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ESG Phenomenon: Climate Framework; PIMCO; Calvert

Editorial Staff, 7 October 2020


Developments and commentary in and around the ESG investment space.

Science Based Targets initiative (SBTi)
With the ESG accounting landscape strewn with competing initiatives and confusing acronyms, the launch of the Science Based Targets initiative, or SBTi, isn't helping the terrain. Nevertheless, the climate reporting and validation framework, backed by leading environmental groups, is providing lenders and insurers with a clearer path for reaching emissions targets set by the Paris accord.

Fifty-five financial institutions, including Bank J. Safra Sarasin, Standard Chartered, Eurazeo, and Amalgamated Bank, have already committed to following the SBTi  validating methods.

And there should be plenty more to follow. More than 1,000 firms, with a combined market cap of $15 trillion across 50 sectors, have pledged to align their carbon reduction goals with the 2016 deal struck in Paris. The question since has been how do firms go about demonstrably achieving this? The consortium behind the SBTi believes businesses now have that answer.

The framework has been jointly developed between CDP, United Nations Global Compact, World Resources Institute (WRI), and the World Wide Fund for Nature (WWF) to fast-track climate action using uniform, science-based reporting methods.

Cynthia Cummis, SBTi steering committee member and director at WRI said: “Today’s breakthrough means banks and other financial institutions can better understand and act on the link between their lending and investing activities and real-economy emissions. The finance sector now can, and must, build the bridge to a net-zero emissions economy and enable system-wide improvements based on climate science." 

In short order, climate stress has gone from nice to promote to top of the material-risk agenda for investors and managers, with financial institutions seen as key to funnelling capital into green solutions. The IPCC predicts that investments in energy transition technologies need to scale up between $1.6 trillion and $3.8 trillion annually between now and the middle of the century to meet the Paris ambitions.

Swiss asset manager J. Safra Sarasin committed to SBTi aims in 2015. Jan Amrit Poser, chief strategist and head sustainability said that the firm will be following the framework to become carbon neutral by 2035. The firm has already submitted a real estate case study for review. "We encourage all other financial institutions to follow and join us on the journey towards net-zero,” Poser said.

From Thursday, the SBTi is inviting other institutions to submit targets for validation, with the first 20 submissions being assessed free of charge during a pilot phase. The group will then use the feedback to update the framework in April 2021.

PIMCO and Pulitzer Center
Fixed income giant PIMCO has partnered with Washington DC-based media non-profit the Pulitzer Center to boost reporting on gender equality and the economic empowerment of women and girls.

The three-year partnership will include a $950,000 PIMCO Foundation grant to primarily support reporting projects and college/university reporting fellowships on these issues.

“Our new partnership will support the Pulitzer Center’s outstanding work sharing essential stories that would otherwise go untold; helping to educate, raise awareness and increase equality in societies worldwide,” Manny Roman, chief executive officer of PIMCO, said.

Executive director at the Center, Jon Sawyer, said committment from PIMCO would "facilitate a major expansion of our work" on these issues. The enterprise reporting outlet, launched in 2006, supports around 150 reporting projects through direct grants to journalists and media training. Media partners over the years have included The New York Times, PBS NewsHour, The Guardian, and National Geographic.

Calvert Research and Management, a subsidiary of US-based Eaton Vance, has launched a think tank to explore responsible investing. 

The Calvert Institute for Responsible Investing will start in North America, Eaton Vance said in a statement yesterday. 

Asset owners and investors in Europe and Asia will be able to learn about the institute’s work by connecting to its online hub hosting the latest research and client events and webinars. 

“Through research, education and collective action, the Calvert Institute seeks to direct the power of the financial markets increasingly to addressing the leading global challenges of our time, including environmental degradation, climate change, racial inequality and social injustice,” Eaton Vance said. 

The organisation will also partner with academic bodies, industry groups and other like-minded investors to create and sponsor third-party research focused on environmental, social and governance issues of concern to responsible investors.

Current research projects include exploring and assessing forms of corporate governance, human capital management, inequality and the financial materiality of gender and racial diversity, ESG integration, public finance, sustainable practices and the global energy transition.

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