cop26 trending themes for investors

COP 26: A Spotlight on Emerging Climate Action Themes for Investors

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.

Read our infographic - 5 Breakout Innovations in Sustainable Banking

Infographic | 5 Breakout Innovations in Sustainable Finance for Banks

This infographic describes five key innovations in sustainable finance, including green deposits, sustainable deposits, green trade loans, green guarantees and letters of credit, sustainable supply chain financing, and offerings for borrowers in industries not traditionally considered green.

Listen to the latest episode of the Sustainalytics Podcast | Aligning Executive Action to Strategy With Sustainability-Linked Compensation

What’s Happening in Sustainable Finance: Market Expectations Rise, Green Bonds Continue to Flourish, and Biodiversity Climbs Up the Agenda

Highlighting the growth of the global sustainable finance market during the first half of the year and the increasing attention on biodiversity among issuer and investors.

COP26 Video 3

COP26 Goal #4 - Work Together to Deliver

Why do ESG research and ratings matter to financial market participants? Ulziitushig (Toshi) Batbuyan, Associate, Oil & Gas Research, talks about how investors can leverage Sustainalytics' ESG Risk Ratings in various capacities.

governance in brief

Governance in Brief – November 11, 2021

SEC publishes new guidance on shareholder proposal exclusions SEC publishes new guidance on shareholder proposal exclusions The U.S. Securities and Exchange Commission (“SEC”) has published new guidance that will make it more difficult for companies to block ESG-related shareholder proposals from being included on proxy ballots. Under the previous guidance, corporations were able to exclude proposals that dealt with matters relating to the company’s ordinary operations unless they raised significant social policy issues for the company. Additionally, proposals related to operations accounting for less than 5% of the company’s assets and earnings were subject to exclusion. Under the revised guidance, the previous company-specific approach would be replaced by a broader societal impact analysis. Specifically, proposals that the SEC previously deemed excludable due to their lack of a significant company-level policy issue will no longer be viewed as such if they have a broad societal impact. Additionally, proposals related to operations not meeting the economic thresholds should not be excluded provided they raise issues of broad social concern related to the company’s business. Moreover, companies will not be able to exclude climate-related resolutions if they require timeframes or targets “so long as the proposals afford discretion to management as to how to achieve such goals.”

Exploring the Role of ESG Factors in the Fixed Income Investing Process

While many mainstream investors with an equity focus are applying ESG considerations as a part of their investment decision-making processes, how are fixed-income investors looking at ESG factors to assess corporate credit risk, bond selection, and other related activities?

oil refinery GHG

The Impact and Cost of Air Pollution: U.S. Petroleum Refineries

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.

Green tinted stock market graph, sustainable finance

Simplifying Sustainable Finance – Explaining Green Bonds, Green Loans, Sustainability-Linked Loans and Bonds and More

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.

cop26 goal 3

COP26 Goal #3 – Mobilize Finance

How can governments, companies and financial institutions help to mobilize finance to achieve global climate goals? Mayur Mukati of Sustainalytics’ Corporate Solutions unit discusses the role of sustainable finance in supporting a just and sustainable climate transition.

governance in brief

Governance in Brief – November 04, 2021

Volvo Cars shares jumped as much as 22% in the first day of their trading on Nasdaq Stockholm as the company raised SEK 20 billion (USD 2.3 billion) in an IPO which valued the company at SEK 158 billion. The successful debut came after Volvo Cars cut the size of the offering by a fifth and priced it at the bottom of the initial range, in response to investors’ concerns over how much control China’s Zhejiang Geely Holding Group Co (“Geely”) would retain. Moreover, Geely agreed to convert its common shares of class A, carrying 10 votes per share, into a corresponding number of common class B shares, which are entitled to one vote per share. Prior to agreeing to convert the shares the enhanced voting rights would have given Geely 98% voting power despite its stake in the company dropping to around 84%. Additionally, Geely decided not to exercise an upsize option that would have allowed it to increase the offering by 20%. The amended offering could result in a free float of 16% to 17.9% depending on whether an overallotment option is exercised. Volvo Cars shares closed at SEK 57.99 on November 2, up from the SEK 53 listing price.

EU Action Plan SFDR

Momentum Around Principal Adverse Impact Data Remains Strong Despite SFDR Delays

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.

Bridge arch against blue sky

Quick Start Guide: Key Considerations for Sustainability-Linked Loans

To help explain sustainability-linked loans, Sustainalytics has developed a quick start guide highlighting key considerations when entering into an SLL agreement.

governance in brief

Governance in Brief – October 28, 2021

Hong Kong’s Financial Reporting Council has launched an inquiry into Evergrande's accounts for 2020 and the first half of 2021, as well as an investigation into the audit of the firm’s 2020 accounts conducted by PwC. According to the regulator, as at the end of 2020 reported cash and cash equivalents amounted to RMB 159 billion, failing to cover the firm’s current liabilities of RMB 1,507 billion, in addition to the further borrowings of RMB 167 billion maturing in 2022.

How Sustainable Finance is Shaping Change in Banking

How Sustainable Finance is Shaping Change in Banking

This ebook highlights key issues for banks, including strategies to embed ESG into lending and investment decisions, and important innovations in sustainable finance.

energy crisis

What ESG Risks Should Investors Consider During the Energy Crisis?

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.

SFDR EU taxonomy

SFDR and EU Taxonomy Product Disclosure Rules Finally Released

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.

biodiversity species

Biodiversity: A Crisis Equaling, Possibly Exceeding, Climate Change

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.

governance in brief

Governance in Brief – October 21, 2021

The U.S. SEC has announced that it is reopening comments on a proposed rule that would claw back executive compensation in cases of financial restatement due to “material noncompliance.” The rule was initially proposed in 2015, as mandated by the Dodd-Frank Act, but has yet to be finalized. The clawback would apply to incentive-based compensation awarded to current and former executives during the three fiscal years preceding the restatement “regardless of whether the misstatement was due to fraud, errors, or any other factor.” The recovered amount would equal the excess compensation relative to the amount to which executives would have been entitled based on the restated financial statements. The clawback provisions would apply to compensation that is granted, earned or vested upon the attainment of a financial reporting measure, including stock price and total shareholder return. Additionally, under SEC’s proposal, stock exchanges would have to establish listing standards requiring public companies to adopt and comply with clawback policies. Issuers would be subject to delisting in case they fail to disclose their policies and comply with their provisions. The SEC is seeking public input on the proposed rule for a period of 30 days.

Sustainability-Linked Loans - A Bridge to Connect Corporate Sustainability and Finance

Infographic | 5 Benefits of Sustainability-Linked Loans for Companies

This infographic outlines some of the benefits companies can experience by entering into a sustainability-linked loan with their lenders.

governance in brief

Governance in Brief – October 14, 2021

A federal jury has ordered Tesla to pay USD 137 million to a contract worker over claims of workplace racism. Plaintiff Owen Diaz accused Tesla of creating a hostile work environment and failing to address racial abuse despite repeated complaints.