Positive signs for sustainability and investors in this third quarter, not only in Europe but at global level, mark a convergence of interests which highlights the seriousness of the debate around sustainability and ESG issues in today’s economy.
At an international level, there are clear indications of a marked interest in ESG investments. As Japan’s Government Pension Investment Fund (GPIF), worth Euro 1.04 trillion, decided to establish a new forum by the end of the year to accelerate progress on ESG, they look for an ESG index to try and maximise L-T investment returns through minimising externalities related to environmental and social issues. CalPERS, already a member of this forum, is taking a renewed commitment to sustainability with a new five-year ESG strategic plan. The pension fund says the plan is the next stage of evolution of CalPERS’ work on sustainable investing, focusing on: reporting standards & transparency, engagement and research.
Positive news also came from China, where the G20 included ‘green finance’ as one of its major policy themes for the first time, ahead of the G20 Leaders Summit in September. This was a major shift which means that it will lead to policy in G20 member states. The G20 was very decisive in crystallising the commitment of the Paris Agreement on Climate Change and bring them into force as soon as possible.
As the debate around corporate reporting in Europe intensifies, and the European Commission finalises its work around the guidelines for non-financial reporting, across the Atlantic, the Securities and Exchange Commission (SEC) is increasingly aware that the information companies are reporting on as part of their SEC filings, are falling short of investor’s expectations. As US law requires public companies to tell shareholders of substantial events that relate to their business, such as lawsuits, financial performance and overall business trends, the Commission has noticed that certain relevant information that allows shareholders to get the full picture of how companies are managing the threat of climate change were missing and is therefore considering changing the rules on environmental disclosure.
In September, green bonds remained at the top of everyone’s agendas, as the EIB (the European Investment Bank) decided to submit its comprehensive statement (CAB) describing, in detail, its Green Bond activities in 2015 to a third party audit and get an Independent Reasonable Assurance Report issued by KPMG Luxemburg. This move will lead to a higher degree of assurance and standardisation (as part of limited assurance) which adds further substance to the green bond market, while offering enhanced reliability to the information provided by the EIB, in full support of the Green Bond Principles of the International Capital Market Association (ICMA). This step marks the EIB’s intention to take transparency, one step further, on the path to standardisation for green bonds.
More transparency is demanded from companies and investors even in Switzerland, as the nation’s Federal Office of the Environment launched a public consultation in October, inviting stakeholders to express their view on how to help investors “actually assess the CO2 relevance of assets”. Although Switzerland already has a levy on C02 emissions, and an independent emissions trading scheme that could potentially link up to the EU Emissions Trading System, the country intends to undergo a total revision of its CO2 legislation, in order to be able to implement the conditions of the Paris climate agreement.
The European Commission is preparing to develop its strategy on Sustainable Finance and in view of that is going to set up an Expert Group made of specialists that can help shape the objectives and targets for a sustainable Europe. Eurosif looks favourably at this initiative and following from the European Union ratification of the Paris Agreement, eagerly awaits discussions around the start of implementation of the Paris Agreement, at COP 22.
Against this backdrop, Eurosif is putting the finishing touches on the 2016 edition of the SRI Study, which has been prepared in collaboration with all the SIFs and which will be launched in Brussels on the 10th of November.
See you there!
Eurosif Executive Director