ESG Essentials: in the news this week

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Climate graph of the week 

Util used machine learning to assess how metal mines perform against the UN’s Sustainable Development Goals globally. They found that uniformly, metal mining scored poorly on environmental measures, with significant negative implications for SDG 15 (Life on Land) in particular. It is interesting to note, however, that they support SDG 8 (Decent Work and Economic Growth), helping to fuel economic growth, employment and income opportunities. 

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‘Apollo 13 moment’: Investors warn meat and dairy industry facing a ‘near disaster’

The FAIRR Initiative’s latest issue briefing analysing the findings of the Intergovernmental Panel on Climate Change (IPCC) Sixth Assessment Report warned of an ‘Apollo 13’ moment, whereby the animal agriculture industry must evolve or die. FAIRR called on the animal agriculture sector to embrace alternative proteins and align itself with global climate goals to mitigate both financial and physical risks. FAIRR’s Executive Director Maria Lettini warns that without critical action, global animal agriculture faces “a near disaster that will take urgent innovation to survive”.

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Financial firms face $225 billion in water-related losses, analysis estimates

CDP and non-profit Planet Tracker launched a new report which analysed responses from 1,112 companies to understand their exposure to water-related risks. They found financial institutions face losses of at least $225 billion from risks related to water, with a third of them doing nothing to assess the potential impact. Of the 377 listed financial institutions reporting to CDP, 33% said they were not assessing their exposure to the connected risks, which can include fines and other liabilities, shareholder lawsuits or an inability to get insurance.

“Financial institutions need to understand how exposed they are to these risks and take immediate steps before it’s too late,” said Cate Lamb, CDP’s global director of water security.

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Sustainability and defence are ‘separate conversations’, say ESG investors 

Russia’s invasion of Ukraine sparked a debate in ESG investment that, weeks later, looks unlikely to be settled. Some argue that the rising threat to European security and democracy justifies defence companies’ inclusion in ESG and sustainable investment strategies. After all, argues defence giant ThyssenKrupp, “without security there is no sustainability”. However others are concerned that investment in defence would undermine sustainable investment, unless there was a clear way to avoid weapons being transferred to undemocratic states. 

Gunnela Hahn, head of sustainable investment and governance at the Church of Sweden, disputes that defence stocks and ESG are even related: “It’s two separate conversations, one is to invest in companies that work hard to create sustainable value for society by treating people and the planet with dignity and respect, ensuring good ESG practices throughout the value chain. The other conversation is limited to how we protect our borders and territory from military attacks.”

The debate continues….

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Investors pulled €1.8bn from BlackRock green bond fund, Article 8 funds suffer net outflows

So-called ‘Dark green’, or Article 9, investment funds have proven to be the most resilient form of green fund, according to data on EU funds from Morningstar. These are funds that, under the EU’s Sustainable Finance Disclosure Regulation (SFDR), are defined to have a clear sustainable investment objective. This was demonstrated by the fact that such funds saw inflows of €8.6bn in the first quarter of 2022. In contrast, ‘light green’, or Article 8 funds – those which less actively promote environmental and/or social characteristics – saw outflows of  €3.3 billion over the same period.

On the relative resilience of Article 9 funds over Article 8 ones, Morningstar suggested that it could be down to the former’s lower “exposure to hard-hit fixed-income funds”.

Read the full article here.

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