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5 things you need to know about … ESG developments

#1 Global Cross Border M&A

Bloomberg, Q3 2020, by value

Environmental, social and corporate governance (ESG) issues continue to attract attention globally, with investors increasingly willing to hold companies to account. Here are our top five things you need to know about ESG developments.

 

Responsible investment funds

Latest data from the Investment Association has shown investors plunged nearly four times the amount of cash into responsible investment funds in 2020 than they did in 2019. Responsible investment funds saw net flows of £7.1bn in the nine months to September – around 275 per cent more than the £1.9bn measured in the first three quarters of 2019.

#1 UK M&A

Bloomberg, Q3 2020, by value

 

UK focus on climate change

In November, the UK will host the 26th UN Climate Change Conference of the Parties (COP 26) in Glasgow. Described by the UN Secretary General as "pivotal" and by the U.K.'s Alok Sharma as "make or break" for the zero-carbon economy, the conference coincides with increased UK legislation in relation to climate related disclosures, including the continuing obligation, introduced by the FCA into Listing Rule 9.8, which requires all commercial companies with a UK premium listing to make a "comply or explain" statement in their annual report in line with the Task Force on Climate-related Financial Disclosures (TCFD).

#1 Legal Adviser to UK quoted companies listed on the LSE

Adviser Rankings, US law firms, October 2020

 

ESG frameworks

Reuters has previously described the many ESG frameworks as an "alphabet soup". This is slowly changing, with increasing efforts towards the establishment of unified reporting standards. The five major frameworks currently used, namely (1) the Sustainability Accounting Standards Board (SASB); (2) Global Reporting Initiative (GRI); (3) the Carbon Disclosure Project (CDP); (4) the Climate Disclosure Standards Board (CDSB); and (5) the International Integrated Reporting Council (IIRC), announced their collaboration towards joint market guidance in 2020, with SASB and IIRC merging to form the Value Reporting Foundation.

 

Climate strategy

The Investor Forum, whose members account for a third of the UK's FTSE all-share market capitalisation, called on the government to consult on rolling out "say on climate votes" – a concept popularised by hedge fund and shareholder activist, Chris Hohn. In December 2020, Unilever plc became the first blue-chip company to voluntarily give investors a say on its climate strategy, announcing that it would put its plans to cut greenhouse gas emissions to a non-binding shareholder vote at its May 2021 AGM (and every three years thereafter).

 

Green bonds                             

The first green bond was issued in the Netherlands in 1648 to repair a dyke. The bond was issued by the Dutch Water Board and organised to prevent the country from being submerged by the sea. The bond was written on goatskin, is perpetual in nature and one of the oldest bonds in the world which is still paying interest. Yale University acquired the bond in 2003 for €24,000 and collected 12 years of interest on the bond in 2015, amounting to the princely sum of €136.20. We assume that the University acquired the bond for its historical rather than monetary value.

 

White & Case is a founding member of The Financial Times' Moral Money Forum, which takes key issues from the ESG debate and produces regular reports to identify and illuminate the most interesting ideas, policies and practices that are making a difference.

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