ESG Essentials: New leadership at the World Bank, Working Conditions and the Inflation Reduction Act

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New research from FAIRR shows poor working conditions in the meat sector is contributing to labour shortages

New research from the $70tn backed FAIRR Initiative found that poor working conditions at major meat firms are contributing to labour shortages in the sector, impacting both production and profits.

The report highlights that sick pay benefits introduced during the height of the pandemic have been largely repealed or weakened, jeopardising companies’ ability to attract and retain workers.

Though in many cases higher pay has remained, FAIRR’s research showed that while some companies implemented temporary policies to guarantee sick pay, only Tyson Foods has made them permanent. 

As the industry suffers economically due to rising prices and supply shortages, there is concern  among investors that much of the progress made on labour practices post-pandemic will be walked back without sufficient pressure from investors. For now, company policies will only heighten risk in the long term.

Juan Salazar, Senior Engagement Specialist at Pictet Asset Management, who was quoted in FAIRR’s report said “Investor action on working conditions in the meat industry should not falter as the threat from the pandemic reduces. It is imperative that focus is sustained on the poor industry conditions which were exposed by COVID-19, but are not confined to times of emergency.”

World Bank President steps down after conflict with Biden administration on climate stance

Dramatic news emerged from Washington last week, as World Bank President David Malpass announced his resignation amid widespread speculation that he had lost the confidence of President Biden. The administration had previously openly criticised the leadership of the World Bank for a perceived lack of commitment to slowing climate change and its impacts. In a public event in 2022, Malpass appeared unwilling to accept the scientific consensus that climate change was caused by human activity.

This change in leadership will likely have significant consequences for sustainable finance and the world economy. The US retains a great deal of power over the World Bank, and will likely seek to align the organisation with the current President’s priorities. 

As the Washington Post reported, the Biden administration, which has a strong record of supporting sustainable finance initiatives at the federal level, has increasingly turned to international finance to fund its climate objectives. Although the World Bank doubled its investment in climate finance to $32 billion in 2022, it has failed to fund climate-related projects to the degree the Biden administration and other world governments had hoped. New leadership could herald a dramatic shift in the attitude of the World Bank towards climate change.

French financial regulator makes landmark decision to exclude fossil fuels from Article 8 & 9 Funds

The French Financial Market Authority (Autorité des marchés financiers, AMF) has published a proposal that would impose stricter environmental criteria for Article 8 and 9 financial products. 

Under the EU Sustainable Finance Disclosure Regulation (SFDR), financial products such as indexes or funds are classified into bands denoting their environmental objectives- determining how they can be advertised and how they are regulated. Article 8 funds are ones that primarily pursue financial return as an objective but have ESG factors built into their policies. Article 9 funds are products with an explicit sustainable investing objective that strongly advocates for impact. 

Marking a significant move for Europe, the French government has taken steps to restrict investments in companies that engage in any fossil fuel activity in Article 8 and 9 funds. Under these new regulations, Article 9 funds will be entirely prohibited from investing in fossil fuels and Article 8s will only be able to do so if those companies have a convincing transition plan to exit from fossil fuels entirely. 
These regulations tackle what some critics call hypocrisy at the heart of many ESG funds that have, at many times, funnelled significant capital into fossil fuels while purporting to be a ‘sustainable’ product.

New data shows the ongoing effect of the Inflation Reduction Act

Figures have emerged that show the ongoing significance of the Inflation Reduction Act, a landmark climate law that will have an indelible effect on sustainable finance. The data, from energy research consultancy Wood Mackenzie, show a direct correlation between the forecasted growth of US renewable energy and investment emerging from the US government. 

This forecast suggests that US renewable capacity will almost triple in ten years, with growth particularly concentrated in solar and wind power, rising to 120 GW. This would be enough to power 80.4 million households (in 2020 there were 123.6 million households in the US). 

While there is still more investment needed to grow renewables at a sufficient pace, these figures show the power of government action in the transition to achieve net-zero.

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