November 2022 Newsletter

Please see below for our round-up of November’s top ESG news and stories.

SEC Charges Goldman Sachs for Not Following ESG Investment Policies

Goldman Sachs Asset Management (GSAM) was charged by the U.S. Securities and Exchange Commission (SEC) for its failure to implement and follow its own policies and procedures on some of its ESG funds. GSAM agreed to a $4M penalty, without admitting or denying SEC findings. The charges relate to policy and procedure regarding three ESG-themed GSAM portfolios between 2017 and 2020; failures include an absence of written policies in place for ESG research, and failure to follow policies once established. The SEC has cracked down on asset managers’ promotion of ESG claims in recent months, charging BNY Mellon for misstatements regarding ESG considerations for some of its mutual funds, and DWS’ CEO resigned after police raid the firm’s Frankfurt offices as part of a greenwashing investigation. LINK

What’s in a name? EU watchdog cracks down on ESG investment funds

The European Securities and Markets Authority (ESMA) has proposed stricter rules for the promotion of investment funds as “ESG”. Reporting that 27% of AUM in EU funds now sits in ESG-labelled funds, ESMA addresses greenwashing concerns in a new consultation paper. The paper outlines two criteria to be met in order for funds to be labelled “ESG” or “sustainable”: firstly, at least 80% of the fund’s investments should meet environmental and social objectives laid out in the EU’s rules on sustainability related disclosures in the financial sector; secondly, if the fund uses “sustainability” in its title, it should meet the additional threshold of 80% of investments in sustainable assets. LINK

Net Zero Asset Managers Initiative Hits $66 Trillion AUM

The Net Zero Asset Managers (NZAM) initiative has surpassed 290 signatories, and with them, an AUM of over $66 trillion. All signatories have committed to achieving net zero greenhouse gas emissions by 2050. The initiative was launched in December 2020 with 30 signatories whose AUM totalled $9 trillion. NZAM forms parts of the Glasgow Financial Alliance for Net Zero (GFANZ). NZAM signatories agree to commitments including cooperating with asset owners on decarbonisation goals and setting interim targets aligned to net zero 2050; these targets are reviewed every 5 years. Commitments to date primarily cover listed equity and fixed income, although methodologies for other asset classes are to be incorporated into targets as they are developed. LINK

Key takeaways from COP27

Our analysis of the COP27 summit focusses upon progress made in Sharm el Sheikh toward meeting the commitments made in Glasgow at COP26. The largest commitment came from developed nations as they agreed to the establishment of a loss and damage fund to support developing nations in rebuilding infrastructure and communities after extreme weather events. Less successful were the attempts to expand commitments on phasing out fossil fuels; the original wording established at COP26 remains in place: “phasing down” rather than “phasing out” coal power. Elsewhere, repeated attempts to reach an annual $100bn spent on climate finance (a target set at previous COPs) failed, and tackling the thornier issues surrounding carbon markets (notably, the treatment of carbon removals and carbon credit rules for emissions avoidance) seemed to be deferred until COP28. LINK

Press release: Alternative credit managers launch ESG integrated disclosure tool

A group of asset managers in private credit markets have jointly launched the ESG Integrated Disclosure Project (ESG IDP) to standardise private credit ESG disclosures, providing greater transparency and accountability. Investors should benefit as the ESG IDP helps identify industry specific ESG risks within credit portfolios, facilitating a more consistent comparison of data across alternatives managers. Founding partners include Apollo Global Management and Oak Hill Advisors; the initiative is led by the Alternative Credit Council (ACC), Loan Syndications and Trading Association (LSTA) and the UN PRI. The initiative recognises distinctions between private credit ESG disclosures and those of other asset classes, while building upon the PRI’s ESG Factor Map, which highlighted overlaps between existing ESG frameworks. LINK