely to restrict 'impact investing'," it said late last month. More broadly, a survey published Oct. 4 of 552 financial professionals by research firm PitchBook revealed an increase in critical views toward ESG. It received roughly 50 "highly negative" responses to ESG in 2022, compared with just one two years ago.

That may yet feed through to the investment industry. "It would be naive to say that there wouldn't be consequences" of the rise in anti-ESG sentiment, said Rekha Unnithan, co-head of private equity impact at Nuveen.

Source

Investors call for more than carbon metrics to assess net-zero transition

The vast majority of investors need much more than just carbon metrics to assess the financial impact of the move towards a low-carbon economy, according to a survey. The findings come from investment professionals’ responses collected by WTW (formerly Willis Towers Watson) at the September 2022 Climate Week NYC event.The global advisory, broking and solutions firm found 85% of respondents rejected carbon metrics as the best measure to assess risks and opportunities for their investments. Those quizzed also ranked the most significant barriers to greater adoption of ESG principles within their portfolios. The biggest problem by some distance was data quality and consistency, with 66% saying a lack in this area undermined confidence.

Climate change: The rocky road to somewhere

Another 41% said they need greater availability of tools and metrics to accurately measure transition risk, and also stronger evidence that ESG integration will improve performance over the long term. As part of the push towards net zero, regulators increasingly require investors to disclose their climate-related financial risks, and also companies to report their carbon emissions. WTW growth acceleration leader Diya Luke says their Climate Quantified data and analytics product will help with the transition. She added: “Investors are hungry for data on how climate risks impact investment outcomes. “We now have forward-looking metrics that shine light on all the climate-related financial risks across industries.

 

How to Make Sure Your ESG Investments Are the Real Deal

More than ever, shareholders want the companies they invest in to make real progress on environmental, social, and governance (ESG) issues. A string of studies this year make this clear. In one study, just over half of retail investors said ESG has influenced their investments. In another, 65% of investors said it’s important for corporations, banks, and other financial institutions to disclose information about their climate change risks and strategy. And in a third, a whopping 90% of investors said it’s important for executives to prioritize recruiting diverse talent.

The desire on the part of shareholders is clear. Unfortunately, the reality of what corporations are actually doing can sometimes be more difficult to decipher.

Just about all organizations make promises about the climate, diversity, inclusion and other ESG issues. But promises don’t automatically translate into results. An analysis published by the Harvard Business Review looked at some companies in ESG and non-ESG portfolios. It found that “companies in the ESG portfolios had worse compliance record(s) for both labor and environmental rules.”

To many of us who work to advance ESG, this does not come as a big surprise. As more organizations jump on the proverbial bandwagon, it can be difficult for investors to keep track of who is authentic -- and who is just saying what they want to hear.

Sometimes this phenomenon reaches absurd heights. For years, I have faced online attacks, trolling, and harassment from groups that oppose my organization’s work for ESG in the energy sector. Now, seeing how times have shifted, some of those same people are suddenly presenting themselves as pro-sustainability and pro-diversity. And not knowing any better, some business leaders are taking them at their word.

As an investor, you want to know who is the real deal -- who makes ESG issues a core value of their business. Here are keys to finding out.

Read full article

'ESG investing is not good enough'

Mark Armstrong has a rigorous process when it comes to sustainable investing, as he looks to assemble stocks that have a true impact. The founder of Blue Sphere said the advice firm did not stop at ESG screening "because we don't believe it's good enough". Instead it follows a three-layer process that allows it to screen out companies not deemed 'ethical' before screening out those that don't meet environmental, social and governance principles. It also screens in stocks that have a positive social or environmental impact. This is called impact investing. "We really, truly believe - and when we speak to clients [about] what they think ethical or ESG investing is - it's actually impact investing they're seeking, not ethical or ESG," said Armstrong.

Research from Boring Money carried out this year showed conviction, or impact, investing has become a priority for many investors in the UK, as 14 per cent of ESG investors are now so committed to sustainable investing they put ESG criteria first and performance second when selecting investments. But Armstrong said there were still hurdles to jump in communicating impact investing to clients, as there was not yet a consensus on the right terminology to use. "Ethical and ESG is the banner that the industry uses a lot and is in a lot of people's language. But what they're actually talking about is impact," he said. "They want to invest in a way that not only provides them with a financial return but also is having a positive, measurable social and environmental impact." And it's not just clients who get confused by the terminology, the industry too was taking ESG to mean a variety of different things, he said. "We really need to define what we mean by ESG. Are we looking at how the company affects the environment, ...or are we looking at it from how the environment affects the company's profits moving forward?"

Read full article

New Zealand farmers may pay for greenhouse gas emissions under world-first plans

By 2025, farmers would pay a levy on emissions from sources such as cow burps and gases from their urine under proposals released by Jacinda Ardern

In a world-first, New Zealand appears set to introduce a scheme that will require farmers to pay for their agricultural greenhouse gas emissions, including the methane belched out by cows and nitrous oxide emitted through livestock urine.

The prime minister, Jacinda Ardern, and three of her ministers, stood behind a podium of hay bales at a North Island dairy farm on Tuesday morning to unveil the government’s plan for putting a price on the climate cost of farming.

The emissions created by the digestive systems of New Zealand’s 6.3m cows are among the country’s biggest environmental problems. The plan includes taxing both methane emitted by livestock and nitrous oxide emitted mostly from fertiliser-rich urine – which together contributes to around half of New Zealand’s overall emissions output.

“The proposal, as it stands, means New Zealand’s farmers are set to be the first in the world to reduce agricultural emissions,” said Ardern, adding that it would give the country’s biggest export market (worth $46.4bn a year) a competitive advantage globally, while putting the country on track to meet its 2030 methane reduction target.

“No other country in the world has yet developed a system for pricing and reducing agricultural emissions, so our farmers are set to benefit from being first movers,” Ardern said. “Cutting emissions will help New Zealand farmers to not only be the best in the world but the best for the world.”

The plan arose out of the He Waka Eke Noa scheme – a partnership between farming leaders, Māori and government. The scheme was created in 2019 following calls from the farming sector to price greenhouse gas emissions at farm level, rather than forcing farmers into the separate Emissions Trading Scheme, which they criticised as being a blunt tool to calculate agricultural emissions.

Read full article

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