The true greenium, green securities, and fossil/green fee league tables

AI tool for climate risk assessment in the financial system

Project Gaia , an initiative of the BIS Innovation Hub and the Bank of Spain , the Deutsche Bundesbank and the European Central Bank , has leveraged AI to enable the comprehensive analysis of climate-related risks in the financial system.

The True Greenium

In a new research paper In Search of the True Greenium from March 2024, the authors Marc Eskildsen , Markus Ibert , Theis Ingerslev Jensen , and Lasse Heje Pedersen propose a robust green score combined with forward-looking expected returns, yielding a more precisely estimated annual equity greenium of ?25 basis points per standard deviation increase in greenness. Furthermore, they provide greeniums for corporate bonds, weighted-average costs of capital, and sovereign bonds.

In the Name of Climate: Private vs. Public Funds

A publication by MSCI Inc. shows some interesting facts about public and private funds with climate-related names.

• The number of public and private funds with climate-related names has surged in recent years, with more than 70% of the cumulative capitalisation attributed to funds launched since the start of 2020.
• Despite similarity in the names, these funds are rather different. Renewable electricity accounted for over 40% of private climate funds’ net asset value, while information technology dominated in public climate funds. Real assets drove private climate funds, while equity was more prominent in the public space

The Anthropocene Fixed Income Institute (AFII) has published the latest green/fossil fee league tables for Q1 of 2024 . The Box is an AFII tool investors can use to grade banks based on the loan syndication fees they make from green and fossil fuel activities. Using it, they can select those counterparties that most closely align with their climate objectives, and incentivise other dealers to change their ratio of green/fossil financing.

Canadian banks RBC, TD, and BMO sit at the bottom of the rankings due to increased fossil fuel income in recent months. At the other end of the table, European banks dominate, with BNP Paribas in pole position among Tier 1 banks, and Swedbank among intermediate banks.

In ASEAN, Overseas-Chinese Banking and United Overseas Bank top the rankings, while Sumitomo Mitsui Banking Corporation (SMBC) Asia Pacific and Bank PT Bank Mandiri (Persero) Tbk. occupy the bottom-most spots.

EU & Just Transition - State of play

The Fair Way Forward: Opportunities for all through an EU Just Transition publication by WWF examines the elements already in place to support a just transition in the EU. It also presents recommendations for a strengthened just transition policy framework which is required to ensure a wide-reaching and inclusive transition for the EU’s low-carbon and sustainable economy. The transition to a low-carbon economy requires change that has a pace only seen before in the context of a war.

NEWS

ESG Today - Texas Pulls $8.5 Billion From BlackRock Over ESG Investing

ESG Today - Deutsche Bank Ties Senior Exec Compensation to Loan Book Decarbonization Goals

ESG Today - Republican States Launch Lawsuit to Block New SEC Climate Disclosure Rules

Responsible Investor - BlackRock fails to convince Texas doubters as school Fund pulls $?8,5bn over ESG

Financial Times - We need to talk about carbon removal

Financial Times - Climate graphic of the week: Oceans set heat records for more than 365 days in a row

RECOMMENDED READINGS

European Parliament wants to improve consumer protection against misleading claims and has established a verification and pre-approval system for environmental marketing claims to protect citizens from misleading ads.

Florence School of Banking & Finance shared some critical reflections on the concept of transition risk and the importance of defining transition risks in order to make the financial system more resilient and stable.

The SEC and the rise of the climate risk industry by Axios informs about the impacts of the long-awaited guidelines covering the direct carbon emissions of many companies.

OMFIF published an article Addressing barriers to climate investments in EMDEs with focus on its evolution, scaling up and collaboration across industry.

SEC Disclosure Rules Welcomed but Unlikely to Fill Data Gaps article by A-Team Insight discusses reactions to the announcement of the US’s first-ever rule on ESG disclosures.

A study by Investor Impact Initiative , using Ethos Foundation (Switzerland) voting recommendations for the 2023 AGMs as a benchmark to define the sustainability-oriented asset owner position, ranks asset managers on the basis of their orientation towards sustainability. The ranking reveals that a gap remains between the preferences of asset owners, broadly in favour of sustainability issues, and the votes carried out on their behalf by asset managers at AGMs.

Real Economy Progress shared an article that finds that according to a research done by AMF Most firms don’t know how they’ll finance climate plans, finds French regulator

Industrial Emissions Directive , the main EU instrument regulating pollutant emissions from industrial installations by European Comission

MSCI in an article In the Name of Climate: Private vs. Public Funds looked across funds with climate-related names to highlight fundraising trends, sector composition and the key underlying asset classes

Net-Zero Banking Alliance Members Vote to Reinforce Guidelines for Climate Target Setting by UNEP FI

European Bank for Reconstruction and Development published a Transition report 2023-24 that focuses on the shift towards a sustainable economy, the reconfiguration of global supply chains, and the scramble for the raw materials required by the digital and green economies

Institutional Investors Group on Climate Change published an updated version of the Net Zero Investment Framework updated: NZIF 2.0

Unpacking Climate Risk discuss the topic of emissions and transition shocks in What if emissions aren’t a good proxy for transition risk?

Edie informed about the approval of the CSDDD?Directive in CSDDD: EU lawmakers push ahead with stripped-back version of due diligence mandate

The Bureau of Investigative Journalism commented on the situation in the Gulf Coast Santander weakened fossil fuel policy after raising billions for gas projects

ONLINE COMMUNITY INSIGHTS

LinkedIn Post: Antoni Ballabriga presented the new robust framework of BBVA to guide their net zero journey shared their as Net-Zero Banking Alliance (NZBA) updated their climate commitments by voting to adopt a new version of the Guidelines for Climate Target Setting for Banks

LinkedIn Post: Mathieu Joubrel shared results and implications from research paper Categorical Cognition and Outcome Efficiency in Impact Investing Decisions written by Matthew Lee, Arzi Adbi, and Jasjit Singh

Harshal Kalambe shared a new ESG cheatsheet for those needing a quick and easy breakdown of the ESG criteria categories:

LinkedIn Post : Emma Aurora Kaasinen shares an example of a climate risk assessment of a property, located in Finland

LinkedIn Post: Pratiksha More writes about the most recent regulations on Greenwashing in East Asia

LinkedIn Post: Mark Campanale shares his view on the topic of a carbon-intensive debt, as $3.2 trillion of debt from commodities and utilities issuers due to be refinanced over the coming years

LinkedIn Post : Florence Arke published practical and actionable guidance on navigating the CSRD & TNFD

LinkedIn Post: Jorian Hamster informs about a new approach in greenwashing litigation - business to business greenwashing claims

LinkedIn Post: Review of Finance shared a summary of? an article"ESG shareholder engagement and downside risk" by Andreas G F Hoepner , Ioannis Oikonomou, Zacharias Sautner , Laura T Starks and Xiao Y Zhou .

LinkedIn Post : Rickard Nilsson posted this insightful message about #greenwashing with key takeaways about CDP:

?? CDP institutions actively decarbonizing their equity portfolios between 2005 and 2019.

?? Portfolio re-weighting is the predominant portfolio decarbonization strategy (especially for investors in Emission Schemes countries)

?? Very weak evidence of corporate changes among top emitting firms through the CA100+ initiative, and following the Paris Agreement

?? No evidence of preference in favor of stocks developing climate patents but some re-weighting towards companies generating green product/service revenues.

EVENTS

April

• On 9 April, EU Economy and Finance will host an event focused on "Recovery & Resilience Facility and European Strategic Investments". The European Commission and the Belgian Presidency of the Council of the European Union organise the event to mark the publication of the mid-term evaluation of the Recovery and Resilience Facility (RRF). It will take place in Brussels, Art & History Museum (Cinquantenaire) and online. Webstreaming will be available on this webpage .
• Online: on 9 April Planet Tracker will host a 30-minute webinar on the Quarterly Research Update, providing, for example , data dashboard on the key water risk in the textiles industry.
• 10 April, between 9am and 1pm CET, EU Sustainable Finance Days 2024 will be hosting a special event in Madrid. The event will delve into the EU Sustainable Finance policies and EU instruments such as InvestEU programme (incl. SME window and sustainability guarantee), Green Gateway , Enterprise Europe Network’s sustainability advisors , and other European Commission actions supporting SMEs in accessing sustainable finance. The event will be organised as hybrid – in Madrid and web-streaming. Website link and registrations .
• The European Commission ( EU Economy and Finance ) and the EU Platform on Sustainable Finance will host an event in Brussels on 22 April to have a deeper dive into the different focus areas of the Sustainable Finance framework and the Platform's work. Register your interest to attend the event on the event website . International Sustainable Finance Centre (ISFC) will host the after event information reception. l

May

• Between 21 and 24 May, European University Institute will host its Climate week, seeing interventions by Kate Hampton , Kurt Vandenberghe , Marco Mensink , Jos Delbeke , and many others. More information on the website .
• Between 27 and 29 May, CEE Sustainable Finance Summit will take place in Prague - speakers include Martin ?polc , Jenny Bofinger-Schuster from International Sustainability Standards Board (ISSB) Nathan Fabian from Principles for Responsible Investment and many other leading authorities on sustainable finance and business. More information on the event website .