Gustavo Bernal Torres
Commitments, Process Challenges, Quantitative ESG, and Carbon Labels
Here are 5 ESG insights you might have missed this week:
Key Challenges for the Next Phase of Net Zero Investing-
Generation Investment Management recently launched its 4th Insights piece, in which they set out their thinking on the critical next steps for net zero investing.
Maintaining the integrity of net zero commitments is crucial for the climate – and for the business case for net zero investing. As investors move onto a net zero path, they will need to consider seven key challenges: Integration with the investment process, value chain, offsets and carbon removals, systems in transition, disruptive change, hidden risks, and evolving science.
Tracking to net zero impacts investment both through capital allocation choices and engagement. Building the right processes to do this over time in line with credible interim net zero goals is key. Engagement resourcing, breadth and forcefulness must match the scale of the task. Reporting on progress over time with transparency of methodologies and assumptions is crucial to build confidence and momentum.
Largest Ever Commitment to an Impact Investor-
Temasek and LeapFrog Investments Forge US$500 Million Partnership.
Temasek, an investment company headquartered in Singapore, has entered into a US$500 million strategic partnership with leading global impact investment group LeapFrog Investments.
The strategic partnership will take the form of a multi-fund investment by Temasek to anchor LeapFrog’s future funds. Temasek will also take a minority stake in LeapFrog and provide growth capital to support the expansion of the LeapFrog team and investment capabilities across Asia and Africa. LeapFrog and its investment process will continue to be managed and controlled by its team of partners, with Temasek taking one non-executive seat on LeapFrog’s Management Board.
Source: https://www.temasek.com.sg/en/news-and-views/news-room/news/2021/Temasek-and-LeapFrog-Investments-Forge-US500-Million-Partnership & https://leapfroginvest.com/announcement/
The Quantitative Approach for Sustainable Investing-
From Boston-based PanAgora Asset Management, a paper considering the salient challenges associated with ESG investing, and how quantitative approaches to ranking ESG contributing factors may address these challenges. Currently, managers typically use fundamental approaches to assess stocks and build “ESG portfolios.” However, just as the advances in quantitative MPT portfolios have gained ground over fundamental analyses of stock returns in past years, so can quantitative rankings of ESG factors improve on purely fundamental ESG approaches in future years. Their intent is to address the advantages and 3 possibilities of quantitative capabilities in ESG investing.
Source (Registration required): https://www.panagora.com/insights/the-quantitative-approach-for-sustainable-investing/
ESG/BlackRock: Greenwash Should No Longer Wash in Investment-
Fund managers’ green claims must face as much scrutiny as their investment return projections.
It may be the beginning of the end for asset managers who sell old funds in new green bottles. This week, a new EU regulation requires European fund groups to start backing up their claims of investing sustainably. The world’s largest, BlackRock, wrote to European clients on Wednesday promising to increase the proportion of investments that meet the EU guidelines.
"Bogus claims abound in the world of ESG. Revealingly, the largest weighted constituents of MSCI’s World ESG Leaders are very similar to those of its regular world equities index. It is time for the authorities to police the green claims of fund managers as tightly as their projections on investment returns."
Brands Are Starting To Add Carbon Labels To Their Packaging-
Several companies are now offering consumers a way to see the full footprint of the product they’re using—but an accurate measurement can be hard.
On one side of a package from the indie beauty brand Cocokind, there’s a long list of sustainability facts laid out like a nutrition label. The product inside has a carbon footprint of 24.50 grams per use, it explains. It’s a carbon label, and the brand is one of several companies to begin using them.
“We were calling ourselves ‘clean’ and ‘sustainable,'” says founder Priscilla Tsai. “Those things are valid, but what they mean are obviously not regulated as they get thrown around more and more in the industry. We realized we can’t just use these words anymore, and we needed to be able to figure out, how do we measure this internally? And how do we communicate that, and make sure that the burden of education is on the brand and not the consumer?”
One more thing: From CDP, the Climetrics rating of over of 20,000 global funds- Funds from all major asset managers are scored on how a fund’s portfolio holdings disclose and manage greenhouse gas emissions, water resources and deforestation, as well as the fund’s investment policy and climate governance.
Find the ratings here- https://www.cdp.net/en/investor/climetrics
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