Diversity, Impact Investing, & Climate Change - ESG Weekly Roundup #7
Diversity and inclusion are about more than press releases or social media posts. Firms need to disclose much more detail on who they hire and how much they pay. Are they doing enough?
Hi there,
A special welcome to all of my new subscribers who’ve joined this week, and thanks for the feedback that has been coming through. Every Sunday I’m putting together this brief roundup of what I’ve been reading, watching and listening to. I look forward to getting your feedback through replying to this note, in the comments, or on Twitter.
Regards,
Brennan
Reading Time: 10 minutes
Chart Of The Week
Source: RIAA report released this week
there is a lack of intermediaries who can advise on and create social impact investing to stimulate market growth – in this report, respondents’ perceptions about catalysts and barriers to market growth reinforce the need to nurture intermediaries who create the impact-oriented investment deals that will convert appetite into substantially increased investment
Quote Of The Week
On the positive, many companies have recently pledged significant funds to civil rights groups, which certainly is helpful. Nevertheless, many of these same firms aren’t fully disclosing the racial makeup of their employee base or pay disparities amongst various groups. This type of data is critical for investors to analyze the progress made by companies over time with respect to inclusion, and to advocate for more change. Some industries, such as technology, are somewhat better with disclosure and have vocalized the need for more inclusion. Unfortunately, within tech, little progress in actual outcomes have been made on this front.
Source: Black Lives Matter: Can sentiment in corporates change permanently?
What I’ve Been Reading
ESG and Responsible Institutional Investing Around the World: A Critical Review:
Readers might come away from this survey skeptical about the potential for ESG investing to affect positive change. I prefer to characterize the current state of the literature as having a “healthy dose of skepticism,” with much more remaining to be explored. Here, I hope the reader comes away with a call to action. For the industry practitioner, I believe that the investment industry should strive to achieve positive societal goals.
Addressing Climate as a Systemic Risk: A call to action for U.S. financial regulators:
This Ceres report outlines how and why U.S. financial regulators, who are responsible for protecting the stability and competitiveness of the U.S. economy, need to recognize and act on climate change as a systemic risk. It provides more than 50 recommendations for key financial regulators to adopt, including the Federal Reserve Bank (the Fed), the Office of the Comptroller of the Currency (OCC), the Federal Deposit Insurance Corporation (FDIC), the Securities and Exchange Commission (SEC), the Commodity Futures Trading Commission (CTFC), state and federal insurance regulators, the Federal Housing Finance Agency (FHFA), and the Financial Stability Oversight Council (FSOC).
Plunging cost of wind and solar marks turning point in energy transition: IRENA
More than half of the renewable capacity added in 2019 achieved lower power costs than the cheapest new coal plants, the report found. Auction results also suggest that the average cost of building new solar photovoltaic (PV) and onshore wind power now costs less than keeping many existing coal plants running, reinforcing the case for phasing out coal, the report said.
Transition to a 1.5°C World with the S&P Paris-Aligned & Climate Transition Indices:
To meet the EU’s proposed minimum standards for CTBs and PABs, we have launched two new index series: the S&P Paris-Aligned Climate (PA) Indices and S&P Climate Transition (CT) Indices, respectively, collectively referred to as the S&P Paris-Aligned and Climate Transition (PACT) Indices. Both methodologies meet the respective EU requirements12 and other climate objectives to become compatible with a 1.5°C scenario and recommendations from the TCFD (see Exhibit 5).
Climate disclosures within the Annual Report: An Australian focus:
Our key financial regulators and standard setters, ASIC, APRA and the ASX Corporate Governance Council, have all recently issued guidance emphasising the importance of considering climate change – not just as a matter of corporate sustainability reported outside of annual reports but as a matter that should be considered as part of the preparation of the annual reports. Guidance developed jointly by the AuASB and AASB indicate a need to describe how material climate risks have been considered in the Financial Statements and therefore be subject to audit.
The Climate Measurement Standards Initiative (CMSI) will create a common understanding of the physical risks from climate change in Australia as well as providing projections for future repair and replacement costs of residential and commercial buildings and infrastructure.
The CMSI is specific to Australian conditions, using peer-reviewed research from Australian and international scientists to support the work of financial institutions. Australia has been strongly affected by the increasing severity and frequency of climate-related natural disasters. The resulting risks manifest in many ways from more local flooding, increases in extreme weather events, severe bushfires, prolonged drought and torrential rains and storms.
Decline and Fall: The Size & Vulnerability of the Fossil Fuel System:
Our analysis finds falling demand, lower prices and rising investment risk is likely to slash the value of oil, gas and coal reserves by nearly two thirds, increasing the risk and likelihood of stranded assets.
What I’ve Been Watching
The ESG Alphabet Soup Series
Is ESG Investing Just Marketing Spin? [definitions]
Is ESG Investing Just About Climate Change? [environmental factors]
Social Risks, Modern Slavery, And ESG Investing [social factors]
Governance, The Keystone Of ESG Investing [governance factors]
What Is The Greenhouse Gas Protocol? [environmental factors]