Water Risk, Regulatory Guidelines in China and Europe, and Mergers
Here are 5 things you might have missed this week:
Merger of S&P Global and IHS Markit Creates ESG Data Powerhouse-
Leading market data companies S&P Global and IHS Markit announced a definitive merger agreement, combining the companies in a transaction valuing IHS Markit at an enterprise value of $44 billion.
S&P is a world leader in sustainable investing data and services, including its preeminent Dow Jones Sustainability World Index, the S&P Global ESG Scores, powered by the SAM Corporate Sustainability Assessment (CSA).
IHS brings a broad suite of ESG capabilities to the table as well, including its ESG Reporting Repository, a suite of sustainable fixed income indices, a liquid tradeable global index for tracking carbon credits, numerous ESG and Corporate Governance IR solutions, and its recently introduced sovereign ESG data solutions, among others.
Source: https://www.esgtoday.com/merger-of-sp-global-and-ihs-markit-creates-esg-data-powerhouse/
A Transformational Framework for Water Risk-
DWS, as part of a working group on ‘Transformational Investment’ organised by the World Economic Forum (WEF), published a report with an institutional framework on addressing water risk across asset classes.
Water is a finite resource with only 2.5% potentially being usable for life on earth. In the past 100 years, water per capita has decreased significantly as a result of population growth while water quality has deteriorated. Today, 785 million people lack a basic water-drinking source and two billion people use a contaminated drinking water source.
Water risk is understood at the macro level. However, failure to properly address water risks is likely due to factors, including (i) the fragmented nature of water regulation, (ii) the characteristics of water investments, and (iii) our misplaced belief that water is plentiful and cheap.
Source: https://www.dws.com/insights/global-research-institute/a-transformational-framework-for-water-risk/
Green Development Guidance for China's Belt and Road Initiative Projects-
China's Ministry of Ecology and Environment has published the Guidance (formerly known as "Traffic Light System") to layout higher requirements for sustainable infrastructure investments overseas.
The Belt and Road Initiative (BRI) is a massive global infrastructure development strategy adopted by the Chinese government to invest in nearly 70 countries and international organizations. Morgan Stanley has predicted China’s overall expenses over the life of the BRI could reach USD$1.2–1.3 trillion by 2027, though estimates on total investments vary.
The guidance aims to explore the formulation of guidelines on the assessment and classification of BRI projects from the perspective of preventing ecological and environmental risks, provide green solutions for participating countries and projects, and support decision making for stakeholders.
The document includes project categorization of BRI projects, green lists (including solar and wind projects), red lists (including coal), yellow lists (including waste-to-energy), a project evaluation system, and recommendations for moving from "dirty to green" investments, such as strict environmental impact assessments according to international standards and grievance mechanisms.
Source: http://en.brigc.net/Reports/research_subject/202011/t20201125_102839.html
EU Watchdog Warns of Risks after BlackRock Appointed as ESG Advisor-
According to a ruling by the European Union’s watchdog, BlackRock's links with the fossil fuel industry and banks create potential conflicts of interest to fulfill the ESG mandate.
In March, the Commission awarded BlackRock’s Financial Markets Advisory arm a mandate to help incorporate environmental, social and governance factors into European banking rules.
According to the ruling, the EU’s executive body “did not provide sufficient guarantees to exclude any legitimate doubt” of potential conflicts of interest when it hired the world’s largest asset-management firm. The decision has no legal power to force the Commission to cancel the mandate but may pressure the body to do so.
Source: https://fortune.com/2020/11/25/esg-blackrock-appointment-european-commission/
Lux Regulator to ‘Fast Track’ ESG Disclosures-
Head of investment fund supervision Marco Zwick says the CSSF will launch a fast-track procedure for updating fund prospectuses to help asset managers meet the deadline of March 10 for compliance with the EU’s Sustainable Finance Disclosure Regulation (SFDR).
Zwick says boards of directors will have to certify that funds meet the SFDR requirements to disclose sustainability risks in their portfolios, and the CSSF will conduct sample checks.
However, the regulator recognizes that asset managers lack details about the rules since the European Commission has not yet published regulatory technical standards, and in many cases may struggle to obtain needed information from companies in which funds have invested.
Source (Subscription required): https://www.igniteseurope.com/c/2971373/371923/regulator_fast_track_disclosures
One more thing:
An ESG research group at MIT has developed a short game to better understand ESG decision making and preferences. You can play a short 'game' to contribute to the research efforts.
Find the game here- http://esgmachine.com/esglinkedin
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