- Remuneration discussion with Infineon
- COP26 and the importance of Net Zero (new insight)c
- The US officially returns to the Paris Agreement
- SEC to update corporate climate disclosure guidance
- UK pension bill on climate-change written into law
- CTI releases report on Petrostate energy transition
- Singapore consults on green finance taxonomy
- Hampton-Alexander Review finds UK boardrooms meeting diversity targets
- Set of “Principles for a U.S. Transition to a Sustainable Low-Carbon Economy”
- The Social Cost of Carbon
Martin Currie Engagement and Developments
Remuneration discussion with Infineon
We had a call with Infineon (European Long-Term Unconstrained strategy), the German semi-conductor group, to talk through changes proposed on remuneration ahead of the upcoming AGM. There have been a number of positive changes already in the remuneration structure, in particular an increased weight of long-term incentives (LTIs), the introduction of an explicit ESG component within LTIs (including a focus on diversity and carbon emissions) as well as reduction of a discretionary modifier.
Our call focused on the details, motivation, and extent of some of the changes and in particular the introduction of a peer group (in lieu of the Philadelphia Semiconductor index/SOX) for the Total Shareholder Return (TSR) measurement within LTIs. The company was very open and the discussion very constructive.
COP26 and the importance of Net Zero (new insight)
2021 could prove to be a pivotal year in the fight against climate change. With the crucial climate summit, the 26th Conference of the Parties (COP26) happening in Glasgow in November this year, governments around the world are stepping up policy commitments to combat global warming. As part of our Long Term Invest Institute (LTII), we have published the first piece in a new series of papers focussed on the importance of reaching 'net zero' emissions, exploring the meaning and necessity of having a net zero ambition.
In our subsequent papers we will then look at the challenges (technological, political and social), the opportunities, and the role that corporates and the financial services industry can play in achieving this goal.
2021 could prove to be a pivotal year in the fight against climate change. With the crucial climate summit, the 26th Conference of the Parties (COP26) happening in Glasgow.
The US officially returns to the Paris Agreement
Following the commitment of President Biden to re-enter the Paris Agreement when he took office on January 20th the return of the US to the Agreement became official on Friday 19th February. This means that the US returned just over 100 days after it left. The Biden administration has already stated that a tougher climate target will be set before it hosts the global summit for world leaders on 22 April 2021.
SEC to update corporate climate disclosure guidance
A decade after it last issued guidance on how companies disclose the risks presented to them by climate change, the United States Securities and Exchange Commission (SEC) will review and update. They will review the extent to which public companies address the topics identified in the 2010 guidance, assess compliance with disclosure, engagement, and understand how the market is currently managing climate-related risks. This work will be used to update the 2010 guidance to reflect developments in the last decade.
UK pension bill on climate-change written into law
Under new UK laws, pension schemes will now be required to take account of the government’s net zero targets and the Paris Agreement (which seeks to limit global temperature rises to 1.5°C). This introduces civil penalties, alongside new criminal offences, and will place climate change firmly at the centre of the requirements on schemes.
CTI releases report on Petrostate energy transition
The Carbon Tracker Initiative (CTI) published a report looking at the impact of the energy transition on the ‘Petrostates’ – the 40 countries with the greatest fiscal dependence on oil and gas revenues. The report suggests that, compared with industry expectations, Petrostates’ government revenues would be US$9 trillion lower over the next two decades (2021-2040) under the low-carbon scenario. Much of this decrease is driven by lower prices, rather than lower volumes. Overall, oil producing countries risk losing US$13 trillion in total by 2040. The 19 worst affected countries have a total population of 400 million with a clear risk of job losses and cuts in public services.
Singapore consults on green finance taxonomy
Mirroring what we have been seeing in Europe, the Green Finance Industry Taskforce (GFIT) convened by the Monetary Authority of Singapore (MAS), has released a consultation paper on proposed taxonomy for financial institutions to identify activities that can be considered green or transitioning towards green.
A key feature of the proposed taxonomy is that it encompasses transition activities that allow for a shift towards sustainability while considering starting positions and supporting inclusive economic and social development. The consultation seeks feedback on GFIT’s recommendations on the environmental objectives, focus sectors, and a traffic-light system which sets out how activities can be classified as green, yellow (transition), or red according to their level of alignment with environmental objectives.
…women now occupy 1,026 board seats at the FTSE350 companies, up from 682 in 2015. The FTSE 100, 250 and 350 have now all reached target of women making up 33% of boards.
Other market developments
Hampton-Alexander Review finds UK boardrooms meeting diversity targets
The Hampton-Alexander Review produced its latest report looking at the extent to which the diversity has made progress towards the targets set for 33% female board membership by the end of 2020. The report found that women now occupy 1,026 board seats at the FTSE350 companies, up from 682 in 2015. The FTSE 100, 250 and 350 have now all reached target of women making up 33% of boards. However, the review found that progress is lacking when it comes to appointing women into the most senior executive roles, such as CEO positions.
Set of “Principles for a U.S. Transition to a Sustainable Low-Carbon Economy”
The US Climate Finance Working Group released a set of “Principles for a U.S. Transition to a Sustainable Low-Carbon Economy” as part of efforts to engage with US regulators on climate finance. Among the ten principles are calls for more harmonised global taxonomies, metrics, and standards to encourage comparable data and information on sustainability, and the promotion of more robust climate disclosure and international standards.
The Social Cost of Carbon
The Social Cost of Carbon (SCC) attempts to capture the economic damage resulting from the increase of Green House Gases (GHGs) in the atmosphere, felt through the impacts of climate change. Essentially, the SCC estimates the ‘net present value’ of future social costs of one additional tonne of carbon emitted in terms of today’s value. Estimates of the SCC vary widely but are key in assessing the cost-benefit analysis of climate policy, so assumed levels can have a significant impact on the future path of these policies. In the US the SCC is required to be incorporated into Federal agency decisions. Trump chose to reduce the SCC to $8/tonne whereas Biden has now proposed that this be increased to $51/tonne for the time being.
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