This week in ESG
This week in ESG: EU decarbonisation continues, while the Fed shuts down climate committees and Thames Water is fined over sewage.
Key highlights
🎯 EU nears climate goals – the EU is closing in on its 2030 climate goals, now just shy of its target to cut emissions by 55% (since 1990 levels) and increase renewable energy to 42.5% of total usage.
🥤 PepsiCo delays climate targets – the group pushed back its aim for a zero-emissions supply chain from 2040 to 2050 and scrapped its goal to make 20% of all drink containers reusable.
🏦 US Federal Reserve shuts down climate groups – the US central bank disbanded a number of committees established to identify and combat the impact of climate change on financial stability.
💧 Thames Water fined £123m for sewage leaks – Following an investigation, Ofwat fined Thames Water over persistent sewage issues. The regulator also specified that the fine must be paid by the company and its investors – not its customers.
🌳 Microsoft's record carbon credit purchase – the tech firm purchased 18 million tonnes of nature-based credits to support a pipeline of afforestation, reforestation and revegetation (ARR) projects. The credits aim to offset carbon over the next 15-20 years.
Chart spotlight - rising military spending is a climate concern
Source: Bloomberg, NATO 2024 estimate. Note: US is 3.38% and Canada 1.37%
The chart above shows North Atlantic Treaty Organisation (NATO) defence spending as a proportion of GDP. Figures that continue to rise, driven by international conflicts and pressure from the US. While NATO members have already committed to spending 2% of GDP on defence, debates are currently underway around increasing this to 3.5%.
Why this matters
A new UN study by the Conflict and Environment Observatory - focused on links between military spending and climate change - found that the rearmament of NATO alone could cause an extra 200 million tonnes of carbon emissions to be produced per year. If you also consider the impact of Russia, India, and China, such a shift can only spell disaster for the environment.
The concern doesn’t end with emissions. While the swelling military spending itself causes considerable environmental damage, the planet also suffers as countries continue to divert funds away from areas like climate provisions and humanitarian aid to pay for these increases. It’s also been well established that rising temperatures lead to further global conflicts, as nations are forced to compete harder for ever-dwindling resources - and the cycle becomes self-reinforcing.
So, despite a reignition of the debate around whether defence stocks should be included in ESG portfolios, we remain committed to excluding weapons manufacturers from ours. For a more detailed account of our views, please see our recent article The defence dilemma - defence stocks and ESG.
Marking milestones in responsible investing
We’re proud to celebrate 13 years of our Active ESG Growth range and 3 years of our Passive ESG Growth Solution - milestones that reflect our long-standing commitment to responsible investing.
We felt it was a good opportunity to share that we’ve refreshed our Responsible Investment Policy, outlining how ESG considerations are integrated not just into specialist solutions, but across our entire investment approach.
As Julian Parrott from Ethical Futures puts it:
“At a time when some firms are stepping back from responsible investing in any form, it’s good to see Parmenion making a clear statement - embedding ESG principles across all portfolios, not just in a separate ESG or ethical silo. It's quite a good read too!”
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