Despite myriad sustainability targets and ESG reports, only two of the 15 largest European and North American private equity firms have policies that restrict investments in fossil fuels
Welcome back to the Climate Nexus finance newsletter – a regular update that looks at the big stories and players at the intersection of climate change, finance, regulation, and energy, with tips for the week ahead.
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Private equity is the dinosaur in the climate change space
Despite myriad sustainability targets and ESG reports, only two of the 15 largest European and North American private equity firms have policies that restrict investments in fossil fuels, according to a report last week from Reclaim Finance. And both of those firms are French (sacré bleu!) The report notes the role private equity has in keeping fossil fuel assets running, particularly coal mining and shipping. Though at least in the short term, the industry’s appetite for oil seems to be waning—it signed only 10 new exploration and production deals this year compared to 100 or so a year on average over the last decade. Meanwhile, the sector itself is struggling, with firms like Carlyle facing fundraising challenges.
Pension managers could be liable for climate loses
Climate change is putting Americans’ retirement savings at risk, but fund managers continue to rely on flawed models that underestimate financial impacts, according to a new report from Carbon Tracker. The analysis found climate economists make “strikingly false assumptions” and ignore climate “tipping points” that would trigger losses magnitudes greater than the 2008 global financial crisis. Pension fund managers have a fiduciary duty to address risks and could be held liable if they fail to make a course correction.
Shareholders and voters defy ESG attacks
Defying the drumbeat of anti-ESG campaigns, investors are standing firm. A wave of 52 anti-ESG shareholder resolutions were filed this year but scraped up a mere 2.4% average support, according to Proxy Preview data. While shareholder enthusiasm for climate and social resolutions waned somewhat, the data shows the overarching investor commitment to ESG issues has not.
At the ballot box, the trend is similar. Despite Florida Governor Ron DeSantis's fervent campaign against what he terms the "woke agenda," his anti-ESG rhetoric isn't resonating with voters.
An Africa Climate Summit without renewables?
We were reviewing the agenda for the Africa Climate Summit, taking place in early September in Nairobi, and we couldn’t help but notice no mention of renewables, solar, or wind. Not that it means that they are completely off the agenda—sessions on “desert to power” and African green growth will likely encompass planet-saving energy. Still, it’s quite worrying to see that green hydrogen and carbon markets receive more prominent billing, as does a panel pushing natural gas as a transition fuel.
Deutsche counts greenwash costs
Deutsche Bank’s asset management arm put aside tens of millions of Euros as it braces for big fines from regulators, including the US Securities and Exchange Commission, after being caught greenwashing. While the activities of a European asset manager may not at the top of your radar, the precedent set here should be. Other financial institutions selling green vaporware should be extremely worried. The case for clear climate-related financial regulation just got stronger.