ICYMI: 20 key climate change and finance stories from October

During October UK Financial Reporting Council was accused of failing to enforce corporate reporting laws, Swiss pension fund portfolios assessed as ‘4°C off Paris climate agreement’ and BHP came under pressure over membership of anti-climate lobby group. Round up below.

News from UK:

• The Financial Reporting Council’s failure to effectively oversee and enforce corporate reporting laws has serious implications for investors — especially where climate risk is concerned, according to a new ClientEarth investor briefing (17 Oct)
• EAPF Asset owner profile: ‘What the Environment Agency does is real stuff’ FTfm interview Emma Howard-Boyd, Chair of the Environment Agency. Reflecting on the pooling of local authority pension schemes the article says that ‘for now the fund is ramping up pressure on investment consultants, stock exchanges, credit rating agencies, actuaries and auditors to force companies to disclose climate-related risks and explain their preparations for a low-carbon economy.’ (29 Oct)

Emma Howard-Boyd, by Tony Healey in FT

• HSBC Asset owner profile: HSBC UK pension scheme CIO Mark Thompson tells Investment & Pensions Europe about the Future World fund, saying ‘I believe a benefit of this approach is that a focus on the future world and the impact of climate change, in a fiduciary framework, is attractive for my younger members. I think it will help them become more engaged with their pension fund.’ (September magazine)
• Aviva Investors has proposed reforms of sell-side research practices, which it said were failing investors by being “overly positive, sometimes biased, and preoccupied with short-term financial metrics”. Steve Waygood tells Investment Week that ‘national regulators such as the FCA to do more, adding they could “stipulate that research reports include an outlook of more than a year and a specific section on ESG, which requires analysts to demonstrate how material ESG considerations are integrated into their overall conclusions and ratings”. (Investment Week, 2 Oct). Steve Waygood and Anita Skipper go into detail on the report in an oped in Responsible Investor (4 Oct)
• UK Investment consultants commit to include ESG factors: ‘In an initiative co-ordinated by the AMNT and the UK Sustainable Investment and Finance Association (UKSIF), 12* influential investment consultants have committed to back guidance from the UK pensions regulator that trust-based defined contribution (DC) and defined benefit (DB) pension schemes should take ESG factors into account where they are financially material.’ (I&PE, 25 Sept)
• InfluenceMap and Friends Provident Foundation published Gridlock in UK Power Markets report that ‘finds the Big Six utility companies have undue influence on UK energy policy and regulation, hindering the clean energy transition and posing significant investor risk (Clean Energy News, 17 Oct).
• ECIU: The U.K.’s subsidy ban for new onshore wind farms could tack 1 billion pounds ($1.3 billion) onto power bills over five years by eschewing one of the cheapest forms of clean energy. (Bloomberg, 25 Oct)

Claire Perry MP, Minister for Climate Change and Industry

• UK government Clean Growth Strategy published on 12 October. The strategy sets out ‘how it hopes to meet the nation’s legally binding climate goals. The strategy covers the fourth and fifth carbon budgets, spanning 2023–2027 and 2028–2032, by when the UK must cut its greenhouse gas emissions to 57% below 1990 levels.’ (Carbon Brief)

News from Europe:

• Swiss pension fund portfolios ‘4°C off Paris climate agreement’: A government-backed survey of investment portfolios found that strategies were on average in line with the global climate warming by 6°C by the end of this century, rather than the 2°C maximum set by the Paris Agreement on climate change. (I&PE, 26 Oct). The test was ‘carried out on 79 pension funds and insurance companies — which manage two-thirds of all Swiss assets at CHF376 billion ($381 billion)’, reported swissinfo.ch (23 Oct). See also the Swiss government press release and full report (pdf, 50 pages) by 2 Degree Investing Initiative.
• Institutional investors urge EU ambition on vehicle standards: The IIGCC has written to EU policy makers urging the European Commission proposals on cars and vans to be in line with 2030 and 2050 targets and to guarantee ‘high-level ambition for new vehicle standards, including consideration of targets for electrification of the EU fleet’. (IIGCC letter & press note, 4 Oct)
• TCFD Special Advisor Russell Picot will chair IIGCC’s new Investor Practices programme, including an ‘in depth facilitated dialogue between IIGCC’s growing membership on disclosure by both asset owners and asset managers.’ (RI, 31 Oct)
• The World’s Largest Wealth Fund Could be Advised to Dump Climate Baddies: ‘Norway’s $1 trillion sovereign wealth fund may soon be advised to dump the worst emitters of gasses that contribute to climate change, according to its watchdog. … The Council of Ethics is ‘looking at cement, steel, energy producers’ (Bloomberg, 25 Oct)

News from around the world:

• BHP under pressure over membership of anti-climate lobby group: BHP Billiton is rethinking its membership of Australia’s leading mining organisation over differences on climate change (The Times, 20 Sept). The move comes as BHP faces a shareholder resolution urging the company to terminate membership of bodies that demonstrate a pattern of advocacy on policy issues at odds with the company’s positions since 2012 (The Guardian, 19 Sept). The Australian reported that ‘BHP’s falling out with the Minerals Council of Australia has claimed the scalp of the lobby group’s chief executive, Brendan Pearson [whose] advocacy for coal and opposition to the Finkel review’s Clean Energy Target left him and the MCA increasingly isolated from BHP’ (22 Sept). Bill McKibben wrote in Business Green that ‘it’s time for investors to call time on the company’s support for those who seek to obstruct action on climate change’ (18 Oct). Brynn O’Brien from the filers Australasian Centre for Corporate Responsibility (ACCR) explained the rationale for the resolution in Responsible Investor (5 Oct). On the day of the UK AGM the Guardian reported that ‘attempts by corporate shareholder activists to have BHP accept advisory resolutions from shareholders look set for defeat but the momentum for companies to take greater account of shareholders’ views on matters of corporate governance, environmental sustainability and corporate ethics is mounting’ (19 Oct). The Australian AGM takes place on 16 November in Melbourne. The Street, 1 Oct)
• Nine European asset owners among ‘most responsible’ investors: APG from the Netherlands, Denmark’s PKA, the Irish Strategic Investment Fund, and France’s ERAFP were all named on the list, produced by US think-tank New America as part of its “Bretton Woods II” work on responsible investment. (IP&E, 25 Oct)
• Japan’s government pension fund and World Bank partner to mobilise capital markets for ESG: to research “practical solutions for integrating sustainability solutions into fixed income portfolios” on what they termed a “first step”. (Responsible Investor and IP&E 12 Oct)
• Saudi Aramco: $1tn Saudi Aramco listing a potential threat to London’s governance standing, according to ShareAction (RI, 16 Oct). ‘Saudi Arabia’s finance minister has confirmed the kingdom is exploring a private stake sale in state energy giant Saudi Aramco, with plans for an international listing just one option for a privatisation billed as the largest initial public offering in history. (FT, 26 Oct). See also Three Crucial Things We Still Don’t Know About the Aramco IPO (Bloomberg, 29 Oct).
• Chevron loses taste for the Great Australian Bight: Chevron has become the second big oil company to abandon plans to drill for oil in the Great Australian Bight, almost exactly a year after BP ditched its more advanced plans for the untapped basin. (Guardian, 13 Oct)
• Climate Finance Accelerator: ‘Government delegations from Nigeria, Colombia, and Mexico presented their climate finance propositions to a diverse group of investors, at the close of the week-long Climate Finance Accelerator.’ (NDCi Global, 18 Aug)
• ING Bank to expand sustainable loan programme to Asia, with pricing linked to ESG (Responsible Investor ($), 20 Oct)
• IEA: Renewable electricity set to grow 40% globally by 2022 (Carbon Brief, 4 Oct)

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