In Brief

US Solar Fund widens investment policy

Allowing investment into ‘development-stage assets’

The £150m US Solar Fund has announced proposals to widen its investment policy following a strategic review.

In a circular published this morning (October 31), the trust has amended its policy to include “development stage assets” that the board believes will allow for greater diversification and facilitate further growth opportunities.

Meanwhile, the board said that after consideration in its strategic review, it has not and does not expect to receive any proposals for the sale of any of the trust’s assets.

Subject to shareholder approval at an EGM on November 17, Amber Infrastructure will take the reins of the trust in April 2024, replacing New Energy Solar Manager.

The trust named Amber Infrastructure Group as its ‘preferred candidate’ to replace New Energy Solar Manager as the trust’s investment manager in August.

Amber is a specialist infrastructure investment manager with approximately £5bn of funds under management.

The selection of Amber follows a ‘multi-phase competitive process’ conducted by the trust’s board as part of the strategic review initiated in October 2022.

According to the Association of Investment Companies, the trust is trading at a 34.9% discount to net asset value.

Over the last three years, the trust’s returns were down 30.1%, compared with the AIC Renewable Energy Infrastructure sector average, which fell 14.9%.

This article first appeared on ESG Clarity’s sister title Portfolio Adviser.

Asset managers tell governments: Stop deep-sea mining ‘madness’

Widespread concern in the scientific community regarding deep sea mining

A group of 36 financial institutions, representing over €3.3trn of assets, are urging governments to protect the ocean and not proceed with deep-sea mining.

The Global Financial Institutions Statement to Governments on Deep Seabed Mining, coordinated by the Finance for Biodiversity (FfB) Foundation, wants the practice halted until the environmental, social and economic risks “are comprehensively understood”, and alternatives to deep-sea minerals have been fully explored.

The action, supported by firms such as Federated Hermes, Nordea, Storebrand, Rathbone Greenbank, UBP, WHEB and Tribe Impact Capital, comes ahead of the annual meeting of the International Seabed Authority on 24-28 July 2023, which holds the potential to grant commercial authorisation for deep-sea mining for the first time.

There is a widespread concern in the scientific community regarding deep sea mining and the irreversible impact it could have on delicately balanced and sensitive, deep ocean ecosystems.

Permitting extraction in this uncharted territory would not only destabilise fragile marine ecosystems but also undermine the very foundations of a circular ocean economy.

Jan Erik Saugestad, CEO of Storebrand Asset Management, said: “We must remember that the deep sea is really one of the very few pristine ecosystems remaining, and to just open for exploitation without insight is close to madness. 

“There is increasing recognition that biodiversity loss is a true financial risk and something we must consider when we invest in companies”.

FSB: Next steps for climate data and disclosure alignment

Roadmap highlights key areas for progress

Forward-looking data and continued international cooperation are two of the key areas for focus in the coming months, according to the Financial Stability Board’s (FSB) latest roadmap.

The annual FSB Roadmap for Addressing Climate-Related Financial Risks provides progress updates and areas for focus. It will be delivered to G20 finance ministers and central bank governors in Gandhinagar, India, next week.

Notable progress this year is the recent announcements by the International Sustainability Standards Board (ISSB) of its final standards, IFRS S1 on general sustainability-related disclosures and IFRS S2 on climate-related disclosures, and that the ISSB will be taking over the monitoring of TCFD.

But the report also highlights progress on improving the comparability of data, the development of frameworks and metrics for monitoring climate-related vulnerabilities, and the work on embedding climate-related risk into risk management.

“Across all blocks of the Roadmap, financial institutions’ progress in addressing climate-related financial risks relies on the non-financial corporate sector making similar progress, including in the areas of firm-level disclosures, addressing data gaps and transition plans,” the report said.

Looking ahead, the FSB would like to see further alignment in order to prevent firms having to double up on disclosures, and the development of metrics that measure climate-related risks in a forward-looking manner.

It is setting up a working group that will, as an initial task, develop a “conceptual understanding on the relevance of transition plans and planning by financial and non-financial firms for financial stability”. It stressed again that with many initiatives having started or being considered, “it will be important to ensure close coordination among the FSB, SSBs and other relevant bodies”.

Persefoni hires ISSB special liaison to sustainability board

Professor Kerstin Lopatta brings a European expertise to the climate accounting firm

Former vice-chair of the European Financial Reporting Advisory Group’s (EFRAG) sustainability reporting board Kerstin Lopatta has joined climate accounting company Persefoni’s sustainability advisory board. 

The ex-special liaison to the International Sustainability Standards Board will advise Persefoni’s board and executive team on three core areas: optimal climate disclosure standards; anticipated regulatory shifts; and how best to integrate sustainability reporting into corporate and investment management. 

Software provider Persefoni helps companies including Citi, Virgin and Hitachi track and measure their business’ carbon emissions, as well as automate their financial disclosures. Lopatta brings her experience at EFRAG, where she was responsible for the inaugural set of European Sustainability Reporting Standards that underpin sustainability reporting rules in the European Union (EU).  

A key part of Lopatta’s role will be to ensure that Persefoni’s solutions are tailored to customers that need to comply with EU disclosure regulations, such as the Corporate Sustainability Reporting Directive (CSRD). 

Co-founder and CEO, Kentaro Kawamori, said: “The EU remains at the forefront of the regulatory climate disclosure movement, and it is vital that Persefoni software enables our customers around the globe to seamlessly comply with the CSRD and operate in the region with confidence.” 

Lopatta’s appointment comes hot on the heels of two other high-profile hires at Persefoni. Former Securities and Exchange Commission (SEC) acting chair and commissioner Allison Herren Lee joined the advisory board in May, while former SEC lawyer Emily Pierce joined the firm’s regulatory department in December last year.

Lopatta, a professor of financial accounting, auditing, and sustainability at the University of Hamburg, said: “I am thrilled to join the Persefoni Sustainability Advisory Board and work with such a talented team tackling the next evolution of carbon measurement and reporting.”

Bloomberg launches low-carbon commodities index

Overweighting commodities with a lower carbon footprint

Bloomberg has launched a commodities carbon index designed to support investors in transitioning portfolios.

The Bloomberg Commodity (BCOM) Carbon Tilted Index overweights commodities with a lower carbon footprint while minimizing tracking error to Bloomberg’s flagship BCOM parent index.

“The BCOM Carbon Tilted Index is designed with investors’ complex needs in mind. There is a growing want to support the transition to a low-carbon economy while remaining aligned with their investment goals across all asset-classes,” said Allison Stone, head of multi-asset product, Bloomberg Index Services Limited.

The new index is the latest extension of the Bloomberg Commodity Index, which was launched in 1998 and introduced to the market the first explicit focus on market liquidity and capping mechanism constraining individual sectors and preserving a balance over time. BCOM provides broad-based exposure to commodities, and no single commodity or commodity sector dominates the index.

Fed governor claims climate change does not pose serious financial risk

Christopher Waller says climate risk is not 'material enough' to effect overall US economy

Climate change is real but does not pose serious financial risk, Federal Reserve System board of governors member Christopher Waller has said.

Speaking at the IE University-Bank of Spain-Federal Reserve Bank of Saint Louis Conference, ‘Current Challenges in Economics & Finance’, in Madrid last week, Waller said the risks posed by climate change “are not sufficiently unique or material to merit special treatment relative to others” but that he welcomed continued research.

“Climate change is real, but I do not believe it poses a serious risk to the safety and soundness of large banks or the financial stability of the United States,” he said. “Risks are risks. There is no need for us to focus on one set of risks in a way that crowds out our focus on others.”

Commentators expressed concerns that climate risks, which are projected risks in the future if action is not taken, are being underestimated by financial markets, which tend to rely on historical data.

Waller said the Fed considers financial risk as having relatively near-term effects and as creating “losses large enough to affect the real economy”.

Although he acknowledged the financial risks posed by physical climate risk and transition risk, he said “they are not material enough to pose an outsized risk to the overall US economy”.

Waller concluded: “Placing an outsized focus on climate-related risks is not needed, and the Federal Reserve should focus on more near-term and material risks in keeping with our mandate.”

The Fed is considering developing a set of proposed principles for large banking organizations to manage climate-related financial risks, an idea Waller opposed late last year.