Sustainable SPACs, EU Regulation, Financial Audits, and CFA Standards
Here are 5 ESG insights you might have missed this week:
Sustainable Investing Strategies Account for 30% of all SPACs-
According to ImpactAlpha and Sustainable Research and Analysis,of the $171 billion raised by companies going public via special purpose acquisition companies, or SPACs, sustainable investing strategies account for 30%.
A very hot, some argue overvalued, market for SPACs may be attracting some sustainability-oriented investors. Commonly referred to as blank check companies, SPACs have two years to search for a private company with which to merge or negotiate an outright acquisition and in that way bring the company public.
The universe of SPACs, a pathway for private companies to list on major stock exchanges, consists of 533 entities with a combined deal value of $171 billion. As of mid-March, 163 of these, or 31% based on deal value, pursue business strategies that are aligned either partially or entirely with sustainable investing strategies.
Source (Registration required): https://impactalpha.com/sustainable-investing-strategies-account-for-30-of-all-spacs/
Finding ESG Funds Just Got Easier-
New regulation helps investors identify funds with a sustainable mandate more easily.
March 10 saw the EU Sustainable Finance Disclosures Regulation (SFDR) take effect, requiring fund companies to classify each of their funds into one of three categories: Article 6, 8, or 9, depending on the strategy’s objective.
The less-than-catchy category titles are derived from the legislations. All funds are now required to provide some ESG disclosure (as per Article 6), while Article 8 (or light green) and Article 9 (dark green) funds will be required to provide more detailed ESG information to investors.
SDG Impact Standards for Bond Issuers-
After two rounds of public consultation, UNDP has published guidelines for Bond Issuers, which provide a common language and a clear system to fully integrate the SDGs into all business and investment decision-making processes.
The Standards are provided as a public good for all Bond Issuers who want to contribute positively to sustainable development and the SDGs. They are voluntary and freely available for all to use as a best practice guide and self-assessment tool to help Bond Issuers integrate impact management into decision-making.
They are part of what will be a harmonized suite of Standards and complementary tools, including a glossary, guidance, assurance protocols and training for different actors across the capital and investment spectrum.
Properly Done Financial Audits Are A Powerful Tool For Addressing Climate Change-
The Trustees of the IFRS Foundation had a meeting and discussed their proposed “Sustainability Standards Board (SSB).” The current plan is a formal announcement at COP 26 in November of this year.
The “Effects of climate-related matters on financial statements” begins by noting that “IFRS Standards do not refer explicitly to climate-related matters. However, companies must consider climate-related matters in applying IFRS Standards when the effect of those matters is material in the context of the financial statements taken as a whole.” In other words, even before the SSB establishes explicit standards for climate reporting, climate is an important topic that needs to be considered in preparing a company’s financial statements.
This will change the incentives to management, aligning them with a sustainable world. It will improve the quality of financial statements and the quality of audits to the benefit of investors who represent their ultimate beneficiaries. Which is people like you and me.
Accusations Of ESG Greenwashing Miss The Point-
New perspectives on the ongoing controversy started after Tariq Fancy's (former Head of Sustainable Investing at BlackRock) USA Today op-ed.
The most surprising part of this ongoing controversy is that anyone is surprised. Wall Street greenwashes. That we knew. I’ve warned for years that ESG investing is mostly a charade, as have other cleantech investors. While I admire Mr. Fancy’s conviction, I fear that he is missing the point.
Even if the world’s biggest polluters wanted to go green – and even if the BlackRock's of the world supported them – they don’t have the technology to do it. ESG funds rarely invest in the step-change technologies that would enable polluters to eliminate fossil fuels from their value chain. Unfortunately, Mr. Fancy doesn’t think much of those opportunities. True, opportunities that don’t yield the same returns – potentially, it yields significantly greater returns.
One more thing: CFA Institute is developing a new standard: the ESG Disclosure Standards for Investment Products. Similar to the GIPS performance standards, the new ESG standards aim to bring clarity, consistency and comparability to evaluating ESG products.
Find the story here- https://www.linkedin.com/feed/update/urn:li:activity:6785181405543460864/
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