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    The Year in Green – 2020

    While there might be much to be forgotten about 2020, this year also brought a fair number of positive changes in the world of sustainable investing. We sifted through our collection of close to 500 articles and boiled it down to the essentials.

    “2020 – The year of the Moment of Truth… It´s about the future of our children – mine and yours,” said global environmental scientist Johan Rockström in January. The year started with an ominous cloud of smoke over Australia’s bush. The tragic images of devastated land and the death of billions of animals prompted leaders to commit to driving change. After disappointing investors in early 2019, BlackRock‘s Larry Fink upped the antes in his annual “letter to the CEO”. “Awareness is rapidly changing, and I believe we are on the edge of a fundamental reshaping of finance,” he stated.

    For what became one of the last global ‘IRL’ events, leaders gathered in Davos for the annual World Economic Forum, which brought further proof that the dime finally dropped on climate change (for most at least). For the first time since the Forum started conducting its Global Risks Perception Survey 15 years ago, only climate-related threats ranked as the top risks for 2020. How could they have known? Increasingly isolated among the developed world leaders, US Treasury Secretary Steven Mnuchin rebuffed Greta Thunberg’s call to cease all fossil fuel investments, while others took the opportunity to announce further commitments. Another initiative announced in the Swiss Alps this week became the Future of Sustainable Data Alliance.

    As the pandemic’s first cases were reported in various European countries, in early February, the PRI hosted its first-ever Nordic Forum in Stockholm. AP2 CEO Eva Halvarsson welcomed the participants on behalf of the PRI. Amazon founder Jeff Bezos made the headlines later in the month, as he caved to the pressure and set aside a fraction of his fortune to save the world. Meanwhile, in Sweden, state pension AP1 finally succeeded in finding a successor to its now-infamous CEO and chose Kristin Magnusson Bernard.

    At the end of February, while the market started taking stock of the coronavirus epidemic, we looked at early estimates of the effect on the worldwide GDP as well as the related dip in CO2 emissions in China.

    In March, our day-to-day lives got more seriously disrupted by travel bans and event cancellations and the European Commission‘s published the Technical Expert Group’s (TEG) final recommendations on the taxonomy. ShareAction and the Asset Owners Disclose Project‘ published another important report, the “Point of No Return”, where the organisation attempts to classify the sustainability of major asset managers.

    As we got used to working remotely, we reached out to the AP funds 1, 2, 3 and 4 to find out how their sustainability efforts contributed to the strong financial performance they announced for 2019, as they reported a 17.6% average return. Magdalena Håkansson, Ulrika Danielson, Anne-Charlotte Hormgard and Tobias Fransson share the progress they made recently. At the beginning of the week, AP1 coincidentally decided to divest from fossil fuel. Meanwhile, the three Swedish institutions Alecta, Länsförsäkringar and Folksam gobbled up a SEK3 billion “COVID 19 bond”, a social bond issued by the IFC to provide financial support and loans to companies that are strongly adversely affected by the spread and turmoil linked to the virus outbreak.

    We then talked to researchers, bankers and asset managers about what they think COVID19 means for climate-related investments and the Paris Agreement’s goals. Here is what Hens Steehouwer from Ortec Finance, Andrew Howard from Schroders, Andrew Parry at Newton Investment Management and Thomas Kansy, at Vivid Economics, had to say. Meanwhile, AP3‘s CEO, Kerstin Hessius appeared in several media, warning against the economic destruction that the Coronavirus could unleash on the world.

    At the beginning of April, Pfizer came out with a COVID19-SDG bond and the Nordic Investment Bank (NIB) with a $1 billion Response bond. Just before the Easter break, we talked to Triodos IM‘s Hans Stegeman and Franklin Real Asset Advisors‘s Raymond Jacobs to examine the social effects of COVID-19. We concluded our COVID-19 ESG series with a review of reactions on the governance front.

    Meanwhile, Länsförsäkringar launched a competition where end-investors could vote for the most sustainable fund in their offering. One winner received a prize in each of two categories. Find out who. Our March 9 feature this year was published a little later and focused on women and mentorship, a great read about inspiration and friendship. Just before the end of the month, Sustainalytics, became a wholly-owned subsidiary of Morningstar.

    At the beginning of May, we offered you a long read with stories of deception and fraud, a cautionary tale for impact investors. In a survey of the asset management industry conducted by Finncap about how corporate profitability is affected by the pandemic, concerns were emerging that companies may have been prioritising directors over workers in their responses to the crisis. Georgia Institute of Technology and Northwestern University expressed concerns that a UN PRI membership’s main benefit is the increased business flow rather than improved ESG performance. Real estate company K2A launched a Green Equity Framework, the first such framework in the world. Meanwhile, Norfund, Norway’s development finance institution, found out it had fallen prey to fraudsters. In the same country, NBIM published an analysis of shareholder voting process, a review aimed to single out the steps and deadlines that stand in the way of more efficient voting processes.

    Just before the start of the Swedish summer, we joined Schroders’s Andy Howard, and Peter Sandahl, Head of Sustainability at Nordea Life & Pensions, to discuss the goals of the Net Zero Asset Owners Alliance and the challenges ahead. Shortly thereafter, 29 investors including Sweden’s AP2 and AP4 National Pension Funds, AP Pension, Handelsbanken, Nordea Asset Management, SEB Investment Management, Sparebank 1 Forsikring and Storebrand Asset Management co-signed a letter to Brazilian embassies across the world to start a dialogue on deforestation. At the same time, a number of stakeholders including SchrodersBNP Paribas Asset Management, Candriam, ShareAction and the WWF decided to join forces to enhance their interactions with the EU institutions and published a joint statement in support of seven recommendations for the upcoming Non-Financial Reporting Directive (NFRD).

    In July, among other interesting readings, the Stockholm School of Economics Mistra Center for Sustainable Markets (Misum) released a report exploring the effects of COVID-19 on sustainable economic and investment practices and the Rockefeller Philanthropy Advisors launched a practitioners guide to help investors turn their interest into action. A review of ESG and responsible investing by global institutional investors published by the CFA Institute argues that responsible investing has acted as a risk management tool rather than as a return enhancer for PRI signatories. Harvard Business School Professor George Serafeim who leads the Impact-weighted accounts initiative demonstrates, together with co-authors David Freiberg, DG Park and Robert Zochowski, that environmental impact is associated with lower corporate market valuation.

    Stockholm-based supplier of sustainable battery cells Northvolt announced the signing of a series of loan agreements worth US$1.6 billion with a consortium of commercial banks, pension funds and public financial institutions, including Danske Bank, Danica Pension, PFA Pension, SEB, and the Nordic Investment Bank.

    In August, it was time to brush up on the EU Taxonomy and we provided a number of helpful resources. At the same time, the European Commission‘s published the feedback it received on its proposed amendments pursuant to the integration of ESG disclosures into MiFID II. At the end of the month, the Production Gap 2019 Report, produced by a partnership including SEI, IISD, ODI, Climate Analytics, CICERO and the UNEP, finds that governments are planning to emit considerably more CO2 than planned.

    Stepping into September, Eurosif stirred the European sustainable investment community by publishing a response to the consultation on ESG disclosures (SFDR) which heavily criticised the proposal of the ESAs. The same week, Sweden’s much-awaited sovereign green bond reached the market. Elsewhere, an illustration of the mounting pressure companies will face when internal ESG checks and balances fail, Rio Tinto announced that its CEO, Jean-Sébastien Dominique Francois Jacques would step down following the destruction of the Juukan Gorge Cave site in the Pilbara region of Western Australia in May. Later that month, AkademikerPension (previously MP Pension) took exclusions to the next level and announced the exclusion of China from its investment universe.

    In October, AP7 revealed that a settlement had been reached with Alphabet, Google’s parent company, following a shareholder lawsuit launched in January 2019 on the grounds of sexual harassment, while the EU Commission announced the composition of the new Platform on Sustainable Finance. In a new report from Majority Action, a non-profit, non-partisan organisation focusing on holding corporations accountable for their investments, BlackRock and Vanguard came under criticism for their lack of shareholder action on climate change in 2020.

    As the severity of the pandemic’s second wave in Europe became evident, Japanese Prime Minister Yoshihide Suga announced that the country will become carbon neutral by 2050 and the European Union launched its first social bond.

    In November, AP Pension, AP2, PKA, Nordea, Öhman and P+, are the Nordic institutions among the members of the Institutional Investors Group on Climate Change (IIGCC) who sent a letter this week to 36 of the largest European companies discussing their expectations for Paris-aligned accounts and Ulf Erlandsson, challenged investors in the State Bank of India (SBI) issued green bond as the bank prepares a loan to Adani for investment in the Carmichael mine in Queensland, Australia resulting in Amundi and several other managers divesting from SBI’s green bonds. The same month, the International Integrated Reporting Council (IIRC) and the Sustainability Accounting Standards Board (SASB) announced they will merge into a unified organization, to be called the Value Reporting Foundation, by mid-2021. Söderberg & Partners’ 2020 report on sustainable pension funds highlights that Länsförsäkringar, Skandia and SPP are Sweden’s top-rated Sustainable Pension companies. Meanwhile, Nordea and AMF were downgraded from their 2019 achievement.

    In December, AP2, announced this week that the fund will no longer invest in fossil fuel companies. AP7 published its report on Corporate Climate Lobbying for 2017-2019. The study aims to increase awareness about the problem of negative climate lobbying and to encourage more investors and companies to engage in responsible climate lobbying. In another report from ShareAction, asset managers are still not effectively using their proxy voting power when it comes to environmental and social issues. Following in the path of the Net-Zero Asset Owner Alliance and the Institutional Investors Group on Climate Change (IIGCC), 30 asset managers representing US$9 trillion in AUM announced the launch of the Net Zero Asset Managers initiative. Just before the holidays, the AP Funds 1-4’s Council on Ethics published a list of Human Rights demands it has for large tech companies, in a document the Council on Ethics authored together with the Danish Institute for Human Rights.

     

     

    Photo by Kelly Sikkema on Unsplash

    Aline Reichenberg Gustafsson, CFA
    Aline Reichenberg Gustafsson, CFA is Editor-in-Chief for NordSIP and Managing Director for Big Green Tree Media. She has 18 years of experience in the asset management industry in Stockholm, London and Geneva, including as a long/short equity hedge fund portfolio manager, and buy-side analyst, but also as CFO and COO in several asset management firms. Aline holds an MBA from Harvard Business School and a License in Economic Sciences from the University of Geneva.

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