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Utilities have found themselves in the literal and metaphorical eye of the storm over the last year as hurricanes, floods and wildfires of increasing frequency and strength have wreaked damage on their assets. In late August, Storm Ida made landfall in Louisiana, USA and devastated the power grid lines. Entergy, the utility operating in Louisiana, supplying most of New Orleans, restored 90% of the supply only by mid-September, with 87,000 customers still without power.

From a market perspective, engagement and voting on governance issues have been used as levers for influence for a long time. On the other hand, environmental and social issues were historically addressed from a values-based perspective or primarily for fact-finding purposes. Today, many responsible investors leverage corporate dialogue as a tool to influence and drive meaningful change and impact

There are many factors that rating agencies consider within its overall assessment. For example, ESG rating companies tend to look for at least three years of ESG metrics to determine company trends and long-term ESG targets, goals, and strategies to manage and reduce ESG risks at least five years ahead. Read on to learn about how Sustainalytics' Material Risk Engagement program promotes and protects long-term value by engaging with high-risk companies on financially-material ESG issues. (A North American Snapshot)

In this blog, we look at the delay of the level 2 regulation, some aspects of the Q&A, and the ongoing confusion and divergence around SFDR. We pay special attention to the potential impact of the Principle Adverse Impact indicators, an element of SFDR.

On July 6th, the European Commission published its Strategy for Financing the Transition to a Sustainable Economy, the successor of the EU’s Sustainable Finance Action Plan, which launched in 2018. The strategy focuses on transforming the financial system and financing transition plans, building on the 2018 Action Plan, which centered on developing the EU Taxonomy, putting in place disclosure regimes, and developing tools for the market to develop sustainable investment solutions and prevent greenwashing.

On issues from voting rights to climate change, the relationship between investors, companies, and governments has never been more dynamic. This has spurred a lively discussion about the impact and appropriate role of these actors in addressing systemic environmental and social issues. An increasingly cited view is that commitments made by businesses and investors are often superficial, and at best, can provide only incremental progress towards addressing the problems we face. Some go further to suggest that sustainable investing has done more harm than good, with the notion that these efforts have provided a false sense of progress and have delayed meaningful government action. This is a worthwhile debate, but my experience over the last eight years in the sustainable investing space has given me a very different perspective.

For investors looking to enhance ESG risk management and the long-term impact of sustainability efforts, a systemic approach can help identify interventions that will most effectively mitigate the risk of negative outcomes or divert the chain of events towards a more sustainable trajectory. Typically, this involves moving from single-issue or company-specific tactics to progressively integrate system-level considerations in ESG strategies. Targeting systemic change through active ownership is one way to acknowledge and start unravelling the dynamic web of global challenges.

As the global economy looks towards recovery after being impacted by the pandemic, the oil and gas industry faces a growing wave of shareholder activism and climate litigation due to a heightened focus on an accelerated transition as an indirect impact of the pandemic – painting an increasingly bleak picture for those within the industry.

On 26 May 2021, the Court of The Hague orders Royal Dutch Shell (RDS) to reduce CO2 emissions to a net 45% by the end of 2030 compared to 2019 through the Group Policy of the Shell Group. The order of a national (Dutch) court demands that a global company (RDS) fulfills its obligations under the Paris Climate Agreement, although RDS was not a party in that agreement, and there is no legal equivalent in The Netherlands. What are the broader consequences of this order, also globally and for other companies and potentially also other jurisdictions?

In recent months, a lot has been said and written about the EU Taxonomy, the green classification system of economic activities that aims to drive capital flows to sustainable investments supporting the EU’s policy goals on climate and the environment. Political, corporate, and civil society lobbying reached its peak when the EU published draft rules last December, which deviated substantially from expert recommendations. However, the latest draft delegated act with rules on Taxonomy reporting published by the European Commission on May 7th has received far less attention even though some of the proposed changes affect the practical implementation timelines as well as the scope and ambition of the regulation.

Research shows that Property & Casualty insurance underwriters are not accurately pricing climate risks, and US government policy and program decisions are proving to be unsustainable. In our most recent blog, Justin Cheng talks about the resulting premium pricing corrections in the wake of intensifying extreme weather events. With this trend, a significant number of US homeowners are unable to obtain property insurance while taxpayers take on the increased cost of climate risk.

Watch our video to learn how applying Sustainalytics-driven carbon metrics to Morningstar indexes can facilitate a nuanced approach to portfolio decarbonization, with encouraging investment attributes.

As Earth Day is around the corner on the 22nd of April, the Biden Administration is to convene a global climate summit. Following a historical precedent for several such events, since its inception in 1970, including signing the landmark Paris Agreement . We have seen positive developments since the Paris Agreement; societal actions to address some of the root causes of climate change have yet to suppress the negative trends . Historically, active ownership on climate change has focused on direct emissions from highly exposed sectors, such as fossil fuel and utility companies. However, the more complicated, less direct aspects of climate change have seen limited progress. Tackling such issues will see a strong need for collaboration from both countries and other key sectors, in particular, banking and finance. Banks are key to support this transformation; facilitating economic activity for positive change throughout the entire value chain is key.

Listen in as Sustainalytics’ Engagement Manager, Henry Pallister-Dixon, sits down with Beatrice Crona from the Royal Swedish Academy of Science and the Stockholm Resilience Center at Stockholm University to discuss:

As the Biden administration moves into the White House this week, the world is waiting to see if a promising focus on climate change along with a Democratic Congress will present plausible opportunities to cut carbon emissions. While the outgoing administration backed initiatives supporting coal energy[1], it doesn’t appear to have slowed industry decline.

While Oil and Gas (O&G) operations are responsible for roughly 15 percent of global energy-related GHG emissions, some energy companies have pledged the role of natural gas (NG) as a transitional fuel. At the same time, NG energy use is increasing globally, and shale-gas extraction is booming at an unprecedented rate. One factor that is often overlooked is the methane emissions across the NG value chain.

Climate gentrification is an emerging concept describing how land with greater resiliency against intensifying physical impacts of climate change becomes more desirable and valuable.[1] It catalyzes fast and visible socio-economic transformation in communities.

Globally, oil and gas companies are weathering a storm like no other in their history. Although volatility seems to have settled somewhat since the early months of 2020 (when the Russia-Saudi Arabia oil price war experienced its most heated moments yet), cost-cutting and debt borrowing continues to plague the industry as the vast majority of COVID-19 related restrictions remain in place worldwide.

Recent reports concerning record decreases in global greenhouse gas (GHG) emissions due to the COVID-19 pandemic have spurred hope for a “green shift” in our global economy, post-pandemic. The importance of this shift cannot be understated, given that capital investments made within the next five-to-ten years will determine the world’s carbon pathway to 2050 and beyond.

Planes grounded, borders closed and passengers staying at home: the past months haven’t been easy for the airline industry. COVID-19 has led to the deepest crisis ever in the history of the sector.[i] Airlines are in dire need of cash to recover, while at the same time the industry is also expected to adapt and prepare itself for the more critical crisis ahead that is climate change. Despite the slowdown of air travel, long term prospects of mitigating carbon footprint of the industry are not clear. Carbon commitments supported by comprehensive programs are in place, nonetheless, our research suggests that existing measures may not be sufficient to curve down emissions and mitigate climate change.