Global Investors to Governments, Surveys, Shorting, and Power Plants
Here are 5 ESG insights you might have missed this week:
1. 2021 Global Investor Statement to Governments on the Climate Crisis-
587 investors managing $46 trillion in assets urge governments to undertake five priority actions to accelerate climate investment before COP26.
Signatories to the 2021 Global Investor Statement to Governments on the Climate Crisis are issuing the strongest-ever unified call from investors for governments to raise their climate ambition and implement meaningful policies — including mandatory climate risk disclosure, strengthened national commitments, ending fossil fuel subsidies and phasing out thermal coal — or risk missing out on the enormous investment opportunities in tackling the climate crisis.
Investor signatories to the statement are calling on all governments to undertake five priority actions before the 26th United Nations Climate Conference in Glasgow in November (COP26):
Strengthen their NDCs for 2030 before COP26
Commit to a domestic mid-century, net-zero emissions target
Implement domestic policies to deliver these targets
Ensure COVID-19 economic recovery plans support the transition
Commit to implementing mandatory climate risk disclosure requirements
Link to Source: https://theinvestoragenda.org/press-releases/14-september-2021/
2. HSBC's 2021 Sustainable Financing and Investing Survey-
The fifth annual global survey of 2,000 capital markets issuers and institutional investors, was conducted during May and June.
The results highlight the larger the size of company or investor (by annual revenues or assets under management), the greater the importance of environmental and social issues. Some 70% of issuers with revenues greater than $10 billion or investors managing over $25 billion see these issues as very important – significantly higher than the global average of 44%.
Half of issuers say that climate change is already affecting their business or activities – up from 37% last year and a three-year high.
An astonishing 94% of companies expect to move away from environmentally- and socially-challenged business models in the next five years. Companies are transforming their business models and capital allocation in response to climate change and this will accelerate: 70% of issuers are considering ramping up business activities that might benefit from climate change or starting new ones.
Link to Source: https://www.gbm.hsbc.com/en-gb/feed/sustainability/sfi-survey-global-report
3. The Real Effects of Mandatory CSR Disclosure on Emissions: Evidence from the GHG Reporting Program-
The authors, from Carnegie Mellon University, examine the real effects of the Greenhouse Gas Reporting Program (GHGRP) on electric power plants in the United States.
When large power plants were required to disclose their carbon dioxide output, emissions fell by 7% (The effect is stronger for plants owned by publicly traded firms). But small plants, exempt from disclosure, increased emissions by 25-56%. Firms that owned both small and large plants shifted production to small ones.
Starting in 2010, the GHGRP requires both the reporting of greenhouse gas emissions by facilities emitting more than 25,000 metric tons of carbon dioxide per year to the Environmental Protection Agency and the public dissemination of the reported data in a comprehensive and accessible manner.
Link to Source: https://www.nber.org/system/files/working_papers/w28984/w28984.pdf
4. Shorting Your Way to a Greener Tomorrow-
From AQR Capital Management, their take on how proper treatment of shorting matters for the ultimate goal of responsible investing: to effect change.
Using short selling to reduce carbon exposure, to get to net zero or to achieve other ESG goals, is a vital tool for ESG investing. It’s also a tool that can readily be incorporated into portfolio construction. For those who want their investing to lead to a lower carbon (and better S and G) world, this is one important tool to help us get there.
When it comes to calculating a portfolio’s ESG score, we have heard arguments ranging from “ignore the shorts” to “net them against longs,” and, my favorite as it’s creatively insane, “pretend the shorts are actually longs.” To say there is confusion would be an understatement.
Link to Source: https://www.aqr.com/Insights/Perspectives/Shorting-Your-Way-to-a-Greener-Tomorrow
5. ESG Investment Funds Rife With Greenwashing: Report-
Green funds sold by some of the world’s biggest asset managers are failing to live up to the climate goals set out in the Paris Agreement, according to an industry analysis by think tank, InfluenceMap.
InfluenceMap looked at 723 equity funds that were marketed as environmental, social and governance (ESG) or as climate-related, representing more than US$330 billion in total net assets.
Using a scale from minus 100 per cent to plus 100 per cent, it ranked funds according to how well they were aligned with the goals set out in the Paris Agreement, with a negative score indicating a portfolio with too much brown or too little green.
Link to Source (Registration required): https://influencemap.org/report/Climate-Funds-Are-They-Paris-Aligned-3eb83347267949847084306dae01c7b0
One more thing: From the International Energy Agency (IEA), the 2021 World Energy Statistics. Key energy statistics, providing top-level numbers across the energy mix, from supply and demand, to prices and outlooks.
Find the charts here: https://www.iea.org/reports/key-world-energy-statistics-2021/supply
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