Weekly News | 30th May to 5th June 2022

Codo Advisory keeps an eye for you on the latest events and trends in climate finance and corporate sustainability, in the world and in Japan. Here’s what caught our attention last week.

World | Asset managers support disclaimers on green investment returns

• While the need for clearer regulation on ESG standards is increasingly felt by fund managers, many are also willing to be “honest” towards clients investing into ESG funds. For some, the issue is that the returns they can expect on the short and medium terms are not necessarily better than standard funds.
• ESG funds can follow several strategies, such as purposefully excluding companies with high carbon footprint, incorporating “some ESG elements” in their investment strategy, or actively seeking to make a “positive environmental and social impact” while searching for returns. Clients should be able to check if their portfolios align with their personal values.
• Lately, fund managers are more and more asked to be more explicit about their response about ESG shareholder resolutions, and how they balance them with their “clients’ long-term financial interests”. While the world largest money manager BlackRock claimed that these do not align with climate resolutions, in Europe clients are expressing their discontent if their investments are not performing in line with Paris goals.
• Read more about this story: Financial Times

Europe | European Central Bank to push for green loan program

• European Central Bank (ECB) President Christine Lagarde manifested her openness to using the institution’s lending capacities in order to support the green transition. Her message was delivered after receiving a letter from climate activists urging for an efficient use of post-Covid incentives, aligned with carbon neutrality goals.
• In its letter, Positive Money, supported by the co-signature of several economists, asked for a “green discount rate” that would encourage banks to fund clean-energy projects among other transition-oriented policies. It also advised that the ECB should support the wider climate agenda while tackling the new conjecture of high inflation hitting the euro-zone economy.
• Read more about this story: Politico, Bloomberg

Asia | Asia-Pacific “Climate Leaders” list presented by Financial Times and Nikkei

• The Asia-Pacific region is particularly exposed to acute climate-related risks, yet it is the most populous one and hosts both the largest ocean and the largest national emitter of GHG (China). It is thus crucial that businesses in this region respond to the looming threats ahead, even though governmental policies lag.
• Nikkei Asia and the Financial Times compiled a list of 200 Asian companies that achieved the greatest reduction in GHG emissions (Scope 1 and 2) between 2015 and 2020. Japan hosts the largest number of companies, but countries such as China were excluded from the list due to difficulties to access data.
• Read more about this story: Nikkei Asia, Financial Times

Comment from Codo: An important caveat of the compilation’s calculations is that they exclude Scope 3 emissions, i.e. emissions from suppliers and customers (often the largest proportion of all, accounting for more than 70% of the total emissions in most sectors). The ranking can therefore give a false impression of the actual contribution of these companies to global efforts for decarbonization. It remains nevertheless an interesting exercise, allowing companies to benchmark themselves against their peers.

Germany | Police raided Deutsche Bank offices for greenwashing allegations

• About 50 officers raided Deutsche Bank’s and its asset management branch DWS’s offices as allegations of greenwashing are targeting DWS. These allegations have been brought about by former DWS executive for sustainable finance, who pointed out that the bank made some inaccurate statements in its 2020 annual report. Investigations were opened by the German financial regulator and the US Securities & Exchanges Commission.
• In 2020, DWS claimed to have invested more than half of its assets in accordance with ESG criteria. According to the prosecutor in charge of the case, the investigation has been triggered by reports about the promotion of “green financial products” that were not so green, as the first research done last week suggests.
• DWS, second largest European asset manager, declared its intention to collaborate with authorities. Its CEO has resigned following the police raid, and its share has now lost more than 6% of its value.
• Read more about this story: Bloomberg, Financial Times, Novethic

Comment from Codo: This event highlights the growing risks faced by companies and investors in a context of increasing awareness against greenwashing. The fight against deceiving environmental claims was a major theme of COP26 in Glasgow last year, with the UN Secretary General announcing that the UN would lead initiatives to tackle this issue. Suspicion of greenwashing is a motive for more and more climate litigation cases around the world, with NGOs, citizens and public authorities suing private companies in court.

Canada | Greenwashing threatens ESG market

• A recent study shows lack of quality sustainability-related data prevents optimal navigation in the growing ESG market in Canada. Incomplete information hinders investors capacity to evaluate the impact of their investments on climate as well as climate-related risks on their own portfolios. Similarly, lack of consensus on various metrics on companies’ climate impact makes their assessment difficult from investors’ perspectives.
• Awareness is increasing around the need for an efficient reallocation of capital to reach net-zero in Canada, and Canadian authorities are developing a set of regulations and guidance to ease climate-related disclosures.
• Read more about this story: Financial Post, Bloomberg

France | First-even inflation-linked green bond issued

• France maintains its pioneering position in the sovereign sustainable finance market by announcing the issuance of a new green bond offering (Green OATs). France was already the first country to issues a sovereign benchmark green bond in 2017.
• The specificity of this new bond is that it is inflation-linked, meaning that the value of the bond is protected against inflation. This offer comes at a time when investors are willing to protect their investments from steep inflationary trends.
• Overall, France green-bond funded expenditures are expected to total €15 billion in 2022 and covers a wide range of investments from biodiversity protection to climate-change mitigation and pollution control.
• Read more about this story: ESG Journal Japan, Environmental Finance, ESG Today,

Japan | Downgraded again in 2021, Japan underperforms key SDGs metrics

• In this year’s Sustainable Development Report, Japan fell from 18^th to 19^th position in terms of progress toward the achievement of Sustainable Development Goals (SDGs). Northern countries won again this year the podium and are followed by Western countries.
• Japan got this year again the worst grade for “Gender equality”, “Climate Action”, as well as on biodiversity goals “Life Below water” and “Life on land”. For the first time, it also got the worse grade for “Responsible Consumption and Production”.
• Read more about this story: Asahi Digital, Catalyst

Comment from Codo: Despite a high level of visibility of the SDGs framework in Japan – including SDG logos visible in mainstream commercials – Japan confirms with this ranking the limits of its current strategy when it comes to truly transform itself to align with the goals of the 2030 Global Agenda set by the UN in 2015. A deeper change of mindset is needed, to imagine and implement a real transition to a sustainable and inclusive society.