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This week in ESG
New ratings regulations, questionable offsets, and financial penalties for big polluters.
Key highlights
🌱 New ESG rating regulations on the horizon – Labour is set to introduce a bill to regulate ESG ratings agencies, aiming to improve transparency. This follows a similar commitment from the Conservatives earlier this year in their Spring budget.
🚫 SBTi finds carbon credits ‘mostly ineffective’– a recent study by the Science Based Targets initiative (SBTi) reveals that many carbon offsets are falling short of their climate goals and may even be diverting funds away from sustainable finance. This comes in the wake of SBTi’s CEO stepping down after publicly supporting such credits without consulting staff.
🌎 Walz brings record of climate success – Kamala Harris’s running-mate for the US presidency, Minnesota Governor Tim Walz, brings a strong track record of climate action. He’s championed numerous sustainability initiatives, highlighting their economic benefits, and set up an ambitious net-zero target for his state.
💧 Thames Water hit with big fine for pollution – in a major blow to its finances, the already cash-strapped Thames Water was slapped with a £104 million fine by its regulator, Ofwat, for releasing raw sewage into rivers. The company are now scrambling to address the spills in hopes to reduce the hefty penalty.
💸 Interest rates rising for big polluters – a study by the Dutch central bank (DNB) found that since 2020, the gap between interest rates on bonds of high-polluting companies versus low-polluters in Europe has grown. The DNB puts this growing gap down to the need for extra compensation to cover the risk such high-emitting companies are exposed to.
Chart spotlight
The importance of climate change in investment strategies.
Source: Robeco, 2024 Global Climate Investing Survey, May 2024.
The chart shows responses from a study of wholesale and institutional investors to the question: “How would you describe the importance of climate change to your organization’s investment policy two years ago, today, and in the next two years?”
Why this matters
Between 2022 to 2024, the importance of climate change to global investors experienced a dip – attributed to pressing global challenges like the Russian invasion of Ukraine, an energy crisis and rising inflation. North America experienced the sharpest decline, compounded by growing political pushback against all things climate and ESG related.
However, what really shines-through is the upward trend from here on. Compared to today, more investors in every region described climate change as important to their investment policy going forward. This really reflects an understanding of the need for, and value of, sustainable investing as climate issues become ever more intense and wide-ranging.
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