Digital library on sustainable finance

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TITLE Asset owner guide: Enhancing manager selection with ESG insight
AUTHOR Principles for Responsible Investment (PRI)
PUBLISHED Apr 2018
LANGUAGES EN 
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Summary

The PRI has published a guide to assist asset owners with ESG-related issues in the investment manager selection, appointment and monitoring process. Among others, this new document makes a fundamental point around manager selection: If there is no cultural fit and understanding of ESG factors between an asset owner and a potential manager, there is little fundament to establish a long-term investment relationship. The guidance covers a number of critical areas including portfolio construction, engagement and voting, and reporting, in addition to looking at ESG scoring tools, highlighting considerations that asset owners should note when selecting managers. The guide is not meant to espouse a “one-size-fits-all approach;”, but focuses on the interactions between asset owners and investment managers, and examines how ESG considerations can be implemented during the manager selection process. 

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TITLE Making Waves: Aligning the Financial System with Sustainable Development
AUTHOR UN Environment Inquiry
PUBLISHED Apr 2018
LANGUAGES EN 
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Summary

The final report of the UN Environment Inquiry into the Design of a Sustainable Financial System cautions that current financial flows are still nowhere near enough to deliver the trillions of dollars needed each year to finance the Sustainable Development Goals and the Paris Agreement. National action is critical, and there are a growing number of ambitious roadmaps on sustainable finance. Each is important, but some catalyze broader international action. For example, China’s new Guidelines for Establishing a Green Financial System are the world’s most comprehensive set of national commitments, covering priorities across banking, capital markets and insurance. Country-specific work will increasingly involve other parts of the United Nations system, partly catalyzed by the support provided by the Inquiry to the UN Secretary-General’s leadership in championing sustainable finance.

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TITLE The European Commission Action Plan - financing sustainable growth: assessment of the reform areas for PRI signatories
AUTHOR Principles for Responsible Investment (PRI)
PUBLISHED Apr 2018
LANGUAGES EN 
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Summary

Nine PRI signatories were members of the HLEG. The PRI served as an Observer, providing technical input on many of the recommendations. This report provides an initial assessment of the 10 reform areas outlined in the action plan. The Commission has committed to a timeline for implementation of the reforms, with the first legislative proposals to be published in May 2018.

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TITLE Switzerland's climate policy: Implementation of the Paris Agreement
AUTHOR Federal Office for the Environment (FOEN)
PUBLISHED Apr 2018
LANGUAGES DE  FR  IT  EN 
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Summary

The publication provides an overview of the current state of climate policy. The primary pillars of the Paris Agreement are presented and important concepts such as the global CO2 budget and climate neutrality are discussed. The publication highlights Switzerland's action to reduce greenhouse gas emissions and addresses the vulnerability of the country under continuing global warming. With the Paris Agreement climate-friendly investments and support of developing countries particularly exposed to climate change gain in importance. 

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TITLE Switzerland's climate policy: Implementation of the Paris Agreement
AUTHOR Federal Office for the Environment (FOEN)
PUBLISHED Apr 2018
LANGUAGES DE  FR  IT 
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Summary

The publication provides an overview of the current state of climate policy. The primary pillars of the Paris Agreement are presented and important concepts such as the global CO2 budget and climate neutrality are discussed. The publication highlights Switzerland's action to reduce greenhouse gas emissions and addresses the vulnerability of the country under continuing global warming. With the Paris Agreement climate-friendly investments and support of developing countries particularly exposed to climate change gain in importance.

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TITLE Extending Our Horizons. Assessing credit risk and opportunity in a changin climate: Outputs of a workin groups of 16 banks piloting the TCFD Recommendations.
AUTHOR UNEP Finance Initiative & Oliver Wyman
PUBLISHED Apr 2018
LANGUAGES EN 
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Summary

PART 1: Transition-related risks & opportunities

This report is the result of a collaboration of sixteen of the world’s leading banks under the UN Environment Finance Initiative (UNEP FI) to pilot the recommendations published by the Financial Stability Board’s Task Force on Climate-related Financial Disclosures (TCFD). Through this collaboration, banks set out to develop and test a scenario-based approach for assessing the potential impact of climate change on their corporate lending portfolios as recommended by the TCFD. 

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EXTENDING-OUR-HORIZONS (pdf 1.3 MB)
TITLE Uncharted waters - How can companies use financial accounting standards to deliver on the Task Force on Climaterelated Financial Disclosures’ recommendations?
AUTHOR Climate Disclosure Standards Board
PUBLISHED Mar 2018
LANGUAGES EN 
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Summary

The paper aims to continue engaging relevant organizations in a discussion about the similarities between the TCFD recommendations and some of the standards issued by the International Accounting Standards Board (IASB), to bring more clarity about how sustainability and financial reporting can be connected. It comes out as the European Commission calls for the review of current International Financial Reporting Standards (IFRS) to assess their potential impact on sustainable investment, as outlined in the recent Action Plan on Sustainable Finance.

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TITLE Women on Boards and the Human Capital Connection
AUTHOR MSCI
PUBLISHED Mar 2018
LANGUAGES EN 
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Summary

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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TITLE Labor Lens Investing
AUTHOR Boundless Impact Investing
PUBLISHED Mar 2018
LANGUAGES EN 
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Summary

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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TITLE European Commission Action Plan on Sustainable Finance - Factsheet
AUTHOR European Commission
PUBLISHED Mar 2018
LANGUAGES EN 
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Summary

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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TITLE Better Leadership Better world - Women Leading for Global Goals
AUTHOR Business and Sustainable Development Commission
PUBLISHED Mar 2018
LANGUAGES EN 
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Summary

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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TITLE Insights from the Reporting Exchange: ESG reporting trends
AUTHOR The Reporting Exchange
PUBLISHED Mar 2018
LANGUAGES EN 
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Summary

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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TITLE Declaration of the Sustainable Blue Economy Finance Principles
AUTHOR European Commission
PUBLISHED Mar 2018
LANGUAGES EN 
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Summary

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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TITLE Roadmap for the Future of Impact Investing: Reshaping Financial Markets
AUTHOR Global Impact Investing Network (GIIN)
PUBLISHED Mar 2018
LANGUAGES EN 
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Summary

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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TITLE Guidance for Sovereign Green Bond Issuers
AUTHOR International Finance Corporation (IFC)
PUBLISHED Mar 2018
LANGUAGES EN 
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Summary

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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TITLE Insights from the Reporting Exchange: Corporate governance and harmonization
AUTHOR World Business Council on Sustainable Development (wbcsd)
PUBLISHED Mar 2018
LANGUAGES EN 
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Summary

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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TITLE Carbon Performance Assessment in Oil and Gas: Discussion Paper
AUTHOR Transition Pathway Initiative (TPI)
PUBLISHED Mar 2018
LANGUAGES EN 
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Summary

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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TITLE Banking on Climate Change - FOSSIL FUEL FINANCE REPORT CARD 2018
AUTHOR Rainforest Action Network, BankTrack, Indigenous Environmental Network, Oil Change International, Sierra Club, & Honor The Earth
PUBLISHED Mar 2018
LANGUAGES EN 
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Summary

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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TITLE A Financial Macro-Network Approach to Climate Policy Evaluation
AUTHOR Veronika Stolbova, Irene Monasterolo, Stefano Battiston
PUBLISHED Mar 2018
LANGUAGES EN 
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Summary

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)
TITLE Strategy, Free Cash Flow, and Climate Uncertainty: Where Now for the Integrated Oil Sector?
AUTHOR Shareaction UK
PUBLISHED Feb 2018
LANGUAGES EN 
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Summary

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:

  1. Ask management teams to commit to returning shareholder capital in lieu of investing in new hydrocarbon growth;
  2. Vote against scrip dividend options in 2018 to increase capital returns to shareholders and;
  3. 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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TITLE European SRI Transparency Code 4.0
AUTHOR Eurosif & Transparent
PUBLISHED Feb 2018
LANGUAGES EN 
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Summary

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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TITLE Leitfaden zur Nachhaltigkeitsbewertung von Start-ups: Ein Praxistool für Gründerteams, Investoren und Fördermittelgeber
AUTHOR FNG & Borderstep Institut für Innovation und Nachhaltigkeit
PUBLISHED Feb 2018
LANGUAGES DE 
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Summary

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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TITLE Is “Being Green” Rewarded in the Market? An Empirical Investigation of Decarbonization and Stock Returns
AUTHOR Soh Young In, Ki Young Park & Ashby Monk (Stanford University)
PUBLISHED Feb 2018
LANGUAGES EN 
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Summary

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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TITLE Banking on a Low-Carbon Future
AUTHOR Boston Common Asset Management
PUBLISHED Feb 2018
LANGUAGES EN 
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Summary

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:

  1. Disclose their climate risk in line with TCFD recommendations
  2. Publish a company-wide, forward-looking strategy aligned with the Paris Agreement
  3. Set clear targets to increase and promote low-carbon products or services
  4. 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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TITLE Politique d'Investissement : Processus & Pratiques / Guide à l'Usage des Investisseurs Institutionnels
AUTHOR Principles for Responsible Investment (PRI)
PUBLISHED Feb 2018
LANGUAGES FR 
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Summary

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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