ERISA, Revenge of the Old Economy, Greenium, and Sea Level Rise Maps

Here are 5 ESG insights you might have missed this week:

1. US Department of Labor Proposes Rule To Remove Barriers To Considering ESG Factors in Pension Plans-

The Department of Labor’s explicit mention of government regulations could encourage more pensions to adopt ESG.
The suggested rule states that plans sponsors under the Employee Retirement Income Security Act (ERISA), including defined benefit pension plans, may often have to consider climate change and ESG factors as part of their return evaluations and as part of their fiduciary duty.
The proposal follows Trump-era rules which garnered significant pushback from industry players. One, when initially proposed during the summer last year, would have prevented corporate pensions from investing in ESG vehicles.
Link to Source: https://www.dol.gov/newsroom/releases/ebsa/ebsa20211013

2. ‘Revenge Of The Old Economy’ After Underinvestment In Fossil Fuels-

Energy crisis? What experts are saying as world faces historic energy-price crunch.
This time around, rising prices are being blamed on a confluence of events. These include the reopening of economies from pandemic shutdowns; decisions by China, one of the world’s largest importers of energy products; worries about major energy producers not ramping up output; and a fitful shift to renewable energy sources, while investment in fossil fuels has waned.
In the U.K., where the government is transitioning to renewables like offshore wind generation, a summer bereft of wind to turn turbines that, in turn, create power, has resulted in demand for energy outstripping availability. Difficulties transporting natural-gas supplies, due to labor shortages and other factors, also has worsened the crisis.
Link to Source: https://www.marketwatch.com/story/energy-crisis-what-experts-are-saying-as-world-faces-historic-energy-price-crunch-11634161109

3. Squeeze On ‘Greenium’ As ESG Bond Investors Demand More Value-

The market in sustainable debt is growing but issuers are being challenged on margins.
Investors have long been willing to pay a premium for green bonds, rewarding companies or governments that want to clean up their act by giving them lower borrowing costs.
Figures from the Association for Financial Markets in Europe suggest greeniums are shrinking in Europe’s corporate bond market — one of the more advanced markets for green issuance. Spreads on ESG corporate bonds versus their “non-sustainable” or conventional counterparts have narrowed to less than one basis point — a 100th of a percentage point — in recent months, having climbed as high as nine basis points in 2020.
Link to Source: https://www.ft.com/content/ecbed322-1709-4ed6-9f7f-d974f6e181da

4. Measuring Portfolio Alignment: Technical Considerations-

From the Portfolio Alignment Team, a group of experts promoting portfolios’ relative alignment to the objectives of the Paris Agreement. The report offers emerging best practice as it relates to building portfolio alignment tools.
To limit global temperature rise to 1.5 degrees, financial institutions need to follow a pathway to net zero for their own operations and—more importantly—the firms they finance. Portfolio alignment metrics help financial institutions align lending and investments with the pathway to net zero.
The report should be viewed as a first step toward promoting the widespread adoption of more consistent, robust, and decision-useful portfolio alignment approaches that will continue to evolve as the development and use of portfolio alignment tools mature.
Link to Source: https://www.tcfdhub.org/wp-content/uploads/2021/09/PAT_Measuring_Portfolio_Alignment_Technical_Considerations.pdf

5. Listed Company Emissions-

New research by Generation Investment Management suggests listed companies are responsible for 40% of emissions.
This underscores the critical role that investors in listed equities must play in climate action, including through engagement and capital allocation choices.
Cutting emissions along the value chain must be a priority for both companies and investors.
As we approach COP26, mobilising action across the listed company landscape will play a crucial role in closing the ambition gap to 2030.
Link to Source: https://www.generationim.com/our-thinking/insights/listed-company-emissions/

One more thing: From Climate Central, an awesome interactive tool that maps out what sea-level rise will look like around the globe.

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