Climate roundup: More providers anticipate EU climate benchmark rules

ISS ESG has become the latest provider to anticipate the publication of final rules for new EU climate benchmark labels, having today said it has created a family of indices that stand ready to meet the specifications.

The index names will be labelled as provisional pending the publication of the detailed rules – so-called delegated acts – consistent with requirements set out by the technical expert group (TEG) that has been advising the European Commission on sustainable finance.

ISS ESG, which is the responsible investment arm of US proxy advisor Institutional Shareholder Services, claimed its new family of indices, which were created in partnership wth Solactive, “exceed TEG requirements by incorporating Scope 3 emissions from inception, ahead of the four-year phase in”.

ISS ESG’s announcement comes after S&P Dow Jones Indices last week outlined a concept index aligned with the more stringent of the two EU climate benchmark categories, the Paris-Aligned Benchmark (PAB).

It said it was on track to launch an index series that will align with the pending detailed rules and also said its product would “go beyond” them.

This would be by way of using multiple approaches, including using backward and forward-looking Trucost analytics, and incorporating transition pathway models endorsed by the Science Based Targets initiative.

MSCI was the first index provider to make a public move towards the new EU climate benchmarks, having in November announced the creation of two series of provisional indices.

MSCI puts its stamp on Carbon Delta risk model

MSCI has followed up on its recent acquisition of climate change scenario analysis specialist Carbon Delta with the launch of its version of a tool to help investors assess their exposure to climate risk.

The MSCI Climate Value-At-Risk tool measures the impact of climate change on company valuations. It builds on Carbon Delta’s model of the same name with the addition of information contained in MSCI’s data sets.

“The model took a big step forward,” David Lunsford, co-founder of Carbon Delta and now head of climate strategy and policy at MSCI in Zurich, told IPE.

“We’ve taken data sets that are important and critical to the model and on top of that we’ve also improved some of our physical risk modelling.”

According to MSCI, the new tool has four main applications for investors:

• how current and future climate policies will affect companies (policy transition scenarios);
• the strategic low carbon investments companies are making (innovation transition scenarios);
• the impact and financial risk relating to several extreme weather hazards;
• exact temperature value signifying what future temperature a company’s activities are aligned with.

MSCI completed the acquisition of Carbon Delta in October. The focal point of its development of climate change risk analytics and tools is its climate risk centre in Zurich, which was the home of the then-Carbon Delta team.

BMO engagement to prioritise climate change 

BMO Global Asset Management will be working with systemically important global financial institutions that are significantly exposed, through their loan book and underwriting portfolio, to climate change-related risks to encourage them to adopt stronger mitigation strategies.

Climate change is its key engagement priority for this year in light of the COP26 meetings in Glasgow later this year, it announced this week.

As part of this it will also focus on the phase-out of coal, marine transport, and sustainable food systems.

Vicki Bakhshi, director in the responsible investment team at BMO GAM, said: “The next decade is absolutely critical to meeting this ambition. Global emissions need to peak and decline to keep the chances of meeting the Paris goals alive.

“Waiting for action by governments is not enough – investors and corporates need to take bold and ambitious action.”

The asset manager’s engagement programme for 2020 also includes responsible drug pricing, setting the appropriate living wage, and managing antimicrobial resistance.