Reporting: WEF claims ESG reporting is driving transformation, but companies struggle with competing guidelines
According to new case studies released by the World Economic Forum (WEF); ESG reporting frameworks are driving transformation globally, notably in sustainability and company culture.
The case studies identified specific strategic and operational changes made within companies reporting on the WEF’s Stakeholder Capitalism Metrics, including new approaches to water management and the implementation of biodiversity strategies and targets.
The WEF have found however, that companies were still struggling with the “competing and disparate” ESG frameworks that currently exist around the world; it also raised concerns that making reporting mandatory could lead to lower transparency as companies may decide against disclosing more than they are required to.
Read more about the WEF and its claims that ESG reporting is driving transformation.
Reporting: SBTi launches new framework to decarbonise the cement industry
The Science Based Targets initiative (SBTi) launched the first framework for the cement and concrete industry, providing a standard method for companies to set near and long-term science-based targets, in line with 1.5°C decarbonisation.
The framework addresses clinker, cement and concrete manufacturers; companies in the value chain that do not produce their own cement materials; users of cement such as construction businesses; and producers of binders and cement replacements.
The SBTI’s guidance covers essential aspects related to target setting and validation processes (including clarifying key definitions); it was developed with the help of an independent Expert Advisory Group consisting of academia, civil society and businesses.
Read more about how the SBTi has launched a new framework to decarbonise the cement industry.
Ratings: Morningstar flags the hidden risks of sustainable companies
Research provider Morningstar has flagged the “hidden” ESG risks posed by companies deemed to be aligned with positive impact goals. Morningstar stated that a company’s alignment with the UN’s Sustainable Development Goals (SDGs) does not necessarily prevent exposure to a plethora of ESG risks.
58% of the 74 companies identified as having at least half their revenues aligned with SDGs have either a “medium” "or “high” Sustainalytics ESG risk score, which indicates that they face significant risks in other ESG segments. Similarly, Morningstar suggested that only a third of sustainability-focussed thematic investment funds (out of 750) receive an “above average” or “high” Sustainalytics sustainability rating.
Read more about Morningstar’s analysis of sustainable companies, and their risks.
Ratings: Sustainable Fitch launches ESG ratings product for investors
Fitch’s ESG Ratings are assigned on an absolute basis rather than being sector-relative and Fitch aims to provide investors with more granular data, distinguishing between entities, frameworks and instruments. Each of the three is concerned with measuring the impact on the environment and society, albeit from different perspectives.
Whilst Framework Ratings are concerned with an issuing entity’s Key Performance Indicators (KPIs) or Use of Proceeds (UoP) structures, on the robustness of a framework’s governance, Entity Ratings evaluate factors such as a company’s overall strategy and its underlying business activities. Instrument Ratings integrate the two approaches described above.
Sustainable Fitch’s initial dataset covers labelled and KPI-linked instruments with a value of half a trillion dollars issued by entities in Europe, North America and the UK. Fitch’s objective is to rate the entire sustainability-labelled fixed income market by early 2023.
Read more about Sustainable Fitch’s new ESG ratings product for investors.
