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Carbon removal demand soars, EU warms to natural gas, Japan joins net-zero club

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Welcome to Moral Money. A reminder: Moral Money subscribers are entitled to a complimentary pass to the FT’s Investing for Good Europe: Mainstreaming ESG event on November 3. Check out the full event agenda here, which includes a keynote interview with Marisa Drew, chief sustainability officer at Credit Suisse.

Today we have:

  • A gusher — not in oil — but in carbon removal projects

  • Can natural gas and nuclear be green(ish) in Europe?

  • UK social impact investing market tops £5bn

  • Japan joins the club — carbon neutral by 2050

Carbon removal sector heats up

In less than a year, there has been a threefold increase in the number of companies committing to net zero, from Apple to General Electric. This is already delivering more than hot air: as companies seek to make good on their commitments, demand is heating up for technology that can suck carbon from the atmosphere and projected revenues from this are soaring.

A new study commissioned by the UN-supported Principles for Responsible Investment (PRI), for example, reckons that by 2050 the demand for forest-related carbon removal will be delivering $800bn in annual revenues by 2050.

Processes such as direct air carbon capture, use and storage could generate an additional annual revenue of $625bn by 2050, the report says. The analysis was conducted as part of the PRI’s inevitable policy response programme.

Meanwhile individual companies are already jumping in. Apple is funding conservation of an 11,000 hectare mangrove forest in Colombia. Earlier this year, Amazon launched the “right now climate fund,” which is investing $100m in nature-based solutions. The fund’s first project, Amazon announced in April, is a $10m investment to remove 18 megatonnes of carbon dioxide from the atmosphere. 

Fossil fuel groups are following suit. BP is paying to protect 40,000 hectares of forest in Zambia. Total has committed to investing $100m a year in forest protection.

What is doubly notable is that financial companies are supporting this growth with instruments such as green bonds, says Jason Eis, executive director of Vivid Economics, and lead author of the PRI report. He hopes this will create a tipping point, enabling serious investment into carbon removal projects after this has languished for many years. “Finally, I feel like the die has been cast,” Mr Eis told Moral Money. “The money is there. Now it will be interesting to see how quickly the market develops.” (Patrick Temple-West)

An EU green(ish) light for natural gas and nuclear

Frans Timmermans, European Commission vice-president in charge of the European Green Deal, presented the European Climate Law earlier this month © REUTERS

Moral Money has previously reported how banks are developing transition bonds for companies that need cash to cut their carbon emissions. For example, Credit Suisse is working with the Climate Bonds Initiative to set parameters for legitimate transition bond projects.

Now the European Commission is increasingly signalling its support for what could count as transition projects. Frans Timmermans, the commission’s executive vice-president for the European Green Deal, told the International Energy Agency on Monday that “natural gas will play the role of a transitional fuel”. While not as clean as wind and solar power, technologies have improved to help scrub carbon emissions from natural gas, he said.

Natural gas is also crucial to developing hydrogen as a viable energy source. Hydrogen has boomed in popularity this year, but only a tiny amount of hydrogen production is produced without carbon emissions.

“Of course we want green hydrogen,” Mr Timmermans said. But in the interim, “blue hydrogen,” which is usually produced with natural gas, will also play a role, he said, adding carbon capture and sequestration will be needed for this.

Mr Timmermans also said nuclear power is an option for countries that need it. This is striking since when the European green deal was proposed in December 2019, Austria, Luxembourg and Germany led a charge against giving nuclear the green stamp of approval. “If you come to the conclusion that is your best option, then the commission will certainly not stand in your way,” Mr Timmermans said.

This stance is not echoed in all European bodies. The European Investment Bank, for example, created shockwaves late last year when it announced it would stop financing all fossil fuel projects — including natural gas. Werner Hoyer, EIB president, told a meeting of the B20 business group on Monday that the EIB remained committed to this hardline stance, since it planned to turn itself into the “Climate Bank”, with $1tn of green investments in the coming years.

Werner Hoyer, president of the European Investment Bank, speaks during the International Economic Forum of the Americas’ Toronto Global Forum © Bloomberg

Mr Hoyer is also working with the commission to mainstream its green taxonomy, that sets out tough definitions of “green” versus “brown”. “All this work [with the taxonomy] is aimed at preventing greenwashing and to promote more transparency,” he said, hailing the role that Europe is playing in setting global standards. “For the time being Europe is at the front line.”

However, Mr Hoyer also acknowledged the need for more “transition” mechanisms (even if the EIB is not funding “transitional” fuels). Thus a big question for the months ahead will be whether or not banks test the transition bond market with natural gas and nuclear project financing — and whether environmentalists will bang their greenwashing drums. (Patrick Temple-West and Gillian Tett)

UK social impact investing market tops £5bn

Covid-19 has put a new focus on the “S” in ESG. However, fresh data from the UK suggests that financial investment in this area was rising even before the pandemic hit.

According to Big Society Capital, a London-based impact investor, social impact investing broke through £5bn in 2019, up 20 per cent compared with the year before, with a jump in funding for social concerns such as mental health and housing for people with learning disabilities.

The data show most of the growth has come through alternative sources of financing rather than traditional bank loans. Social property funds account for the largest portion of the social impact investment market, the data show.

BSC has played a significant role in growing impact investing in the UK. It built the social property fund market from nothing to £2bn in the six years ending in 2018. Social property funds, which support housing for at-risk populations including those with learning disabilities, did not exist eight years ago, BSC said, and now they account for 42 per cent of the £5.1bn of outstanding social investments at the end of 2019.

Another UK sector with strong growth was social impact venture investing, which has seen a nearly 50 per cent increase year on year. This venture financing has helped projects dedicated to mental health, childhood obesity and poverty relief.

“The impact of Covid-19 has been both social and economic, and I believe [it] will be a key driver in shifting investors’ focus from a purely financial return to one that delivers a social impact too,” Stephen Muers, interim chief executive of BSC, said in a statement. (Patrick Temple-West)

Chart of the day

Line chart of Share prices and index, in $ terms (rebased) showing Xi move and likelihood of Biden win boost clean energy stocks

President Xi Jinping’s vow last month that China will be carbon neutral by 2060 and expectations that the US election could reshape the US’s energy sector have fuelled a rally in global solar and wind producers.

Grit in the oyster

While many companies are taking extraordinary steps to pitch in for the greater good, that is only part of the story. Here’s a little corporate grit in the oyster

With increasing concerns about human rights violations against Uyghurs in China’s Xinjiang region, clothing and other global companies are scrambling to determine whether any of their source material originate from the conflict zone. 

Now, as Uyghur human rights legislation advances in the US, concerns are mounting about solar supplies from Xinjiang. China produces about two-thirds of the world’s polysilicon, a key component in solar panels.

“We note the potential impact to the solar supply chain given the high dependence on Chinese manufacturing of polysilicon used to make solar panels,” analysts at Bank of America wrote in an October 27 report. US Customs and Border Patrol limits on what is allowed from Xinjiang, “could expand to US solar as well,” the analysts said.

Last week, Bloomberg reported that the top US lobbying group for solar companies recommended businesses move their supplies out of Xinjiang.

Tips from Tamami

Nikkei’s Tamami Shimizuishi keeps an eye on Asia to help you stay up to date on stories you may have missed from the eastern hemisphere

Japan’s long-awaited pledge to be carbon neutral by 2050 was finally delivered earlier this week, following China’s carbon neutrality commitment made in September.

“We will put maximum energy in achieving a green society,” Prime Minister Yoshihide Suga said in his first policy address to parliament on Monday. He added: “Climate change measures are no longer obstacles for economic growth, but would invite industrial and socio-economic reforms and lead to a major economic growth. We have to change our mindset.”

Mr Suga didn’t provide the details on how the fifth-largest emitter would achieve “net zero” within decades, but named a novel technology as one of key innovations for Japan’s successful green transformation: carbon recycling.

While investors welcome the impact that Mr Suga’s comment will have in boosting new technologies, there is surprise that the obvious routes to decarbonisation are not more in focus. “It’s illogical for Japan to ignore the giant elephant in the room which is decarbonising its power plant sector and stopping coal investment overseas,” said Eric Pedersen, head of responsible investments at Nordea Asset Management.

Environmentalists also think that carbon recycling is not the most efficient way to curb global warming. “Turning CO2 back into familiar products such as synthetic fuels and plastics only momentarily delays carbon’s journey to the atmosphere, where it will remain warming our planet,” said Keith Whiriskey, deputy director at environmental NGO Bellona Europa.

But carbon recycling advocates in Japan believe in the potential of the technology.

Carbon Recycling Fund Institute, a foundation established in 2019 to promote the concept and foster research on the topic, estimates that carbon recycling could offset about 10 per cent of the country’s emissions annually by 2050. There are already some successful cases of carbon recycling, such as absorbing CO2 in the process of producing concrete.

“The problem of emissions is a global issue. [We] would like to collaborate with researchers and investors globally,” said Masamichi Hashiguchi, senior executive director at the institute.

Smart reads (and watch)

  • The FT has published its fourth special report on the energy transition: check back on Tuesday for the final story in the six-part series. For now, read Patrick Temple-West on how finance houses are joining the rush toward supporting the energy transition.

  • Check out the Centre for the Study of Financial Innovation’s latest discussion: ESG ETFs: why these ‘themed’ funds are capturing investors’ imaginations. Moral Money’s Billy Nauman moderated a panel with Deborah Fuhr, founder of ETFGI, and Cosmo Elms, head of ETF business development at LGIM. Watch the talk here.

Further reading

  • Money Clinic podcast: How to get started in ESG investing (FT)

  • The confusing investment path to saving the planet (FT)

  • Oil and gas lobby moves to embrace green investors (FT)

  • Finance houses join the rush toward supporting the energy transition (FT)

  • China plans to phase out conventional gas-burning cars by 2035 (Nikkei)

  • The Number of Black Board Members Surged After George Floyd’s Death (Barron’s)

  • How the Virus Slowed the Booming Wind Energy Business (NYT)



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Wall Street stocks hit record highs ahead of crucial jobs report

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Equities updates

Wall Street’s stocks hovered at fresh all-time highs on Thursday, after weekly data suggested employment in the world’s largest economy was beginning to stabilise.

The blue-chip S&P 500 finished 0.6 per cent higher in New York, marking a new closing record level, despite having pushed slightly higher during the trading day a week ago. The technology-heavy Nasdaq climbed 0.8 per cent, also a new high, after data showed the number of Americans actively collecting jobless benefits had fallen to its lowest level of the pandemic.

Ahead of Friday’s closely watched non-farm payrolls data, the US labour department on Thursday reported 385,000 initial unemployment applicants for the last week in July, down from 399,000 in the previous week.

In advance of the release of the payrolls report from last month, economists polled by Bloomberg forecast that the US economy will have added 870,000 jobs in July, up from June’s blockbuster 850,000 figure, while the jobless rate is predicted to dip to 5.7 per cent, down from 5.9 per cent in June.

A strong jobs print would intensify speculation about when the US Federal Reserve might begin to cut back its $120bn in monthly asset purchases, which have supported the economy during the pandemic. “We expect that taper talk could lead to stock market volatility, given the stretched technical indicators,” said analysts at Credit Suisse.

Line chart of Indices rebased showing US equities at record highs before non-farm payrolls release

Goldman Sachs says Wall Street’s climb has further to go this year. Analysts at the bank estimated that the S&P 500 would gain a further 7 per cent by the end of 2021 — on top of index gains of 17 per cent so far this year — on the back of a bullish estimate that company earnings per share would grow 45 per cent throughout this period.

“We expect stronger revenue growth and more pre-tax profit margin expansion, as firms successfully manage costs and as high-margin tech companies become a larger share of the index,” they wrote.

In Europe, the region-wide Stoxx 600 closed up 0.4 per cent at another record high, while London’s FTSE 100 edged 0.1 per cent lower after the Bank of England acknowledged that some “modest tightening” might be needed in the next two years after its latest policy meeting on Thursday.

The UK central bank said economic growth was running “slightly” above expectations. But it also noted “difficulties in matching available jobs and workers” and “uncertainty” over how the UK economy would react to the end of the furlough scheme brought in to deal with the effects of the pandemic.

The BoE’s announcement triggered a brief dip in UK government bond prices, with the yield on the 10-year gilt climbing to a session high of 0.54 per cent before ending day at 0.52 per cent.

In Asia, Hong Kong’s Hang Seng index close down 0.8 per cent and the CSI 300 index of Shanghai and Shenzhen-listed shares dropped 0.6 per cent, as China imposed new nationwide travel curbs as cases of the Delta variant spread to 15 provinces.

The global oil benchmark Brent crude rebounded 1.4 per cent to $71.33 a barrel but remained about 6 per cent lower for the week, as worries that the spread of the virus could depress demand for fuel outweighed tensions in the Middle East with Iran, which has supported crude prices.

Unhedged — Markets, finance and strong opinion

Robert Armstrong dissects the most important market trends and discusses how Wall Street’s best minds respond to them. Sign up here to get the newsletter sent straight to your inbox every weekday



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Taking Aim at a small-cap success story

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London’s Alternative Investment Market was traditionally a hunting ground for gung-ho private investors, willing to take a punt on thinly traded small-cap stocks that could make — or lose — them a small fortune.

But eight years ago, Aim found a higher purpose. It is now the go-to place if you want to reduce your inheritance tax bill.

This week is the anniversary of reforms ushered in by former chancellor George Osborne making it possible to hold Aim shares within a stocks and shares Isa.

Designed to boost investment in small British companies, the tax-free attractions of Isas were yoked with the IHT loophole of business property relief (BPR). Intended to protect family businesses from ruinous tax bills, this IHT exemption also applies to certain Aim shares if held for over two years.

Of course, BPR was never intended to benefit ageing “Isa millionaires”, but plenty of their heirs will be spared a 40 per cent tax charge when they inherit these portfolios. What’s more, the Isa wrapper means there hasn’t been a penny of capital gains or dividend tax to pay despite the stonking performance of Aim shares in recent years. Thanks, George!

Today, up to half a billion pounds a year is flowing into “IHT Isas” offered by specialist investment management companies such as Octopus, Unicorn and RC Brown, according to estimates by investment service Wealth Club.

This trend has been boosted by the pandemic, as the tax liability of soaring equity valuations collides with fears of diminishing life expectancy.

Line chart of Indices, rebased  showing The Alternative Investment Market outperforms

But IHT fever alone cannot account for the impressive outperformance of the alternative index. Since the pandemic nadir last March, the FTSE Aim 100 index has rebounded 107 per cent — nearly two and half times the recovery achieved by the FTSE 100 over the same period.

Hargreaves Lansdown, the UK’s biggest investment platform, says 2021 is “on track to be the biggest ever year” for Aim trading, as investors buy into the small-cap growth story.

Data from investment brokers show that tech, green energy and life sciences companies are the biggest draw for investors, alongside the commodities stocks with which Aim is more traditionally associated.

When the Isa rules changed in 2014, there were just 18 Aim-listed companies with a market cap of £500m or more (a third were highly speculative mining or oil and gas exploration outfits, cementing Aim’s reputation as a volatile market).

Today, there are 68 stocks that have passed the £500m point — and spanning a range of sectors, they are arguably much more investable.

Online retailers Asos and Boohoo are two of the most-bought Aim shares by Hargreaves Lansdown investors this year, having received a huge sales boost during the pandemic.

Other tech picks lurking just outside the top 10 include GlobalData, which supplies thousands of governments and companies with data analytics, and identity data specialist GB Group, which claims to be able to ID more than half the world’s population. All have greatly increased their earnings in recent years.

“The FTSE 100 is full of yesterday’s companies, but if you invest in Aim you can get exposure to tomorrow’s winners,” says Alex Davies, chief executive of Wealth Club. “It’s the nearest thing we have to a British Nasdaq.”

On rival platform Interactive Investor, the green theme dominates. Hydrogen energy producer ITM Power is its bestselling Aim stock so far this year, with investors betting it will benefit from changing energy requirements in a more carbon neutral world.

The same tailwinds are driving investors towards Ceres Power and Impax, an asset management house specialising in ESG.

Two questions hang over Aim’s outperformance. First, has this rally got further to run? Second, how far would any future removal of the IHT advantages dent its popularity with investors?

Simon Thompson, my former boss at the Investors Chronicle and compiler of its Bargain Shares Portfolio, says the small-cap bull run is far from over.

“The outperformance of small-caps reflects the higher weighting in Aim indices to fast-growing sectors (technology, ecommerce and healthcare) that are beneficiaries of benign monetary and fiscal tailwinds — it’s that simple,” he says.

Simon has an enviable crystal ball. He highlighted the likely sectoral winners and losers from quantitative easing in his most recent book, Stock Picking for Profit. While he wouldn’t claim to have predicted the pandemic, it has accentuated these gains as software and ecommerce companies exploit their prime positions, and healthcare stocks benefit from government largesse. However, even Simon accepts that “the easy money has been made”.

He predicts the next stage of the rally will be largely driven by earnings momentum and rotation from growth to value stocks as monetary policy starts to normalise — but pleasingly, this is a market that favours stock pickers.

Accordingly, his picks for the 2021 Bargain Shares Portfolio include Aim-traded mining, oil and gas companies, renewable energy, UK retailers, housebuilders and a royalty company. In its first six months, the portfolio has delivered a total return of more than 20 per cent (9 percentage points higher than the FTSE All-Share index).

As Aim has become bigger and more diverse, so too have its investors. Its ranks of fast-growing tech-enabled businesses have been pulling in the mainstream retail punters, while the growing size of Aim constituents has attracted more institutional money.

Both would help cushion the blow if Aim’s IHT advantage failed to survive post-Covid tax reforms. But if business property relief was limited, I do wonder how many investors would actually sell up.

Some might switch to other tax-advantaged investments like VCTs or EIS, or simply give the money away (assuming the seven-year rule remains in place). But the loss of BPR would be of no long-term consequence to institutions or younger investors like me. In the event of a sell-off, we’d have a chance to buy into the future growth story at a bargain price.

For now, another key Aim theme that is likely to develop is a surge in M&A activity. Simon Thompson notes that the average market capitalisation of Aim companies is at an all-time high of £178m, although the number of listed companies has halved since 2007. This, he says, is a reflection of their higher quality — a factor that will undoubtedly tempt predators to run their slide rules.

Claer Barrett is the FT’s consumer editor: claer.barrett@ft.com; Twitter @Claerb; Instagram @Claerb





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What’s in a name? DWS eyes ESG refresh for funds

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Hello from New York, where I am hoping you are looking forward to some rest and relaxation this month. While it might be fun-and-games time for some of us, Deloitte’s employees are headed to school — climate school.

Deloitte has started to roll out a new climate learning programme for all 330,000 of its employees worldwide. The new programme, developed in collaboration with the World Wildlife Fund, is designed to help Deloitte advise clients. Remember, in June rival Big Four firm PwC said it would add a whopping 100,000 staffers to capture the booming environmental, social and governance (ESG) market.

Clearly, people are eager for ESG information, and we hope we can help fill the void with this newsletter. Read on. — Patrick Temple-West

DWS re-engineers European ETF to lure ESG investors

Corporate name changes are often the focus of public snickering. Standard Life Aberdeen’s switch to Abrdn in April, for example, was widely mocked on the Financial Times website. The FT’s Pilita Clark has even argued that corporate rebranding is a waste of time.

Last week, DWS, Deutsche Bank’s asset management arm, announced the renaming of nine of its ETFs to incorporate the ESG label and track a new index. The new index provided by MSCI, which includes ESG screens, replaces Stoxx indices.

The move is part of a larger trend to appeal to ESG investors. JPMorgan and Amundi were among the companies that overhauled more than 250 conventional funds to add sustainability language and investment criteria in 2020, according to Morningstar. 

Companies that have failed to capture investor interest are now adding “a coat of green paint” on funds, says Ben Johnson, director of ETF research at Morningstar. The changes are “an attempt to revitalise this particular product,” Johnson said.

© Bloomberg

DWS is also adding securities lending activities to the ETFs, the company said. Funds will often lend shares to short sellers to liven up returns, but the practice could raise concerns from ESG investors. In 2019, Hiro Mizuno (pictured), the former head of the world’s largest pension fund, stopped lending out securities from the Japanese scheme because he believed shorting was antithetical to his mission of long-term value creation.

Refurbishing existing funds to give them an ESG-friendly look has limitations, Johnson said.

“There are ESG-like exclusionary screens that are hardly what we would think of as best in class ESG intentional index strategies,” Johnson said. 

And renaming a fund to hoover up ESG money has caught the eye of regulators. Last week, Securities and Exchange Commission chair Gary Gensler said he wanted the agency to revisit its “names rule”, which prohibits funds from using materially deceptive or misleading names.

“Labels like ‘green’ or ‘sustainable’ say a lot to investors,” Gensler said. “Which data and criteria are asset managers using to ensure they’re meeting investors’ targets — the people to whom they’ve marketed themselves as ‘green’ or ‘sustainable’?” (Mariana Lemann)

Climate campaigners allege central banks aren’t doing enough to avoid a ‘hothouse world’

© AP

When the Federal Reserve in December finally joined the Network for Greening the Financial System (NGFS), all systemically important banks worldwide fell under the organisation’s climate risk oversight. With the US onboard, the NGFS can command significant influence over the financial industry’s role in climate change mitigation.

NGFS research is already being used by central banks around the world. To build their stress tests, the Banque de France, European Central Bank and Bank of England have used NGFS forecasts, including the frightening “hothouse world” scenario in which global warming imposes extreme costs on everyone.

© S&P Global Ratings

And companies are taking the financial implications seriously. For example, Global Partners, a US petrol company, has warned shareholders that bank financing could get more difficult as NGFS’s climate stress tests are implemented. 

But the NGFS has flaws, according to Reclaim Finance, a Paris-based activist group founded in 2020 by Lucie Pinson. In a report provided exclusively to Moral Money, Reclaim Finance argued that NGFS climate risk forecasts rely too heavily on carbon capture and storage, which would not sufficiently reduce fossil fuels investment enough to limit global warming to 1.5°C.

In July, NGFS updated its climate risk scenarios to limit global warming to 1.5°C. However, Reclaim Finance takes issue with NFGS’s assumptions about how banks would reduce their carbon footprint to get there. A false sense of security could prompt companies to decelerate efforts to reduce their fossil fuel assets.

NGFS scenarios could allow for significantly more fossil fuel extraction investments in the 2030s, Reclaim Finance said. The International Energy Agency said in May that energy companies must stop all new oil and gas exploration projects from this year to halt global warming.

“These scenarios rely too heavily on carbon capture and storage and permit ongoing investments in fossil fuels, a recipe for climate chaos and stranded assets,” said Paul Schreiber, a campaigner at Reclaim Finance. (Patrick Temple-West)

Inside the fight to eliminate microplastics

© Getty Images

Polymateria, a London-based company, has published findings this month identifying a new type of plastic that can decompose into harmless wax.

Imperial College London scientists proved the technology worked in the Mediterranean, home to the world’s highest global microplastic concentration, according to Niall Dunne, chief executive of Polymateria.

Microplastic, a traditional plastic, is harmful to the environment because over time it fragments into tiny particles less than 5mm in size. These particles are easily digested by aquatic animals and can travel through the food chain.

While there is significant interest and demand for an alternative to plastics, innovation has lagged, Dunne told Moral Money.

Convenience store chain 7-Eleven has begun implementing the sustainable plastic into its packaging, as has Pour Les Femmes, a clothing brand created by House of Cards actress Robin Wright.

“Our awareness on the issue is thankfully rising but sadly robust research and innovation is still lagging behind,” said David de Rothchild, the British environmentalist known for building a plastic boat and sailing it around the Pacific Ocean.

(Kristen Talman)

Tips from Tamami

Nikkei’s Tamami Shimizuishi helps you stay up to date on stories you may have missed from the eastern hemisphere.

To attract more foreign investors, the Tokyo Stock Exchange is instituting the biggest reform of Japan’s stock markets in a decade.

From next April the exchange will require companies to be more aligned with global corporate governance and financial standards. As part of the overhaul, the Tokyo bourse will split into three sections — prime, standard, and growth. To list in the prestigious “prime” section, companies must meet tighter criteria, such as liquidity standards.

Companies in the prime group are also recommended to fill a third or more of their boards with external directors and to disclose climate risk.

Approximately 30 per cent of the companies that are listed on the top-tier group in the exchange fall short of the requirements for staying in the prime section, Nikkei said.

To stay in the top group, some companies are scrambling to unwind long-criticised practices such as cross-shareholdings and cash-hoarding. The new requirement triggered harsh competition among companies to find qualified candidates for their boards. Weekly Toyo Keizai magazine estimates that Japan Inc will face a shortfall of 3,000 outside directors next year.

The companies that failed to qualify for the prime section this time around can apply again with new information by December.

The reshuffle in the exchange is creating new investment opportunities as well as risks. If you are an investor in the Japanese stock markets, it is a good time to take a look with fresh eyes.

Chart of the day

Global impact fundraising activity

With TPG and Brookfield launching $12bn for new climate funds, the impact investing space has never been hotter. Globally there are 675 impact funds representing about $200bn in commitments so far in 2021, according to a July 27 report from PitchBook, a data provider.

These funds include private equity, and early-state venture capital. “We estimate that there is about $73bn in dry powder targeting impact investments,” PitchBook said.

Grit in the oyster

  • DWS has struggled to implement an ESG strategy and allegedly exaggerated ESG claims to investors, according to the company’s former sustainability chief, Desiree Fixler. Fixler, who provided internal emails and presentations to the Wall Street Journal, said she believed DWS misrepresented its ESG capabilities. The former sustainability chief was fired on March 11, one day before DWS’s annual report was released.

© AFP via Getty Images
  • Hundreds of Activision Blizzard workers walked out in protest last week at the company’s handling of a California state lawsuit alleging sex discrimination, harassment and retaliation. The case alleged a “pervasive ‘frat boy’ workplace culture” at the Santa Monica-based company. On Tuesday, J Allen Brack, a top executive at Activision Blizzard left the company in a management shake-up that promised to bolster “integrity and inclusivity”. Read the FT’s story here.

Smart reads

  • As the SEC drafts unprecedented regulations to require ESG disclosures, the oil and gas industry is ramping up an effort to dilute the climate reporting rules, Myles McCormick and Patrick Temple-West wrote this week. Some fossil fuel companies are lobbying the SEC for the first time.

  • John Browne, a point person on General Atlantic’s new $3bn climate solutions fund, has written in the FT that one of its key goals is to avoid greenwashing.

“Business has a reputation for clinging to the past and greenwashing its way through the climate debate,” Browne said. “Now is the time for businesses, and the investors who back them, to play a decisive role in the greatest challenge humanity is likely to face this century.”

  • Electric cars are celebrated by investors and customers alike as causing less environmental damage than their combustion engine counterparts. But, their supply chain is muddled with a mining and manufacturing process that could be become an “environmental disaster”, FT’s Patrick McGee and Henry Sanderson write. Advocates for a circular economy are hopeful that an increase in urban mining, or breaking down and repurposing batteries, “can close the emissions gap and ease supply chain concerns”.

Recommended reading

  • ESG Returns Emerge as Key Focal Point for US Institutional Investors (Fund Fire)

  • Inequality Has Soared During the Pandemic — and So Has CEO Compensation (New Yorker)

  • US forest fires threaten carbon offsets as company-linked trees burn (FT)

  • Beyond Meat boss backs tax on meat consumption (BBC)

  • Does Positive ESG News Help a Company’s Stock Price? (Northwestern School of Management, Kellog)

  • Olympic sponsors need to ‘walk the talk’ on values (FT)



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