Welcome to the Sustainable Money Mail! We think investing should be about trying to beat the market while providing capital to companies that make the world a better place. From climate risk to gender equality, here are the stories that caught our eye this week.
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ECB Pays Attention to Climate Risk
On Tuesday, the European Central Bank (ECB) announced the publication of several new statistical indicators aimed at tracking climate-related risks in the financial sector and the progress of the sustainable finance market.
This is part of the ECB’s climate action plan, launched by the central bank in July 2022, which focused on further incorporating climate change considerations into its monetary policy framework, as well as to enhancing its risk assessment tools to better include climate-related risks.
“We need a better understanding of how climate change will affect the financial sector, and vice versa. For this, the development of high-quality data is key”, stated ECB Executive Board member Isabel Schnabel.
The new data-sets cover three areas: sustainable finance, financed emissions, and the impact of physical climate risks on loan and security portfolios.
The sustainable finance indicators track the issuance and holdings of debt instruments with sustainability characteristics, such as green, social, sustainability and sustainability-linked bonds in the euro area, providing information on the proceeds raised to finance sustainable projects.
The indicators on carbon emissions financed by financial institutions track the carbon intensity of the institution’s securities and loan portfolios, and the sector’s exposure to counterparties with carbon-intensive business models.
The indicators on climate-related physical risks examine the impact of natural hazards, such as floods, wildfires or storms, on the performance of loans, bonds and equities portfolios.
Our Take: In the past few months, European assets have outperformed the U.S by a record margin. We like that the ECB is keeping up with ESG investors.
Broadridge Launches ESG Performance Tool
Fintech firm Broadridge Financial Solutions launched its ESG Analyzer last week, a new ESG disclosure and data analytics benchmarking tool aimed at helping companies compare their ESG performance relative to their industry and peer group, and improve ESG strategy and practices.
The tool provides a repository of public ESG disclosures and underlying metrics, covering more than 5,000 issuers in North America and incorporating more than 2 million data points across a broad range of ESG and sustainability topics, according to Broadridge. It also allows companies to view all of their ESG metrics in a single dashboard and compare data side by side with peer companies. ESG Analyzer also enables user to view how they and their peers align with leading ESG frameworks, and tracks disclosures including SASB, GRI, TCFD, SFDR and UNGC.
“This is the perfect tool for management to understand their strengths and weaknesses on ESG issues, enabling them to see how they compare to peers and create a plan to improve their performance and disclosures where needed”, said Joseph Vicari, Vice President and Practice Lead, Corporate Issuer at Broadridge.
Broadridge shares are up 7.7% YTD.
Our Take: Check out our thread about how AI technology will power the green industrial revolution.
Teachers’ Pension Plan Demands Women Representation
Ontario Teachers’ Pension Plan (OTPP), one of Canada’s largest investors (C$242.5 bn AUM), set new board diversity expectations for large-cap companies in developed markets, targeting at least 40% representation of women on boards.
The new expectation was unveiled as part of OTPP’s 2023 Proxy Voting Guidelines, and marks an increase from the firm’s prior policy of advocating for 30% representation. The change comes as gender diversity at large public issuers in developed markets has been gaining momentum, already exceeding 30% in most of the developed markets in which it invests, according to OTPP.
“Although we still consider a 30% goal to be meaningful, we’re raising the threshold to challenge public companies in developed markets to keep improving as we strive for truly diverse and representative boards”, stated Anna Murray, Senior Managing Director and Global Head of Sustainable Investing at OTPP.
She added that:
“We believe improved diversity is key to board effectiveness, leads to better performance and delivers long-term value for shareholders.”
The guidelines presented by OTPP ask boards to set timebound targets to increase the number of board directors identifying as a member of an underrepresented group, and encourage the boards to report their achievement against those targets.
Our Take: Big institutional investors lead the market - pay attention to what they’re doing.
Note:
All opinions are the author’s own. This is not investment advice. Please consult your financial advisor before making investment decisions.
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