Weekly ESG News: Financial Services and Insurance Industry
News in the spotlight: BlackRock and SGX launch $580m Climate Action Fund
The Singapore Exchange (SGX) and BlackRock have introduced a significant climate action fund called the iShares MSCI Asia ex-Japan Climate Action ETF, with assets totaling $580 million, making it Singapore’s largest equity ETF. This ETF will monitor companies as they advance in their efforts to reduce carbon emissions, offering investors a diversified approach to sustainable investing. It is supported by Prudential and a group of investors including Temasek and Singlife. The fund has a low annual management fee of 0.18% and tracks the MSCI Asia ex-Japan Climate Action Index. SGX believes this listing will mobilize capital and drive solutions to address climate change, providing investors with climate-conscious asset options. Prudential sees its investment as promoting transition leadership and supporting a green transformation across sectors.
Weekly Sustainable Finance Newsletter 37/2023
ESG News of the last week in detail
Products and Service
Zurich Insurance collaborates with KPMG to provide climate change advisory solution
Zurich Resilience Solutions and KPMG Switzerland have joined forces to offer comprehensive climate change advisory services, addressing both physical and transition risks associated with climate change. Their collaborative approach includes risk assessments, transition strategies, and climate scenario analysis, enabling businesses to safeguard their assets, enhance operational resilience, and adapt to a low-carbon economy. This strategic partnership aims to empower companies to navigate the evolving climate risk landscape effectively and promote sustainable business practices while complying with reporting standards and regulations.
Deutsche Bank and EIB launch EUR 400m loan portfolio for medium-sized companies
Deutsche Bank and the European Investment Bank (EIB) are partnering to offer 400 million euros in loans to mid-sized companies in Germany and the EU, focusing on sustainable projects like renewable energy and energy efficiency. These loans are part of an EU-wide risk-sharing program to ease financial access barriers amid economic uncertainties. The EIB will provide guarantees covering up to 50% of the loan amount, benefiting borrowers. This collaboration aims to support the transition to more sustainable business models and accelerate the shift away from fossil energy in Germany.
Robeco launched Climate Global High Yield Bonds
Robeco has launched its first sustainable climate high yield fund, the Climate Global High Yield Bonds strategy, aimed at reducing carbon footprints through high yield investments. The fund aligns with the Paris Agreement and contributes to a 7% reduction in portfolio emission intensity annually. It excludes fossil fuel-related activities and starts with a 50% lower carbon intensity than the current investment universe. Sander Bus, Manager High Yield at Robeco, sees this strategy as a unique and impactful choice for investors.
Nomura AM launches US High Yield Fund under Art. 8 SFDR
Nomura Asset Management has launched the “Nomura Funds Ireland – US High Yield Bond Continuum Fund” for European investors, emphasizing ESG criteria to meet EU Sustainable Finance Disclosure Regulation (SFDR) standards. Managed by Nomura Corporate Research and Asset Management Inc. (NCRAM), the fund focuses on below investment grade bonds and aims for a diversified portfolio of companies capable of managing debt through economic cycles. It is benchmarked against the ICE BofA US High Yield Constrained Index, with a yield of over 8.5% as of late August. The fund considers sustainability, limiting carbon intensity and avoiding high ESG-risk issuers, aligning with European regulations.
BlackRock and SGX launch $580m Climate Action Fund
The Singapore Exchange (SGX) and BlackRock have introduced a significant climate action fund called the iShares MSCI Asia ex-Japan Climate Action ETF, with assets totaling $580 million, making it Singapore’s largest equity ETF. This ETF will monitor companies as they advance in their efforts to reduce carbon emissions, offering investors a diversified approach to sustainable investing. It is supported by Prudential and a group of investors including Temasek and Singlife. The fund has a low annual management fee of 0.18% and tracks the MSCI Asia ex-Japan Climate Action Index. SGX believes this listing will mobilize capital and drive solutions to address climate change, providing investors with climate-conscious asset options. Prudential sees its investment as promoting transition leadership and supporting a green transformation across sectors.
ESG Data and Analytics
S&P Global Ratings launches updated Second Party Opinions featuring Shades of Green
S&P Global Ratings has unveiled an updated analytical approach for Second Party Opinions (SPOs) following its acquisition of Shades of Green in December 2022. This revised approach combines methodologies from both entities to enhance transparency in the sustainable debt market. The new approach outlines the process for providing SPOs, defines S&P Global Ratings Shade of Green, explains its assignment to environmental projects, and assesses alignment with sustainable finance principles, issuer sustainability factors, and the EU Taxonomy. It’s important to note that SPOs are independent assessments and not credit ratings, focusing on alignment with market standards.
MSCI launches MSCI Sustainability Institute
MSCI Inc. has launched the MSCI Sustainability Institute, aiming to drive progress in the role of capital markets in sustainability and global challenges like climate change. The Institute will provide data and training to researchers, encourage innovation in sustainable finance, curate useful research, and host forums for discussion. Linda-Eling Lee, a recognized ESG and sustainability expert, will lead the Institute. Hiromichi Mizuno, a Special Advisor to the CEO at MSCI, will assist in building the advisory group. The initiative seeks to foster collaboration across various sectors to address pressing global challenges.
Regulatory and Law
EU Commission launched consultation on the implementation of the Sustainable Finance Disclosure Regulation (SFDR)
SFDR is undergoing a targeted consultation from September 14, 2023, to December 15, 2023. The goal is to gather input primarily from public bodies and stakeholders familiar with SFDR and sustainable finance within the EU. This consultation welcomes views from financial market participants, investors, NGOs, relevant public authorities, national regulators, and others directly or indirectly affected by SFDR provisions. The objective is to assess the effectiveness of SFDR, addressing issues such as legal certainty, usability, and its role in combating greenwashing. This assessment process includes public consultations, workshops, and roundtables to gather comprehensive stakeholder input.
SBTi announced major transformation due to its UK incorporation
The Science Based Targets initiative (SBTi) is undergoing a significant transformation in response to the urgent need for climate action. They are separating their validation services to enhance credibility, appointing Francesco Starace as the new Chair, and expanding their governance. Additionally, they plan to increase validation capacity to meet rising demand for science-based targets. SBTi aims to ensure trustworthiness in corporate climate goals with improved practices and service excellence. This transformation comes as global demand for credible corporate climate action rises due to extreme weather events. By 2025, they anticipate over 10,000 companies setting science-based targets.
World Federation of Exchanges (WFE) issued guidance on the WFE Green Equity Principles
The World Federation of Exchanges (WFE) has released its Guidance Note on the WFE Green Equity Principles, marking a global framework for designating listed shares as green. These principles revolve around specific criteria related to a company’s green activities, taxonomy usage, governance, annual assessments, and disclosure processes. This guidance also addresses operational aspects, such as assigning responsibility for classification oversight, defining criteria for revocation, and providing public information. Nandini Sukumar, CEO of WFE, emphasized the importance of these principles in promoting transparency in sustainable finance and mitigating greenwashing risks in the global economy. The principles and guidance note are open for public consultation until January 15, 2024.