Sustainable Procurement News

Adopting ESG principles doesn’t just mean checking the boxes

Few issues shaping the private equity ecosystem promise to be as transformational as ESG. For the better part of the past decade, in one form or another, ESG has evolved from a “nice to have” item relegated to the final minutes of boardroom discussions and portfolio company management meetings to a new category of fraud risk and a material compliance requirement with enforcement teeth. And the tectonic plates keep shifting: FTI Consulting’s Todd Rahn believes we’re starting to discover that ESG may be the key to long-term value creation in private equity.

The EU will need additional investments of around €700 billion every year to meet the objectives of the European Green Deal. The bulk of these investments will have to come from private funding.

To address this challenge, the EU has since 2018 put in place three building blocks for a sustainable financial framework:

The EU Taxonomy, a common dictionary for economic activities substantially contributing to the EU's climate and environmental objectives;
Rules on disclosures and reporting for both companies and investors, to ensure proper transparency for all stakeholders; and
Tools, such as standards and labels for Climate Benchmarks and the EU Green Bond Standard.  

The European Economic and Social Committee (EESC) fully supports the Commission's recent measures aimed at setting standards for the definition of "sustainable economic activities", but points out that some elements may prove a complex and costly challenge, particularly for SMEs, and questions whether the current version of the Delegated Regulation is fit for purpose.

The EU needs efficient and urgent measures to reduce emissions and get to grips with climate change. To that end, the Sustainable Finance Package presented by the European Commission could establish a clear, coherent and comprehensive framework in which a greener economy can develop without lock-in effects.

Many retail and food giants are proving that businesses can grow, improve margins and bolster competitive advantage through examination of waste streams and investing in creative solutions — even during a pandemic.

Schroders investment experts explain what impact the pandemic has had on sustainable investing and what it means for the future

Sustainable investing is not just about a company's financial success, but how it achieves that success. The importance of considering all stakeholders is intrinsic to the approach.

Those stakeholders range from employees to shareholders to wider society. The Covid-19 pandemic has shone a spotlight on how companies treat their employees, protect their customers, and help guide their suppliers through a time of crisis.

Absa Bank Kenya PLC has announced a committment to plant 10 million trees across Kenya by 2025 in line with the bank’s renewed Sustainability Agenda.

This declaration forms part of thirteen broader commitments by the bank under the Sustainability Agenda that seeks to protect the people, the environment and well being of communities where it operates focusing on three key areas: climate action, recycling, and sustainable sourcing.

Over the next 10 years, MetLife has committed to reduce its location-based greenhouse gas (GHG) emissions by 30% from 2019 levels, originate $20 billion in new MetLife Investment Management (MIM) — managed green investments, and allocate $5 million to develop products and partnerships that drive climate solutions.

MetLife also committed to plant 5 million trees (prioritizing areas vulnerable to natural disasters) and to maintain carbon neutrality annually across its global offices, fleet, and business travel. MetLife Foundation committed to grant $10 million for environmental causes. In addition, MetLife pledged to mobilize 100 of its suppliers to set their own GHG emissions reduction target by 2025.

Forest-risk companies in Southeast Asia tend to rely almost entirely on debt financing. In view of this leverage, banks can be deemed directly accountable for deforestation and related offences committed by their borrowers.

Stimulus packages to kickstart pandemic-hit economies can either shape a low-carbon future or lock the world into a fossil fuel system. Which countries in Asia are leading the green transition?

Anthesis has supported the Institutional Investors Group on Climate Change with the development of a new net zero guidance framework for the private equity sector. 

Commenting on the launch, Misa Andriamihaja, the private equity lead for the Institutional Investors Group on Climate Change (IIGCC), said, “We are pleased to bring to market this framework for the private equity industry.”

“With this guidance, we support LPs and GPs’ efforts, targets and actions in order to achieve real decarbonisation at the level of portfolio companies. Bespoke net zero target types and tailored engagement actions sit at the core of this game-changing guidance for all private equity investors to start and progress in their net zero journey.”

The CFO role has continued to evolve as private equity firms grew in size and complexity. No longer solely the leader of routine finance functions such as accounting, tax and accounts payable, the financial executive fills a broader role, one that includes more strategic functions, such as providing support to investment professionals and portfolio companies and overseeing a larger talent management pool. In this evolved leadership position, CFOs are expected to provide the data to support potential initiatives. This could include everything from adding product offerings to expanding the traditional investor base and even guiding the firm through such strategic transactions as selling equity in the firm or acquiring other businesses.

European Commission advisers on Monday proposed an expansion of the bloc's sustainable finance rules to better grade activities such as gas-fired power plants that are not yet environmentally friendly.

Whether and how to include gas in the European Union's flagship 'taxonomy', a list of green activities that will help the bloc reach its climate goals, has spurred intense lobbying over the last year.

Investment in supply chain technology and risk management is rapidly increasing as efficiency and sustainability becomes more of a priority across business operations, and two artificial intelligence platform providers announced receiving funding for their systems this week.

Those concerns helped supply chain tech companies raise $24.3 billion in venture funding over the first three quarters of 2021, according to PitchBook, which was 58% more than all of 2020. AI-software providers o9 Solutions and Supply Wisdom are taking part in the growth with investments in their platforms.

HSBC, one of the biggest banks in the world, has set bold climate change ambitions — and its sustainability aspirations are now being replicated in New Zealand.

The bank, based in London after being established in Hong Kong in 1865, believes there is a landmark opportunity to build a thriving, resilient future for society and businesses by prioritising financing and investment that supports the transition to a carbon zero global economy.

HSBC, with assets of nearly US$3 trillion (NZ$4.29t), operates in 64 countries and has 40 million personal banking customers and 1.4m business clients. The bank is prepared to work with all of them to develop tailored solutions to reduce greenhouse gas emission. It is also applying a climate lens to financing decisions.

Many accounting firms, and other companies within the industry, are making a conscious effort to advertise their ‘green’ agenda and outlook. Accountancy Today spoke with sustainability expert Steve Wilhite to breakdown how far the sector has come in road to net zero emissions

Banks must use their power to halt a biodiversity crisis caused by mass deforestation in the production of commodities such as soy, beef and timber, experts at the University of Cambridge have said.

A new report from the Cambridge Institute for Sustainability Leadership (CISL) sets out five ways in which lenders can boost financial incentives for agriculture that reverses deforestation and restores natural habitats.

The researchers say banks should align anti-deforestation policies to a new standard of best practice, set measurable targets towards reversing the clearing of trees while ensuring that senior executives regularly review progress against these targets.  

The group is also calling on financial firms to advocate for policies that make deforestation commercially unattractive or illegal.  

A NextWealth study finds that 78 per cent of advisers include information about ESG, ethical, impact or sustainable investing as part of their know your client process.

The same proportion agree that these kind of questions should be included under the FCA’s KYC heading.

And while ESG is raised in some 17 per cent of client conversations, a jump from 7.5 per cent this time last year, questions remain as to whether advisers are going far enough, given Mifid II rules coming into effect next March will require IFAs to take a client’s sustainability interests into account when recommending a product.

A new analysis tracks the intricate credit flows crisscrossing Asia that profit sectors notorious for their impacts on the planet and people. Regional cooperation is critical to foster responsible lending practices, argue the authors.

Today, Morgan Stanley announced it will become the “first US-based global bank to join the Partnership for Carbon Accounting Financials (PCAF) and its Steering Committee as part of the firm’s commitment to measuring and disclosing its approach to climate change risk and opportunity.” In addition, Morgan Stanley will lend insights and expertise to help PCAF develop the global accounting standard that can be used by all financial institutions to measure and reduce their climate impact. PCAF includes financial institutions from around the world and represent more than US$5.3 trillion in assets.