· 2 min read
illuminem summarizes for you the essential news of the day. Read the full piece on Financial Times or enjoy below:
🗞️ Driving the news: The Financial Times discusses the complexity of the "G" (governance) in ESG (environmental, social, governance), highlighting its importance but also its potential to overshadow climate concerns in investment decisions
• Sustainalytics, a Morningstar company, is addressing this by analyzing corporate governance with a focus on climate impact.
🔭 The context: Governance in ESG investing often boosts a company's overall sustainability rating, even if its environmental focus is weak
• This practice can mislead investors interested specifically in environmental impact
• New approaches by Sustainalytics aim to provide a more climate-focused evaluation of governance
🌍 Why it matters for the planet: Effective governance is crucial for setting and achieving climate targets. Poor governance can lead to environmental regulation breaches, as seen in past corporate disasters
• A climate-focused governance analysis helps align investments with environmental goals, crucial for combating climate change
⏭️ What's next: With growing recognition that investment strategies can include engaging with companies to improve their climate goals, the shift towards analyzing governance through a climate lens could encourage more responsible investment practices and help investors find companies genuinely aligned with net zero targets
💬 One quote: "There’s a growing awareness that climate change investing doesn’t necessarily mean divestment: another approach can be for fund managers to engage with the companies they invest in." - Alice Ross, Financial Times.
📈 One stat: The first Sustainalytics report on utility companies found an average implied temperature rise of 2.6 degrees Celsius by 2050, indicating significant misalignment with net zero targets.
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