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Sustainable Finance Community Update

Working towards a sustainable future

An IFoA Sustainability Board initiative. Follow us on LinkedIn and Twitter for further updates and insights, and subscribe to the newsletter here.
17th September 2021
This week, SFC brings you a slightly lighter newsletter whilst some of our volunteers are off for study leave. Nonetheless, the countdown to COP26, climate news, thought pieces and podcasts continue! Pictured above: "No time to waste" taken by Om, one of our digital volunteers near Old Street, London
In the news
As COP26 approaches, experts talk tech, carbon pricing and what governments should do next
A lot is riding on COP26, the major climate change summit which was due to take place last year but postponed because of the pandemic. The U.K.’s official website for the summit says it will “bring parties together to accelerate action towards the goals of the Paris Agreement and the UN Framework Convention on Climate Change.”

Much of the discussions at Glasgow will be centered around nationally determined contributions, or NDCs. In an interview with CNBC the chairman of the Energy Transitions Commission, Adair Turner, noted how the NDCs presented at COP26 would, when added up, be “nothing like the scale of emission reductions that we need.”

When it came to getting results, Turner stressed the important role national governments could play. “You need not only corporates to be committed and to make voluntary commitments because they want to do the right thing,” he said, but strict government “regulations and taxes and other instruments as well.” He explained how establishing a framework to create the conditions in which businesses could then deliver was key.

Read the article here (CNBC).
Record high power prices make case for faster green transition, EU says
Wholesale European power prices have doubled this year, driven by factors including soaring coal and gas prices, surging CO2 prices and lower than usual renewable energy output. Frans Timmermans, the EU's top climate change official, said on Tuesday that these record high power prices show that the European Union must wean itself off fossil fuels and speed up the transition to green energy.

Timmermans said that even as fossil fuel prices have soared, costs for renewable generation have remained low and stable and that this should encourage the EU to speed up its green transition, to ensure more citizens have access to affordable renewable energy. European carbon prices, which also impact the cost of electricity, have also surged to record highs this year, but Timmermans said they were not the main culprit for soaring energy costs. The EU carbon benchmark contract is trading at around 61 euros ($72.01) a tonne, not far off an all-time high set this month as more ambitious EU climate targets have helped buoy prices.
Read the article here (Reuters).
We're reading
Climate Funds: Are They Paris Aligned?
In the last few years, ESG and climate related financial products have seen a huge growth globally, growing to $1.7 trillion in 2020. On the basis of two climate criteria (portfolio Paris Agreement alignment and fossil fuel intensity) 723 equity funds, with over US$330 billion in total net assets are grouped into two main categories: 'broad ESG' and 'climate-themed'. The main takeaways are:
  • In the broad ESG category, 71%, have a negative Portfolio Paris Alignment score, indicating the companies within their portfolios are misaligned from global climate targets.
  • In the climate-themed fund category there is significant variation in the climate performance of different funds, with Portfolio Paris Alignment scores ranging from -42% to +90%.The majority of funds are misaligned, with 55%, receiving negative Paris Alignment scores.
Read the report here (InfluenceMap).
Countdown to COP26 An analysis of the climate and biodiversity practices of Europe's largest banks
This report curated by ShareAction, discusses how the 25 largest European banks approach five critical climate and biodiversity-related themes:
  • Net-zero targets and alignment
  • High-carbon disclosures
  • Sector policies (fossil fuels, shipping, biomass)
  • Biodiversity
  • Executive remuneration
Each theme includes a comparison table, leading practice checklist, leading practice case studies, and next steps. The objective of this report is to catalyse ambitious climate and biodiversity commitments from the banking sector ahead of COP26. The report provides invaluable insight into how these top 25 banks plan on making a difference with regards to Climate Change and how their approaches compare.
Read the report here (ShareAction).
Tune in
Podcasts: Climate Papers
This podcast series brings together some of the best and keenest minds in preparation for COP26. Each podcast explores the topics outlined in the COP26 Universities Network briefing papers. The briefings range from net-zero solutions, why oceans matter in climate negotiations, nature based solutions for climate change to space-based earth observations for climate security.

The network consists of a group of more than 55 UK universities, coordinated by The Grantham Institute, working together to support ambitious outcomes for climate action at COP26 and beyond.
Available on demand here (Imperial College London).
The Secret Diary of a ‘Sustainable Investor’
This opinion piece is the first of a three-part essay that shares how ‘sustainable investor’ Tariq Fancy’s thinking evolved from evangelizing ‘sustainable investing’ for the world’s largest investment firm to decrying it as a dangerous placebo that harms the public interest. The article argues that the topic is critically important: it lies at the heart of how we reform capitalism to address important environmental and social challenges with concrete action. Fancy challenges business leaders who have advocated some ideas around sustainable investing and gives them the opportunities to offer a serious rebuttal.

Read the piece here (Medium).
Covering all bases: a multi-manager approach to investing
Multi-manager business is driven by an imperative that requires scale and has the power to deliver the largest, widest, and quickest social and environmental impact for investors and stakeholders. A broader exposure to sectors, regions and technologies not only improves beneficiaries’ risk-adjusted returns but is also crucial to help drive the global transition to clean energy and the renewable energy investment required to meet the 2015 Paris Agreement goals.

This article establishes why a multi-manager approach is pertinent to renewable energy and its other uses, including: 
  • The renewable sector is expanding rapidly which can lead to new and not-so-new manager and sector risks. The increased data and analysis obtained through reporting on more deals helps to provide better risk management under the multi-manager approach.
  • Building exposure through a portfolio of managers can also provide access to the broader renewables value chain.
Read the piece here (The Actuary).
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Purpose of the Sustainable Finance Community

Communication is at the heart of shifting mindsets on climate and sustainability issues, and is vital in highlighting and understanding steps we can take as finance professionals to implement positive change.

The purpose of Sustainable Finance Community is to encourage members to read, share and discuss content, in order to help us with this aim. We want to encourage information to flow both ways, so please get in touch by replying to or follow us on LinkedIn and Twitter.

The weekly newsletter summarises information from different sources for the benefit of subscribers. While we take care to select articles, papers and opinions from reputable sources, we do not perform independent verification and hence these summaries should not be relied upon for any purpose. Further, the statements, opinions and conclusions that are summarised within the newsletter do not necessarily represent the views of the IFoA nor the newsletter authors and their employers.

This initiative is brought to you by the Institute and Faculty of Actuaries (IFoA) Sustainability Board (formerly Resource & Environment Board). The Sustainability Board is a group of voluntary actuaries working with the IFoA to encourage change within finance. We work alongside - but separately to - the IFoA and as such this is not an IFoA communication. Find out more about the IFoA Sustainability Board here.

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