Weekly ESG News: Financial Services and Insurance Industry (10/2024)
News in the spotlight: UK plans to regulate ESG ratings in 2024
The UK finance ministry plans to regulate ESG ratings on companies for improved transparency. While no specific timeline was given, a full consultation response and legislative steps are expected later in the year.
Products and Services
Mirova launches new social impact private equity strategy
Mirova, the sustainable finance subsidiary of Natixis Investment Managers, has introduced Mirova Impact Life Essentials (MILE), a €200 million social impact private equity strategy focusing on unlisted European companies contributing to societal betterment. Led by Senior Investment Director Judith-Laure Mamou-Mani, MILE will address challenges related to education, well-being, mindful consumption, and diversity & inclusion. The fund aims to achieve a positive societal impact through an opportunistic approach, offering both minority and majority stakes. Mirova plans to classify MILE under “Article 9” within the European SFDR regulation and use a portion of management fees for philanthropic projects through the Mirova Foundation. This initiative expands Mirova’s private assets portfolio in Europe, aligning with its 2030 roadmap.
Permira appoints team to focus on climate investment opportunities
Permira, the global private equity firm, has formed a dedicated team, led by Kush Patel and another Partner joining in 2024, to identify investment opportunities in the climate transition value chain. The team will focus on both climate transition assets and enablers, aiming to support growth-oriented climate leaders globally. With over 35 years of experience, Permira plans to invest in thematic sub-sectors such as renewable energy, resource efficiency, decarbonization, and grid modernization. The firm believes the climate transition represents a significant global growth opportunity, with a projected $12 trillion cumulative revenue by 2030.
RBC accelerates renewable energy lending
Royal Bank of Canada (RBC) plans to triple renewable energy loans to C$15 billion by 2030, aiming for net-zero emissions in lending by 2050. Facing criticism for significant fossil fuel financing, RBC also targets C$35 billion in low-carbon energy loans and C$1 billion for climate-focused funds by 2030. Despite an 8% reduction in oil and gas sector loans, the bank acknowledges the challenge of aligning with the 1.5°C target in the Paris Agreement. Environmental groups find RBC’s commitment insufficient, citing continued financing of fossil fuels at $37 billion in 2023.
Regulations, Law & Frameworks
SEC approves Climate Disclosure Rule
On March 6, 2024, the U.S. Securities and Exchange Commission (SEC) approved a revised proposal mandating publicly traded companies to disclose climate-related information, encompassing details on climate risks, costs related to severe weather events, and, in some instances, greenhouse gas emissions. The approved version notably omitted Scope 3 disclosures, originally requiring large companies to provide data on emissions from their suppliers and customers. Critics argued that this provision was impractical and posed a risk of involving private companies, like independent contractors affiliated with large entities. The SEC’s decision reflects a scaled-back approach to address concerns and streamline climate disclosure requirements for public companies.
UK plans to regulate ESG ratings in 2024
The UK finance ministry plans to regulate ESG ratings on companies for improved transparency. While no specific timeline was given, a full consultation response and legislative steps are expected later in the year. This follows a voluntary industry code introduced as a temporary measure. The European Union has already approved mandatory ESG rating rules, surpassing the UK’s voluntary code. The lack of immediate clarity on rating criteria and provider scope has left the industry in a ‘waiting game,’ with consultants expecting regulations to require formalized governance structures and published methodologies. The timing of legislation may be influenced by an upcoming general election later this year.
Net Zero & Decarbonization Commitments
Invesco exits CA100+ climate initiative
In a move signaling a trend among major U.S. investors, Invesco has become the fifth asset manager to withdraw or reduce its involvement with the Climate Action 100+ coalition, aimed at pressuring high-polluting companies to reduce carbon emissions. Following recent exits by JPMorgan, State Street, Pimco, and BlackRock’s partial withdrawal, Invesco, overseeing $1.6 trillion in assets, cited a focus on client interests as the primary reason for its departure. Despite criticism from some U.S. Republican politicians regarding potential antitrust law violations, CA100+ maintains strong global investor support, gaining 60 new signatories with around $3 trillion in assets since the initiation of Phase 2.
ESG- and Green Bonds
Canada issues second green bond
Canada issued its second green bond, a 10-year, $4 billion commitment fulfilling the 2023-24 fiscal year pledge. The bond, the first under the updated Green Bond Framework, includes certain nuclear expenditures, showcasing Canada’s global nuclear leadership commitment. Robust demand, particularly from environmentally and socially responsible investors (66%), and international investors (33%), resulted in a final order book exceeding $7.4 billion. This issuance supports Canada’s sustainable finance market, providing a sovereign benchmark and high-quality environmental, social, and governance (ESG) assets. These green bonds unlock private financing for projects, fostering economic growth and job creation. The government promises transparency through annual allocation and impact reports on the use of green bond proceeds.
Leadership Announcements
Climate Finance Asia appoints Alan To as new CEO
Alan To has been appointed as the CEO of Climate Finance Asia, bringing extensive experience in sustainability and ESG from global companies like S&P Global and Bayer. Under his leadership, the organization aims to advance its mission of achieving a zero-carbon economy by promoting sustainability practices across various sectors. Climate Finance Asia is committed to expanding its impact in the region through collaboration with partners. Alan To’s passion for community service and co-founding social enterprises aligns with the organization’s values of caring for the planet and ensuring prosperity for all. His appointment reflects the company’s commitment to strategic growth and positive climate impact.
Sustainable Fitch appoints Marcy Block as new global head
Sustainable Fitch, a leading player in ESG ratings, has appointed Marcy Block as the Global Head of ESG Ratings, showcasing the firm’s commitment to expanding its capabilities in response to the evolving market. Block, with significant experience at Fitch Ratings since 2013, has played a pivotal role in advancing climate and sustainable finance initiatives. Her appointment highlights the increasing importance of ESG considerations in investments and addresses the complexities of the growing regulatory landscape in the sector. This strategic move positions Block to lead Sustainable Fitch in delivering transparent and comprehensive ESG ratings products to meet the demands of the current market.