Charlotte Street Partners

DAILY BRIEFING

DAILY BRIEFING

Truly green or greenwashed?

Written by Li-Ann Chin, associate 
Edited by Scott Reid associate partner
11 June 2021

Good morning,

Yesterday the Ethical Finance 2021 summit, run by our Edinburgh peers, the Global Ethical Finance Initiative, finished its three days of proceedings. The message from a host of global industry and policy leaders who were exploring the theme of ‘Financing a Sustainable Future: Climate and Beyond’ – it’s a boom economy for sustainable investing.
 
Approximately 40 green firms — emission sparing companies, solar-panel firms, makers of hydrogen fuel cells and the like — have seen their share prices triple since the start of 2019. Everyone from oil majors to institutional investors and day-traders are reportedly splurging on green assets and climate-friendly securities. The global sustainable investing industry is thought to now manage more than $30 trillion worth of funds.
 
Companies today want nothing more than to boast about their purported green credentials. Terms like ‘ethical investing’ and ‘responsible finance’ are now ubiquitous buzzwords. The asset management industry has aggressively ramped up their roll out of so-called environmental, societal and governance (ESG) compliant portfolio offerings with, on average, two new ESG funds launched each day.
 
But how much of this is down to greenwashing?
 
A shocking report by The Economist on the world’s 20 biggest ESG funds reveals that on average each of them holds investments in 17 fossil-fuel producers. Six have invested in ExxonMobil, an American oil and gas corporation infamous for its climate denial history, two hold investments in Saudi Aramco. One even has a stake in a Chinese coal-mining company.
 
The trouble with ESG reporting is that the current system relies largely on self-disclosure. Firms get to pick and choose which initiatives to wax lyrical about. And because standardised requirements for reporting ESG information have yet to be agreed upon, inconsistency, subjectivity and opacity run rampant in the industry.
 
Earlier this week, an independent advisory group was formed by the UK Treasury to clamp down on greenwashing. Chaired by the Green Finance Institute, the Green Technical Advisory Group (GTAG) will oversee the government’s delivery of a Green Taxonomy – a framework which sets the bar for investments that can be classified as environmentally sustainable. It is hoped that this will help investors and consumers make better informed decisions and tackle unsubstantiated claims by fund providers on the environmental impact of financed projects.
 
The increasingly common practice of greenwashing has been alarmingly cited by institutional investors as the biggest challenge to improving – or delivering against – sustainability targets. And while the GTAG are set to wrestle with an intrinsically complex task ahead of them, the move to establish a standardised framework for ESG disclosures by the UK government makes for hugely welcome progress.

News

Prime minister Boris Johnson told the BBC that the US and UK have an “indestructible relationship” after his meeting with US president Joe Biden for the first time in Cornwall, insisting that the US, UK and EU are aligned on post-Brexit matters with Northern Ireland. Ahead of the G7 summit taking place today, Johnson also announced that the UK will begin donating surplus vaccines to poorer countries within weeks to reach 100 million doses by the end of the year.
 
The UK reported more than 7,000 new Covid-19 infections for a second day in a row, with seven more coronavirus-related deaths. This data comes as health secretary Matt Hancock said that the Delta variant, first detected in India, now makes up 91% of new cases across the country.
 
Health secretary Matt Hancock denied he lied to prime minister Boris Johnson when he gave evidence to two House of Commons select committees on Thursday, blaming “clinical advice” for his decision to authorise the discharge of people infected with Covid-19 from hospitals to care homes. Hitting back at Dominic Cummings, Hancock also alleged that the government had been better run since the departure of the former No. 10 chief adviser. (£)

Business and economy

The UK yesterday agreed to its annual fishing quotas with the EU, in a deal which was said to be worth £333m. UK fisherman will now be able to catch around 160,000 tonnes of fish in 2021, up 26,000 tonnes on the allocation for 2020 – an increase worth about £27m to the industry.
 
Data from the Office for National Statistics indicates that the UK economy grew 2.3% in April, as a result of shoppers spending more on the high street and in pubs, cafes and restaurants – its highest monthly rate since July 2020. The UK economy is now approximately 3.7% below its pre-pandemic peak.

Columns of note

International travel in the post-pandemic era involves a financial and bureaucratic burden previously not known to Britons. Here, Jonathan Derbyshire reflects on how his trip to Porto has afforded him a glimpse of how European travel will be like post-Brexit. “Free movement has now come to an end for those of us from the UK. And it’s not clear yet what lasting changes the pandemic will have inflicted on cheap flights”, he writes in the FT. (£)
 
When the pandemic hit, 53,000 under-18s in England with disabilities that made them vulnerable to coronavirus were forced to begin shielding at home. They are likely to have not attended school or seen their friends in over a year. Frances Ryan questions in The Guardian the UK government’s lack of plans to inoculate high-risk children, arguing that these teenagers worryingly trapped in limbo deserve priority vaccination.

Cartoon source: The New Yorker

Markets

What happened yesterday?

London equities were a mixed bag on Thursday, as investors digested the latest policy announcement from the European Central Bank, as well as higher-than-expected consumer inflation in the United States. The FTSE 100 closed out the session in the green, up by 0.1% at 7088.18 points, while the FTSE 250 fell by 0.66% to finish at 22,608.76.
 
In the US, despite the publication of a fresh batch of jobless claims data, Wall Street stocks managed to eke out a positive finish, with the Dow Jones Industrial Average adding gains of 0.06% to 34,466.24 while the S&P500 gained 0.47% to finish at 4,239.18. The Nasdaq Composite ended the session firmer by 0.78% at 14,020.33.
 
In the last 24 hours, Bitcoin dipped by 0.43% to $36.771.86, Ethereum fell by 3.89% to $244.21. Dogecoin, the meme stock of the cryptocurrency universe, dipped by 4.1% to end at $0.322660 .
 
In company news:
 
Goldman Sachs will reportedly require its US bankers disclose their vaccination status ahead of a planned return to the office next week.
 
Department store group, Selfridges was put up for sale with an estimated £4bn price tag after the Weston family were approached by a mystery buyer.
 
BrewDog suffered a PR crisis after dozens of former staff members posted an open letter online alleging that it had acted inappropriately and unethically as an employer.

What’s happening today?

Finals
Mind Gym Plc
Stenprop. Limit

Trading Announcements
Frontier Dev

AGMs
Corero Network
Mail.rugrp S
Sirius R E.
Warpaint London

UK economic announcements
(07:00) Balance of Trade
(07:00) Gross Domestic Product
(07:00) Industrial Production
(07:00) Manufacturing Production
(07:00) Index of Services

Int. economic announcements
(15:00) U. of Michigan Confidence (Prelim) (US)

Source: Financial Times

did you know

The term greenwashing was coined by New York environmentalist Jay Westervelt in 1986 regarding the hotel industry’s practice of placing placards in each room promoting reuse of towels ostensibly to “save the environment”. 

Parliamentary highlights

House of Commons

The House of Commons is not sitting. The House will next sit on 14 June 2021.

House of Lords 

The House of Lord is not sitting. The House will next sit on 14 June 2021.

Scottish parliament 

No business scheduled.

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