Innovative Firms Core to ABN AMRO Emerging Markets Strategy

New fund looks to offer exposure to European investors amid growing interest for opportunities in developing economies.

Companies driving technological innovation in emerging markets (EMs) will play a central role in ABN AMRO Investment Solutions’ (IS) and Boston Common Asset Management’s (AM) new ESG equities fund, aiming to help investors diversify their portfolios. The ABN AMRO Boston Common Emerging Markets ESG Equities Fund is an EM equities-dedicated…

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What Europe’s Rightward Shift Means for Investors

The EU has engaged in a flurry of sustainable lawmaking in the past five years, but right-wing groups’ growing influence in parliament may imperil the achievements of its Green Deal.

As the European parliamentary election results trickled in on Sunday evening, it quickly became clear that the polls were correct: Europe had lurched to the right. Greens and liberals lost seats. Climate-sceptic far-right parties gained them, most dramatically in France and Germany. And while across Europe the dominant alliance between…

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Fixing Capital Flows Crucial to Augment Nature Finance

The impact of biodiversity-related disclosures will be limited without the right economic incentives to stimulate private sector support ahead of COP16 this October.

The repurposing of existing finance and the creation of an enabling environment for private finance are essential to boost efforts to address biodiversity-related risks and preserve nature, attendees at the UN Convention on Biological Diversity have said. Meeting in Nairobi, Kenya, for the Fourth meeting of the Subsidiary Body on…

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ESMA Tackles Greenwashing with New Tool

The EU watchdog plans to ramp up scrutiny of sustainable financial products, warning providers not to make “unsubstantiated” claims.

The European Securities and Markets Authority (ESMA) has developed a new tool that will enable it to better identify cases of greenwashing in the investment management industry. In a new report, the watchdog said it had recently increased its analytical efforts to detect mismatches between green claims and actual investment…

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Room Remains for Voluntary Reporting, says CDP

New platform consolidates existing questionnaires to streamline companies’ reporting efforts. 

Although governments around the world are increasingly mandating sustainability reporting requirements, there is still a place for voluntary disclosure frameworks, according to Sue Armstrong Brown, Director of Thought Leadership and Impact at global non-profit disclosure platform CDP.  “CDP prepared the market for the advent of mandatory disclosure,” she told ESG…

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Take Five: Modi Feels the Heat

A selection of the major stories impacting ESG investors, in five easy pieces. 

Climate wasn’t high on the ballot in India’s election, but Modi must soon face uncomfortable truths on coal.

Modi feels the heat – Conducted in record temperatures, the world’s biggest exercise in democracy dealt a blow to the ego of incumbent Prime Minister Narendra Modi, but it’s less clear how the outcome of India’s general election will impact its net zero transition. Stock prices were down this week on the assumption that reliance on coalition partners would slow the pace of the infrastructure investment plans of Modi’s ruling Bharatiya Janata Party (BJP). The impact of the election on India’s climate policy might be less significant, for a number of reasons. First, other priorities regularly topped polls of voter concerns, notably inflation and unemployment, although this has evolved recently, partly due to increased instances of climate-induced physical impacts, from landslides to floods to severe crop losses. Second, both the BJP and its leading opponent, Congress, are strongly committed to India’s continued adoption of renewables, albeit via different means – with the challenger party promising in its manifesto a new green transition fund and more resources for India’s National Adaptation Fund. A third reason, which leads on from the first two, is that neither major party has been forced to properly address India’s biggest climate problem – vast and rising emissions from coal. Indeed, current policy is for domestic production to increase up to 2040 to reduce reliance on imports. Coal – and Modi’s close relationships with the controversial Adani Group – notwithstanding, the BJP’s record on solar and hydrogen investments, and fossil fuel subsidy reductions is impressive. But regardless of the make-up of the coalition, India’s next government will need to up the ante to have a hope of meeting even its existing climate commitments, such as installing 500GW of renewables, which will handle 50% of electricity demand, by 2030.

Down, not out – Support for climate-related resolutions at the AGMs of US firms has been closely watched this proxy season for further signs of a “stewardship depression” witnessed since 2021. But climate votes only tell part of the story, with a high number of social-themed filings also vying for investor backing. These include four shareholder proposals seeking more action and transparency on pay, working conditions and racial equity by Walmart, the world’s largest private employer. Prior to

When is an Asset Manager an ESG Ratings Provider?

Lewis Saffin, Associate at Herbert Smith Freehills, highlights the key takeaways for asset managers from incoming ESG rating regulation in Europe.

Having the support of the European Council and the responsible European Parliament committee, the final compromise text in relation to a regulation on ESG rating activities (the regulation) is expected to start applying 18 months after its entry into force following formal approval and publication. Once live, the regulation will represent the first compulsory rules governing ESG rating activities in Europe.

ESG rating providers are the primary focus of the proposed regulation. However, alternative investment fund managers, UCITS management companies and portfolio managers which use ESG ratings for their products and services carried out in or marketed into the EU (collectively, asset managers) may be in scope if they procure these ratings from third parties or generate them using proprietary ESG methodology.

Asset managers should consider:

whether they are subject to regulatory obligations as an ‘ESG rating provider’ for the purposes of the regulation; and whether they are subject to disclosure obligations as the provider or user of ESG ratings. Can an asset manager be an ‘ESG rating provider’?

The regulation defines an ESG rating provider as “a legal person whose occupation includes the issuance and publication or distribution of ESG ratings on a professional basis”.

ESG ratings are broadly defined and could potentially include any sort of ESG scoring system.

As such, any asset manager which uses a proprietary methodology to generate ESG scores would potentially be issuing ESG ratings and fall within the definition of an ‘ESG rating provider’. However, there are certain exemptions from the substantive licensing, organisational and methodological obligations for ESG rating providers which could be availed of by asset managers.

Relevant exemptions for asset managers

The main carve-outs from the regulation which will be relevant to asset managers relate to:

private ESG ratings which are “not intended for public disclosure or for distribution”; ESG ratings issued by regulated financial undertakings that are used exclusively for internal purposes or for providing in-house or intragroup financial services or products; and disclosures mandated by certain provisions within Regulation (EU) 2019/2088 (the Sustainable Finance Disclosure Regulation; SFDR) and Regulation (EU) 2020/852 (Taxonomy Regulation).

Moreover, where an asset manager issues an ESG rating which is both (i) incorporated in a product or a service which is already regulated under EU law; and (ii) disclosed to

In Search of the Exclusion Premium

Cheng-En Li, Research Analyst at MainStreet Partners, explores how market performance of large-cap companies is influenced by poor ESG practices.

While grappling with uncertainty in capital markets caused by the exacerbation in inflation, mounting policy rates, and geopolitical tensions in 2023 and 2024, many institutions are now looking to align themselves more closely with good ESG practices in response to increased regulation and market demand. But a question in the mind of any investor is how ESG-related controversial behaviours can affect performance over the medium term.

Recently, we conducted research analysing data from 2023 to investigate this relationship between ESG behaviour and capital market performance, using the MSCI ACWI large-cap index as a benchmark. The study first examined whether the share prices of companies flagged for negative ESG behaviour show any discernible trends over the ensuing six months and over the full year in 2023. We then analysed the distribution of companies that have been flagged to determine if certain industries are more prone to ESG-related controversies.

Furthermore, leveraging sector return data, we assessed the performance implications of flagged companies in various industries, examining whether such industries underperform and if there is evidence of an ‘exclusion premium’. This is when outperformance is generated by ‘being selective’ and excluding companies with relevant ESG-related controversial behaviour.

Finally, we created sub-universes based on different ESG flags to explore how incorporating ESG behaviour into investment strategies can enhance performance and mitigate risk.

The findings indicate that this approach may affect the risk and return profiles of large-cap firms.

Negative impact of ESG controversies

ESG controversies/negative ESG behaviour refers to company practices that raise ethical, environmental or social concerns. We developed a framework to classify controversial events based on severity. The framework has five key performance indicators — scale, frequency, response, effectiveness, and transparency — to rate the news for the company with numeric score (ie, severity score) ranging from one to five; the company is assigned a yellow flag/red flag once the severity score exceeds the corresponding threshold.

We would then issue a red flag to a company that has engaged in any controversy that poses a significant threat to the company’s business and future performance, alternatively issuing a yellow flag to a company if the controversy is likely to develop into a material ESG risk.

Among the companies that were newly flagged in 2023, those with controversies over accounting standards and human rights

Storage Systems can Empower Emerging Markets

Andrea Webster, Senior Advisor at SustainFinance, says innovation must disrupt the status quo in traditional energy systems.

Idealists imagine clean renewable energy powering a content and peaceful world around us. Solar panels adorn rooftops and wind turbines swoop to catch the breeze. Reality paints a very different picture; we not only need to re-think and re-engineer the world around us, we also need to persuade many people it is a priority that needs paying for. While the cost of renewable energy is falling, resistance to re-engineering our daily lives is growing.

This is a battle for the narrative. One size does not fit all and motivations to embrace change differ depending on where you are sitting in the world.

For developed economies, the energy transition means replacing existing reliable but high-carbon energy sources with a clean and affordable alternative. Meeting national net zero commitments creates the imperative; however rises in inflation, interest rates and supply chain woes have pushed up the cost of living and reset priorities. We are seeing this reflected in politics with a move to the right.

For developing economies, the challenge is building new sources of affordable energy to meet increasing demand. Reliable energy is fundamental to economic development because it generates prosperity which ultimately helps underpin social order. Providing reliable, clean supply to millions on a low income is a political challenge for many governments.

Fundamental changes

While the global push toward renewable energy has made remarkable strides, with solar and wind power leading the charge, it is simply not fast enough. This was finally acknowledged in Dubai, reaching a new level of global consensus on the need to tackle climate change. COP28 did not go far enough for the scientists, but it was historical in its commitment to phase down unabated coal power. This text will translate into a scaling of fundamental changes in how electricity is generated, stored and distributed; in other words, it will accelerate the structural shifts taking place in electricity supply across the world.

Within the electricity supply chain, energy storage stands out as the crucial piece in building trust with end users and governments to reshape our power supply systems. Robust storage is needed to integrate and manage renewable energy sources to smooth out the intermittent nature of renewable generation. Being able to manage the peaks and troughs of changing user demands and ensuring a reliable power supply from

Africa’s Untapped Opportunity

Eva Warigia, Associate Director, Investor Relations at New Forests, explains how responsibly-managed plantation forestry in Sub-Saharan Africa is becoming an increasingly attractive asset class.

The African continent hosts 17% of the world’s forests. However, nearly four million hectares of these are lost each year, leading to a 3% loss of gross domestic product associated with soil and nutrient depletion, according to a report by the UN’s Food and Agriculture Organization. The report points out…

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