JPMorgan Carbon Executive Warns of Greenwashed Loans: ESG Update

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(Bloomberg) — Andre Abadie, managing director at JPMorgan’s Center for Carbon Transition, said that a lot of the ESG loans that he sees appear to be greenwashed.

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Many of the sustainability-linked loans that Abadie sees being pitched to JPMorgan “are not really fit for purpose,” he said on Thursday at the Bloomberg Intelligence ESG Investment Forum in London. “So I’d say there’s a lot of greenwashing going on.”

“Frankly, it’s a bit of a wild west, because there is variability in the quality of the narrative that companies are coming to market with,” he said.

Andurand’s Mark Lewis Calls Out ‘Simplistic’ Carbon Math (1:45 p.m.)

Mark Lewis, head of climate research at Andurand Capital, said investment managers looking at coal companies in Europe should keep in mind that there’s a built-in carbon cap that regulations in the region enforce, making such firms viable sustainable investments.

Looking at how companies score today is “simplistic” without looking at the longer-term policy horizon, Lewis said.

Lewis said German coal-powered generator RWE AG, for example, “will be aligned with net zero,” because European Union Allowances are “intrinsically” aligned to that. Buying and holding EUAs now means an investor is being managed toward net-zero by policy makers as such allowances become more scarce, he said.

He also said that “decarbonisation and security of energy supply go hand in hand because one of the many virtues of renewable energy is that it is locally produced, you don’t have to import it.”

Chris Hohn of TCI Says Engagement Achieves ‘Nothing’: ESG Update (12 noon)

Trying to get companies to live up to environmental, social or governance targets using so-called engagement strategies ultimately “achieves nothing,” said Chris Hohn, the chief executive of hedge fund TCI Fund Management.

“To me, if you want to achieve change, you need a harder mechanism, a forcing mechanism,” he said. The bottom line is that “talk doesn’t work, voluntary doesn’t work, there need to be forcing mechanisms.”

Read More: Hedge Fund Boss Chris Hohn Rips Into Failed ESG Strategies

It’s therefore in the interest of investors to “force” companies to target decarbonization given the “existential” stakes involved, Hohn said.

Companies that resist decarbonization face a more hostile environment when it comes to regulation, taxation, and employees who “don’t want to work for dirty companies,” Hohn said. Also, “customers don’t want to do business” with companies that pollute, he said.

“It’s obvious to us that pressures are increasing dramatically,” he said.

Carine Smith Ihenacho of Norway’s Wealth Fund Says Voting Is Key to Engagement (11:15 a.m.)

Carine Smith Ihenacho, the chief corporate governance officer of Norges Bank Investment Management, said “we absolutely vote against company boards when we believe they really have not addressed key sustainability challenges.”

The wealth fund divested from 52 companies last year because they didn’t improve, despite efforts at engagement, Ihenacho said.

CEO of Candriam Says Downside Risk on ESG ‘Much Lower’ (10:40 a.m.)

Naim Abou-Jaoude, the CEO of Candriam, said that “companies embedding ESG are creating long-term value.”

Candriam also considers so-called double materiality in its models, Abou-Jaoude said, meaning it looks not only at how ESG risk affects assets, but how an asset impacts its environment.

When it comes to sovereigns, Candriam looks at human, social and natural capital,” he said.

“Engagement is key. We do it as a company and collectively with other companies, try to push them, measure them, educate them and see positive result on society,” Abou-Jaoude said. “And finally we measure impact. We believe we have to practice what we preach.”

With regard to returns, Abou-Jaoude said the “downside risk is much lower” with ESG than with non-ESG strategies. Clients used to challenge that notion about a decade ago, “but less now,” he said.

The biggest challenge facing ESG fund manages is the “alphabet soup” of regulatory acronyms, he said.

Carol Ward of Man GLG Says ESG Is Becoming Embedded in Everything (10:25 a.m.)

“Ultimately, ESG is becoming embedded in practically everything we do across the firm,” said Carol Ward, president of Man GLG, a subsidiary of Man Group Plc.

“We’re quants and like to backtest things,” she said. There are “very few in-depth studies that have structural proof” of how ESG strategies play out. “Some of it comes from 10 years ago when the approach was to divest and exclude, and in reality it’s a lot more nuanced now. A lot about managing the transition and engaging with companies and investing in some of the dirtier companies, but actively driving the regime forward.”

Also, Ward said that Man “would argue that you can use shorting as a strategy, as well as engaging with companies.”

Ninety One CEO Says ESG Data Is Imperfect, Judgment Needed (10:13 a.m.)

“We assume data is imperfect and try to encourage a level of judgment in often data-poor markets,” Ninety One Chief Executive Officer Hendrik du Toit said.

In terms of the biggest risks facing ESG fund managers today, du Toit said that “mislabeling is the real point.”

There’s such “commercial pressures if you just call yourself integrated in the context of SFDR,” he said. “So the industry has to ask itself hard questions.”

David Blood Says Active ESG Management Can Provide Better Results (9:56 a.m.)

David Blood, the co-founder of Generation Investment Management, said the higher fees active managers charge create an “obligation to demonstrate value.”

“Our engagement isn’t just about fees, but because we think it’ll enhance long term results,” Blood said. “Everything we are doing from an investment perspective will be evaluated over a long time horizon.” And while passive investment options remain “very important in terms of broader asset allocation — and passive is a critical part — but so is active.”

“ESG is not a tool to enhance active management, other than we believe ESG provides incremental data and understanding of the business and management teams, and therefore should provide better results,” he said.

Mark Carney Sees Climate Crisis Dwarfing Current Hardship (9:20 a.m.)

The geopolitical fallout from Russia’s war on Ukraine has laid bare the dysfunction of global energy markets, according to Mark Carney, who also warned that the climate shock ahead will “dwarf” today’s hardships.

Carney, who is the vice chairman of Brookfield Asset Management and a former governor of the Bank of England, said the war and its ramifications “have put into sharp relief the many failings of our global energy system.”

The 57-year-old said fossil fuels have become “a weapon in a horrific and unjust war.” And as the rest of the world struggles to fill the energy gap created by Russia’s hostility, the climate crisis is still worsening, Carney said.

We’re “building future costs that will dwarf current hardships,” he said. The goal, therefore, is to seize this moment and move away from fossil fuels, even though the transition “will be complex,” he said. “It’s risky and it’ll be disruptive but it can no longer be delayed.” Carney also spoke of the “multi-decade investment boom” that the renewable energy market represents.

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