Resource Center

Insights on China's growing green bond market, including recent developments, key characteristics, and expectations for the world's second largest market.

As growing pressure to cut GHG emissions is causing Western oil majors to sell their high-carbon assets, it is expected that National Oil Companies (NOCs) will pick up some of the production. For investors holding an interest in or considering investing in NOCs or sovereign debt, it is worth assessing how fossil fuel production shifts will impact their portfolio’s alignment with climate ambitions and ESG values.

When companies are receptive to investor feedback, there are clear real-world impacts and positive changes. Such engagement outcomes vary and are directly tied to the company and its company-specific exposure to material ESG issues.

When companies measure and report the environmental and social impacts of their operations, they can demonstrate to investors large and small that their green and social bonds are reliable investments for maximum impact. Then investors can optimize their portfolios for impact as they do for risk and reward and companies can optimize their efforts to improve.

To help financial institutions examining the climate impact of their portfolios, we’ve compiled a list of the initiatives and organizations offering guidance on the collection, measurement, and disclosure of climate-related financial data.

Find out what businesses are reading with our round-up of Sustainalytics' most popular content in 2021! Clearly, sustainable finance is a hot topic, as well as social impact reporting as businesses work to transition to more sustainable practices.

As our clients and the industry at large focus on proactively mitigating risk and capitalizing on this evolving landscape, stewardship will be a key lever for savvy investors—particularly those facing external pressure to divest. Here are the ESG themes we see influencing stewardship priorities this year.

To address supply chain risk, business leaders must consider an increasingly broad range of factors in procurement, including environmental, social and governance (ESG) impacts. Investors, customers, and regulators are applying substantial pressure on companies to reduce risks like labor disruptions, workforce health and safety incidents, human rights issues, and shortages of natural resources.

As we enter 2022, it struck me that VUCA--a concept that originated in the mid-1980s at the U.S. Army War College to describe the volatility, uncertainty, complexity, and ambiguity of the world after the Cold War—is still a useful framework to think of where we are now.

Corporates seeking to be socially sustainable must be able to comply with existing and upcoming legislation, mitigate reputational risks, and meet the evolving expectations of their stakeholders.

In the weeks following COP26, investors in the UK and worldwide face a myriad of upcoming climate-related regulations heading towards the implementation phase. In addition, major global coalitions such as the Glasgow Financial Alliance for Net Zero have sprung up to attempt to accelerate decarbonization via targeted investment.

In 68% of our engagements, product governance is a significant material ESG issue, but it is our experience that most companies underestimate the materiality of this risk to investors. For some industries, product governance represents on average more than 20% of ESG risk exposure, as identified within our ESG Risk Rating framework.

Banks will play a key role in the green transition and those that commit to sustainable banking may gain an advantage over competitors, among other benefits. Indeed, banks are uniquely positioned to participate in and benefit from the transition to a green economy.

Reactions to the COP26 Conference and the resulting Glasgow Climate Pact have predictably run the gamut from claims of greenwashing to the celebration of progress in the fight against climate change. Ultimately, any judgement on COP26 may be premature, as the success of the conference will best be measured in time by the extent to which commitments made are put into motion. While we wait to see the concrete actions that materialize, the past two weeks have underscored the importance of several themes that will garner increasing attention and should be considered by sustainable investors.

Investors can examine to what extent petroleum refiners manage their Non-GHG Air Emissions and assess the quality of a company's programs to reduce air pollutants. For instance, examining all the petroleum refiners assessed by Sustainalytics, we observe that only 3% have a strong program to manage non-greenhouse gas emissions.

Explaining the differences between some of the most common sustainable finance instruments, from green bonds and loans to ESG-linked instruments such as sustainability-linked loans.

Despite the shifting timelines, we observe that the market momentum around PAIs is not diminishing, quite the contrary. Investors in the scope of the regulation are using the fourth quarter of this year to get acquainted with PAI data and set up their systems. Most investors we speak with want to be prepared in time to be able to monitor PAIs throughout 2022 and adjust their portfolios to boost their PAIs (or rather limit the downside, as these are adverse impact indicators). This means that PAIs may significantly impact stock selection and portfolio construction by fund managers keen to have ‘good’ PAI scores.

As world leaders prepare to meet in Glasgow for COP26 to discuss accelerating climate action towards the goals of the Paris Agreement, an emerging energy crisis persists around the world.

The publication of these rules marks the end of a prolonged period of uncertainty in the market around final rules and timelines - assuming the RTS will be adopted as-is in a Delegated Act, which turns these rules into regulation. There are several noteworthy aspects to these rules, which we address from our perspective in this article.

According to the UN’s Convention on Biological Diversity the main drivers of biodiversity loss are habitat loss and degradation, climate change, pollution, over-exploitation, and invasive species. Habitat loss is directly linked to the conversion of natural ecosystems to agricultural lands and unsustainable use of water resources.