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90% of Asset Managers have a biodiversity blindspot
Global asset management firms, responsible for a combined $77 trillion in client assets are overlooking the new emerging ESG risk that is loss of biodiversity.
A deep analysis by ShareAction, a responsible investing research organization, reveals that only 10% of the 77 asset managers examined have incorporated biodiversity policies in all their portfolios.
ShareActionâs head of financial sector research, Dr Claudia Gray - a biodiversity specialist - said that even the leading asset managers like Vanguard ($7.2 trillion aum) and Fidelity ($4.5 trillion aum), are failing to consider the protection of vital habitats such as forests, rivers and oceans in their investments.Â
Vanguard and Fidelity were amongst the lowest ranked in ShareActionâs Responsible Investing report, which analyzes action on climate, biodiversity, social and corporate governance issues, as well as stewardship standards. European firms outperformed US and Asian counterparts with Orix Europe (ranked 1st), BNP Paribas Asset Management (2nd), Aviva Investors (3rd) and Legal & General Investment Management (4th).Â
Although 34% of asset managers claimed that biodiversity is included in their general responsible investing policy, very few are actively implementing and meeting these objectives. Morningstarâs separate December 2022 report confirms this, with findings showing that only 14 funds with a total of $1.6 billion incorporated biodiversity strategies. A February 2023 report by leading hedge fund Man Group concludes that although implementing biodiversity concerns into existing portfolios does remain a challenge, rapid biodiversity loss will significantly disrupt the world economy if left unresolved.
This follows the United Nations COP15 biodiversity conference in December 2022 which put biodiversity firmly on the investing map. Corporations and those funding them have contributed to the destruction of the worldâs natural resources, with animal populations dropping by an estimated 69% since 1970. Regarded to be as instrumental as the 2015 Paris climate agreement, this COP15 accord has the potential to change the regulatory landscape.
Like it or not, investment managers can no longer turn a blind eye to biodiversity.
âFirms are typically doing nowhere near enough to address the most dangerous human and natural crises of our timeâ, ShareAction said. âWe are running out of time to act on these global problems if we want to avoid catastrophes.
There has been some progress, as ShareAction has coordinated climate change and nature-related shareholder resolutions at companies from Barclays to Glencore and Tesco. The results show that there are âsurprising and inspiring green shoots of progress, investing can be both responsible and profitable, even for those managers of a considerable sizeâ.
OUR TAKE : Asset managers may have to revise ESG Index portfolios soon if they want to align themselves with the United Nations accord, rise to the top of ESG rankings and avoid incoming regulatory penalties.
U.S Commits $6 Billion to Ocean Protection
Last week, politicians, organizations and business leaders from across the world gathered in Panama for the Our Oceans conference. 341 commitments worth almost $20 billion were raised at the event. This action was inspired by the Kunming-Montreal Global Biodiversity Framework goal, adopted in COP15, which aims to protect 30% of oceans by 2030. The flagship outcome was the U.S Delegationâs pledge of $6 Billion to âprotect, restore and take care of the oceanâ, followed by the European Union committing $865 million.
The US package will fund 77 projects to protect the high seas in 2023. Almost $5 billion of this will be committed to combating climate change, half of which will be from Washington's Inflation Reduction Act. The embassy said that this is to "develop lasting climate resiliency for marine resources and coastal communities."Â
$665 million has been assigned for sustainable fishing, over $200 million for anti-pollution, $73 million for blue economy programs, $72 million to maritime security and $11 million for protected areas.
The majority of EU money ($337 million) would be for marine diversity and climate change research, while another $260 million is to launch the Sentinel-1C satellite to observe ice melt and monitor climate change effects.
Other large sums came from charitable organizations including Bloomberg Philanthropies and Arcadia, which established a fund worth $51 million to help support Indigenous peoples and local communities (IPLCs), NGOs and governments to improve and expand marine protection.
Oceans cover 75% of the Earth and are home to 80% of all life on the planet, providing food and nutrition for over 3 billion people as well as a crucial avenue for global trade.
OUR TAKE: Investing in good stocks in the âblue economyâ- including biotech, ocean cleaning, marine diversity and climate change protection sectors - could potentially see big returns as they reap the benefits from the governmentsâ large capital injections and policy support globally.
ADNOC GAS raises $2.5 Billion in the biggest IPO this year
Abu Dhabi National Oil Company (ADNOC)âs gas division ADNOC GAS is due to start trading for the first time on March 13th. The subsidiary of ADNOC, UAEâs state-owned oil company, is the largest gas producer in the country. $124 Billion of orders were drawn for the $2.5 Billion IPO, the biggest of this year.Â
ADNOC Gas has priced its shares at 2.37 dirhams ($0.65) each after offering a range from 2.25 to 2.43 dirhams. With this range, the value is set at around $50 billion. This is the same value as U.S. oil and gas company Occidental Petroleum- the best industry performer of 2022, and a Buffett darling.
Oversubscribed at 50x, there has been extremely high interest in ADNOC Gas which is thought to be mainly driven by the global energy crunch. This was particularly in the gas crisis which was exacerbated by the Western sanctions on Moscow and renewable energy not being able to meet the towering demands urgently. This was reflected in the FY 2021-2022 financial reports for ADNOC gas which showed record earnings of $8.7 billion in the 12 months through October.
Future outlook is strong. At lower gas prices than last year, global demand is expected to grow. This is expected to generate high cash flow and attention for the Middle East. Like other firms, ADNOC Gas has been investing billions of dollars in anticipation and targets to triple its Liquified Natural Gas (LNG) exports to 15 million tons a year.
The current investors are regional institutional investors and state-linked firms such as Alpha Dhabi and International Holding. Just before the IPO, 5% of ADNOC Gas was transferred to TAQA, Abu Dhabi's state-owned power company.Â
OUR TAKE: Following the roaring interest for ADNOC Gas, we can expect more oil and gas IPOs in the Middle East.Â
Qatar, the worldâs gas exporter may look for strategies to retain its dominance. Egypt may also consider public offerings while Saudiâs crown prince is considering issuing another 2.5-5% of Aramco.Â
However, ADNOC has received ESG concerned, with a Morningstar rating of âmedium riskâ. International scrutiny on UAEâs decarbonization actions is expected at COP 28 which is held in Dubai this November. ADNOCâs CEO Sultan al-Jaber will be President of the conference, making it very likely that the company and its subsidiaries will be held under the microscope.
We suggest closely monitoring the risk of climate sanctions if you plan on trading the popularity of the ADNOC Gas IPO.
Note:
All opinions are the authorâs own. This is not investment advice. Please consult your financial advisor before making investment decisions.Â
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