Gustavo Bernal Torres
IPCC Mitigation Report, Systematic Stewardship, DWS, Canada, and Taxonomy
Here are 5 ESG insights you might have missed this week:
1. IPCC's Climate Change 2022: Mitigation-
The Working Group III contribution to the Sixth Assessment Report.
An updated global assessment of climate change mitigation progress and pledges, and examines the sources of global emissions. It explains developments in emission reduction and mitigation efforts, assessing the impact of national climate pledges in relation to long-term emissions goals.
The report includes a whole chapter on the role of investment and finance in these efforts, and the implications for financial stability if an orderly low-carbon transition doesn’t take place.
Link to Source: https://www.ipcc.ch/report/ar6/wg3/
2. The Future of Investor Engagement-
A call for systematic stewardship to address systemic climate risk.
The Net-Zero Asset Owner Alliance, which groups over USD 10 Trillion in AUM, said that investors should move beyond simply engaging with companies that pollute and instead use their influence to target broader structural hurdles to decarbonization.
The report exposes the limits of a strategy that’s been widely embraced by asset managers pursuing environmental, social and governance goals. Engagement strategies need to move beyond portfolio companies and instead target whole sectors and public policy, the Net-Zero alliance said.
Link to Source: https://www.unepfi.org/wordpress/wp-content/uploads/2022/03/NZAOA_The-future-of-investor-engagement.pdf
3. ESG is a Category Error that Needs Unbundling-
The acronym jams together disparate and sometimes contradictory objectives.
The biggest taxonomic mistake in ESG is the category itself. This creates a handy marketing tool for asset managers to sell funds to customers who do not want their investments to finance bad stuff. The problem with the acronym is that it jams together disparate and sometimes contradictory objectives.
Principled investors should respond to the category errors of ESG by pigeonholing themselves more adeptly. If their temperaments and time pressures recommend passive funds, they should remember ESG is only a flag of convenience. Otherwise, they should unbundle this cumbersome category and try to do the right thing unaided. They will often fail. But that is the human condition.
Link to Source: https://www.ft.com/content/c8b11672-4847-44ae-b132-788cb2383a2c
4. DWS' ESG in Strategic Asset Allocation: The 2022 update-
DWS updates and extends framework for the integration of ESG in Strategic Asset Allocation.
2022 analysis reflects the swiftly developing environment of ESG and presents a more granular set of optimisation scenarios that now include Paris alignment, EU Principle Adverse Impact (PAI), or an EU Taxonomy focus. Moreover, we also extend our Framework to Liquid Alternatives and the DWS ESG Long View Estimates.
Our combined optimisation approach that optimises the asset allocation of ESG index instruments beats at anytime a 1:1 ESG index replacement and leads to tangible ESG improvements while minimizing the expected tracking error.
Link to Source: https://www.dws.com/insights/global-research-institute/esg-in-strategic-asset-allocation-the-2022-update/
5. Canada Introduces Mandatory Climate Disclosures for Banks, Insurance Companies Beginning 2024-
The new reporting requirements mark the first step for the country towards a broader set of mandatory climate disclosures.
The federal government’s newly released Budget 2022 directs a move towards a system of reporting based on the Task Force on Climate-related Financial Disclosures (TCFD).
According to Canada’s new budget, Canada’s financial regulator OSFI will require federally regulated financial institutions to publish climate disclosures aligned with the TCFD framework beginning in 2024, stating that it will use a “phased-in” approach for the requirements. Federally regulated entities in Canada include all of the country’s banks, as well as insurance companies, and federally incorporated or registered trust and loan companies, among others.
Link to Source: https://www.esgtoday.com/canada-introduces-mandatory-climate-disclosures-for-banks-insurance-companies-beginning-2024/
One more thing: An infographic from WWF summarizing this week’s IPCC report.
Find the infographic here: https://wwf.medium.com/we-have-all-the-tools-to-cut-emissions-but-time-is-short-956499b89ab9
Do share your comments or the content you think our community should not miss!