Digital library on sustainable finance
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This study tries to answer the question whether having multiple women on a board of directors translates into better financial performance. The findings suggest that the whole is greater than the sum of the parts. Companies with both a more diverse board and stronger talent management practices enjoyed higher growth in employee productivity compared to companies with a diverse board only and to companies with strong talent management practices only. All of these groups outperformed companies with both mostly male boards and lagging talent management practices; those companies had the lowest rates of employee productivity growth, relative to industry peers.
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This paper describes a promising new effort to fight global labor exploitation using financing strategies to advance and expand the global trend toward fair labor practices. It focuses on private market investment innovations and opportunities, where investors interested in improving global labor conditions while achieving positive financial results are most likely to meet their objectives. Labor Lens Investing is an investment approach that uses investors’ leverage through supply chains to advance protections of internationally recognized labor rights.
This paper is meant to ground prospective Labor Lens investors in an understanding of market conditions, to show them examples of what is already being done, to inform them about issues they should consider, and to suggest ways that Labor Lens Investing can progress from an emerging niche to a fruitful investment option for mainstream investors.
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The European Commission presented an action plan on how to finance sustainable growth on March 8, containing wide-ranging suggestions on how to make the European financial centre more sustainable. According to Vladis Dombrovskis, Vice-President responsible for Financial Stability, Financial Services and Capital Markets Union, this plan is meant to redirect capital flows towards a more sustainable economy, to integrate sustainability into risk management and to foster transparency and long-term investment. Against the EU target to reduce greenhouse gas emissions by 40% until 2030, the EU has to mobilise €180 billion a year for the energy and transport sector alone.
The Action Plan is based on the recommendations of the High-Level Expert Group, published in January 2018. Industry and civil actors alike lauded it the “most ambitious sustainable finance package released by a major economic area so far”.
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European Commission Action Plan on Sustainable Finance - Factsheet - EN
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The research identified the six leadership competencies critical to success in developing business opportunities in line with the Global Goals. These are long-term thinking, innovation, collaboration, transparency, environmental management, and social inclusiveness. Existing research shows that these competencies are most prevalent in gender-balanced teams that include women in leadership roles. One of the fastest ways to achieve the global goals is through the financial inclusion of women, by giving access to finance, opening up new market opportunities and support for the SDGs that touch on poverty, clean water, sanitation, education, health, and well-being.
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Better Leadership Better world - Women Leading for Global Goals - EN
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In 2017, the World Business Council for Sustainable Development (WBCSD), in partnership with the Climate Disclosure Standards Board (CDSB) and Ecodesk, launched the Reporting Exchange. This free online platform was designed to help business navigate the often-confusing world of corporate reporting.
The clear trend that emerges is that environmental topics are the most prevalent reporting requirements, while governance topics have been the least. More specifically, 69% of the reporting requirements cataloged by the Reporting Exchange require disclosure on environmental topics, in comparison to 49% and 30% for social and governance topics, respectively. The analysis als shows the need to work towards the alignment and harmonization of sustainability reporting, focusing on both the national and international level.
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Insights from the Reporting Exchange: ESG reporting trends - EN
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The international community has recently reaffirmed its strong commitment to conserve and sustainably use the ocean and its resources and to reduce the adverse impacts of land-based activities. Investment capital, both public and private, is fundamental to unlocking a sustainable approach to the development of the Blue Economy. In this spirit, the organisations commit to applying the 14 sustainable Blue Economy Finance Principles.
The Principles are intended to complement existing frameworks governing responsible investment in aspects of the Blue Economy. They are expressly intended to further the implementation of the Sustainable Development Goals (SDGs), especially those which contribute to the management of the ocean, in particular Goal 14 (“Conserve and sustainably use the oceans, seas and marine resources for sustainable development”). They are also intended to be compliant with IFC Performance Standards and EIB Environmental and Social Principles and Standards.
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Declaration of the Sustainable Blue Economy Finance Principles - EN
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The Roadmap presents a vision for more inclusive and sustainable financial markets and articulates a plan for impact investing to lead progress toward this future. Specifically, the Roadmap details six categories of action to drive progress toward the vision. For each category, the Roadmap describes specific actions needed, which stakeholders should lead on these actions, and a timeframe. Enacting the plan will require collective action by leaders from the entire impact investing ecosystem.
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Roadmap for the Future of Impact Investing: Reshaping Financial Markets - EN
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Many lessons have been learned through the issuance of the first emerging economy sovereign green bond in Fiji, which can be applied to future sovereign issuers. For an international issuance, there is a significant appetite for green bonds from both environmental, social and governance-focused (ESG) investors, and institutional investors with mandates to have a minimum percentage of their portfolio meeting ESG standards. But it should be remembered that international sovereign issuances require a significantly greater effort in terms of regulatory compliance compared to that of a domestic issuance. The primary global guidance comes from the International Capital Markets Association which produced the Green Bond Principles, a set of voluntary process guidelines intended for broad market use, developed by a range of investment and multilateral banks, including the World Bank and IFC. The Green Bond Principles set the foundations for the elements to be incorporated within a Green Bond Policy Framework—a critical document to give credibility to a green bond.
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Corporate governance and integrated reporting requirements need for further work on alignment and harmonization. To facilitate this work, researchers started looking for forms of harmonization in the sustainability landscape by exploring specific types of reporting on the platform.
In this paper, the Reporting Exchange uses the concept of harmonization in reporting to describe the development of better alignment in reporting components, terminologies and methods, and not the development of a single reporting provision. The paper highlights some of the examples of alignment, with the goal of understanding the potential drivers behind this alignment and suggest the lessons that could be applied to other fields.
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Insights from the Reporting Exchange: Corporate governance and harmonization - EN
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This discussion paper makes a proposal for how TPI might assess the carbon performance of oil and gas producers. Its central premise is that oil and gas producers are engaged in primary energy supply and therefore, that the appropriate measure of activity for the sector is energy production and that the appropriate measure of carbon performance is the lifecycle carbon intensity of primary energy supply. Using recent disclosures from Shell, Total and Petrobras, this report tests the proposed measure of carbon performance and identifies the key technical and other issues to be considered in the application of this measure. It demonstrates that:
- It is possible to define low-carbon transition pathways for primary energy production that are consistent with the Paris Agreement NDCs or pledges, and limiting warming of the planet to 2 Degrees;
- An appropriate low-carbon transition pathway for oil and gas producers is measured in terms of companies’ lifecycle carbon emissions per unit of energy supplied; and
- It is possible to assess companies against these transition pathways, using data on their current lifecycle greenhouse gas emissions and on their future ambitions, objectives and targets.
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Carbon Performance Assessment in Oil and Gas: Discussion Paper - EN
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The Rainforest Action Network, BankTrack, Indigenous Environmental Network, Oil Change International, Sierra Club, and Honor The Earth reveal that in spite of the urgent climate crisis, 2017 was a year of backsliding by private banks. The report, 'Banking on Climate Change 2018', is the ninth annual report ranking bank policies and practices related to the financing of some of the most carbon-intensive, financially risky and environmentally destructive fossil fuel sectors. The report also details the negative impacts of these sectors on human rights, Indigenous rights and community health and well-being.
Tracking 36 of the world’s biggest banks, the report finds that the institutions funneled USD 115 billion into extreme fossil fuels in 2017, an increase of 11% from 2016. The single biggest driver of the increase in financing came from the tar sands sector, where financing grew by 111% from 2016 to 2017. The massive hike in bank support for tar sands to nearly USD 47 billion, led tar sands to overtake coal power as the most heavily funded extreme energy sector.
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Banking on Climate Change - FOSSIL FUEL FINANCE REPORT CARD 2018 - EN
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Existing approaches to assess the economic impact of climate policies tend to overlook the financial sector and to focus only on direct effects of policies on the specific institutional sector they target, neglecting possible feedbacks between sectors. To fill in this gap, they develop a methodology based on financial networks, which allows for analyzing the transmission throughout the economy of positive or negative shocks induced by the introduction of specific climate policies. This methodology is applied to empirical data of the Euro Area to identify the feedback loops between the financial sector and the real economy. By focusing on climate policy-induced shocks that affect directly either the banking sector or non-financial firms, the paper analyzes the reinforcing feedback loops that could amplify the effects of shocks on the financial sector and then cascade on the real economy. Our analysis helps to understand the conditions for virtuous or vicious cycles to arise in the climate-finance nexus and to provide a comprehensive assessment of the economic impact of climate policies.
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A Financial Macro-Network Approach to Climate Policy Evaluation (pdf 1.2 MB)Summary
For many decades, there has been a debate about the relation between corporate social/environmental performance (CSP) and corporate financial performance (CFP). This study presents a review of academic research on this topic by applying a second-order meta-analysis. The results demonstrate a highly significant, positive, robust, and bilateral CSP-CFP relation. The relation is positive regardless of whether firms focus on ecological or social aspects, though corporate reputation turns out to be a key CSP determinant.
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This report analyses how structural trends may disrupt future oil demand and explains possible implications for publicly-listed oil companies and their investors. This report concludes with three actions that investors should consider to adapt to this new environment:
- Ask management teams to commit to returning shareholder capital in lieu of investing in new hydrocarbon growth;
- Vote against scrip dividend options in 2018 to increase capital returns to shareholders and;
- Adapt executive remuneration to prioritise returns and profitability over hydrocarbon production growth.
The research suggests shareholders should be requesting cash returns from outperforming oil and gas companies, instead of seeing it invested into economically unsound growth during a period of disruptive change.
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Strategy, Free Cash Flow, and Climate Uncertainty: Where Now for the Integrated Oil Sector? - EN
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The European SRI Transparency Code (the Code) focuses on SRI funds distributed publicly in Europe and is designed to cover a range of assets classes, such as equity and fixed income.
In the reviewed version, applications to sign up to the Code will be in line with key elements of the recommendations made by the Task Force on Climate-related Financial Disclosures (TCFD), Article 173 of the French TECV Act and the latest recommendations made by the High-Level Group of Experts on Sustainable Finance (HLEG) in its final report published in January 2018.
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The guideline gives start-up founders, investors and other users an indication regarding the sustainability potential of start-ups. Clear criteria and a transparent evaluation will enable the most objective and transparent verification of the sustainability potential. The evaluation provides a total value as well as a differentiated result of different sustainability dimensions. Also, the guide offers contextual adaptability of the scoring scheme (e.g., for different sectors and objectives), diversity and differentiation in use, and a positive cost-benefit ratio for all stakeholders.
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This study seeks to remedy the unclear relationship between environmental and financial performance by empirically investigating the risk-return relationship of low-carbon investment and characteristics of carbon-efficient firms. Based on 74,486 observations of U.S. firms from January 2005 to December 2015, the authors construct a carbon efficient-minus-inefficient (EMI) portfolio by carbon intensity, revenue-adjusted GHG emissions at firmlevel. They find that the EMI portfolio generates positive abnormal returns since 2010, which cannot be explained by well-known risk factors. The findings demonstrate that an investment strategy of “long carbon-efficient firms and short carbon-inefficient firms” would earn abnormal returns of 3.5–5.4% per year.
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The report examines climate management by 59 of the world’s largest banks finds urgent shortcomings that threaten to undermine efforts to support the transition to a low-carbon economy. Despite progress in some areas and several examples of individual best practice, the sector is failing to capture the risks and opportunities of climate change. The report supports the engagement letter – backed by over 100 investors with almost $2 trillion in assets under management – sent to over 60 banks last September asking about alignment with TCFD.
The investors call on banks to take four actions:
- Disclose their climate risk in line with TCFD recommendations
- Publish a company-wide, forward-looking strategy aligned with the Paris Agreement
- Set clear targets to increase and promote low-carbon products or services
- Disclose public policy positions related to climate change, and to influence their trade associations to take progressive positions on climate legislation.
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This guide provides a framework for Asset Owners who appoint and monitor external managers to assess whether their managers’ investment policies and processes are consistent with their ESG expectations. It aims to support them in their dialogues with managers so that they gain a clear understanding of the ESG risks and opportunities affecting their portfolios and how their managers are addressing them. This publication is in French.
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The report examines critical ESG risks in 10 sectors, which are classified under four broad themes, including: Water Management, Climate Change, Stakeholder Governance and Consumer Protection. Based on this analysis, many of these issues will potentially reach a tipping point and might pose a threat to shareholder value in the year ahead. For every theme the study contains at least one example from industry players. This story selections are meant to provoke new thinking about risk and sector attractiveness, particularly over the long run.
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Active ownership is generally regarded as one of the most effective mechanisms to reduce risks, maximise returns and have a positive impact on society and the environment – for passive and active investors. This publication provides an overview of the steps investors should consider to develop their active ownership policies and practices, with the ultimate goal of understanding corporate ESG risks and opportunities, defining their expectation for higher business performance and raising standards in the listed equity market. The aim of the guide is to offer all PRI signatories with practical tools, global best practices and references to be co-owners of investee companies and catalysts of change when needed.
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There is a growing consensus amongst leading investors globally that we are moving irreversibly towards a low carbon economy. With this Guide, WWF wishes to support asset owners and show how they can align their electric power sector investments with the objectives set in the Paris Agreement. The Guide focuses on coal and renewable power: such focus does not stem from a disregard of the challenges in gas power or heating, but from the recognition that coal and renewables offer both the most visible and urgent climate-related risks and opportunities to asset owners.
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Asset owner Guide on Coal and Renewable Electric Power Utilities - EN
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Moxie future has launched the first survey specialising on the responsible investment behaviour of women and the barriers they face. The survey was answered by 2536 women in Australia, China, Germany, UK and US, whereof respondents from China showed the highest interest in responsible investing. Also, 83% care about where their money is invested, 69% feel a sense of urgency to invest responsibly, and 63% are motivated to be responsible investors.
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Understanding Female Investors - Women using capital to change the world - EN
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This KOIS Invest report, comissioned by the Blended Finance Task Force, finds that private investment is not at the scale needed to tackle the sustainable land use (SLU) that comes with growing demand for food and energy. There needs to be a paradigm shift in the way in which (i) private sector investors view investment opportunities in SLU and how (ii) public and philanthropic investors engage to catalyse private capital in the Sustainable Development Goals (SDGs). The most common refrain in SLU is the lack of ‘investable’ project opportunities, even though they exist, in the form of early-stage SLU venture capital investments. To make the risk level more palatable to investors, collaboration with public finance institutions - a blended finance approach - is essential.
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This Climate Policy Initiative report, comissioned by the Blended Finance Task Force, analyses opportunities where blended finance can mobilise large scale private capital for clean energy. It evaluates, by geography and clean energy sector, the most significant opportunities for impact on both climate change and energy access per dollar invested; the risks and barriers that prevent investment; and how blended finance could be deployed to address investor needs. The report finds the greatest opportunities for blended finance in clean energy are in Sub-Saharan Africa and South and East Asia, with a subset of eight countries alone offering more than USD 360bn in investment potential in clean energy by 2030.
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Blended Finance in Clean Energy: Experiences and Opportunities - EN
