Weekly ESG Risk Monitor

Foshan Haitian Flavouring and Food Company (603288.CN) was identified the riskiest A-share company of the past week with concern about whether its soy sauce sold to millions of households is safe.

Starting from Sep 10, a video of a man making what he called artificial soy sauce with a mix of food additives went viral on the Internet. Despite no mention of Haitian in the original video, some linked the conduct to the biggest flavouring producer in China. On Sep 30, the company publicly accused of these video creators of abusing people’s concern over food security and “damaging the reputation of the China-made”.

Coming to October, some overseas Chinese people started to share videos comparing the stated ingredients of Haitian’s soy sauce sold in China and other countries, where those sold in China are shown to contain extra food additives and alleged the double standards of Haitian. In response, Haitian’s announcements claimed both products with and without additives are sold globally, including China, and once again accused the people on the Internet of manipulating public opinions. Some also shared the Haitian products sold overseas that contain additives.

*Price of Haitian’s shares (Sep 1 to Oct 14)

Source: Yahoo Finance, MioTech Research

Shares of the company fell by over 9% last week.

*ESG Rating of Haitian

Source: MioTech AMI

Inflation is green? The impact of inflation on emission data

Price up, Emission down

*Stuart Kirk gave a speech at a previous FT Moral Money event with captions on the screen ”Climate change isn’t a long-run risk, just like wars, energy crises, pandemics, financial crises and so on”: Source: FT

Last week, Stuart Kirk, the former Head of Responsible Investment at HSBC Asset Management wrote a blog titled “Inflation is green”. With the double-digit rise in consumer prices, what is called carbon intensity will largely fall.

This is because, Stuart Kirk says, the most popular way to calculate carbon intensity, to measure a company’s carbon and energy efficiency, is to divide carbon emissions by a company’s nominal revenue. In this way, inflation-boosted revenue growth will drive the carbon intensity to drop when the absolute emissions remain unchanged.

LVMH, the company behind luxury brands including Louis Vuitton, posted a 25% growth in revenue in the first quarter of this year, thanks to higher prices as well as volumes. “Only the latter creates carbon”, Kirk commented.

Kirk called climate risk being exaggerated by central banks and governments at a FT Moral Money event this May. He was suspended by HSBC due to the controversial allegation before he later chose to resign.

*Annual % change in consumer price, as of Sep 2022

*Data for Japan is dated as of Aug 2022; Source: Refinitiv, Financial Times, MioTech Research

China launches global clean energy partnership with landmark forum due next year

China’s Ministry of Foreign Affairs has unveiled the conceptual document of the global clean energy partnership following its launch at a ministerial meeting between 60 developing countries last month.

*Ministerial Meeting of the Group of Friends of the Global Development Initiative; Source: Ministry of Foreign Affairs, China

The conceptual document stated that the partners will work towards the UN’s Sustainable Development Goals for 2030 and outline the following plans as part of it:

• China and the International Renewable Energy Agency (IRENA) will host an international energy transformation forum next year;
• Establish energy transformation alliance between developing countries;
• Identify opportunities in the niche but beneficial clean energy projects;
• Encourage investments in clean energy infrastructure in developing countries;
• Facilitate talent communication between developing countries.

Global clean energy partnership

Global clean energy partnership was founded in the High-level Dialogue on Global Development in June, led by China. Its goal is to enhance global collaboration on tackling climate change, help developing countries improve their resilience and adaptation to climate change.

Investors of biggest Australian banks mulls for resolutions at upcoming AGMs

*ANZ headquarter; Source: Glassdoor

Shareholders of Australia‘s three largest banks - Australia and New Zealand Bank (ANZ), National Australia Bank (NAB) and Westpac (WBC) - have asked the banks to make resolutions at their upcoming AGMs to avoid lending for new fossil energy projects or expansions, Reuters reported.

The three banks have received similar climate change resolutions last year. Westpac set out plans this year to reduce lending for fossil fuel projects by 25% by 2030, while ANZ proposed a 35% reduction of scope 1 and 2 emissions by 2030.

Last month, Australia has passed climate change legislation, including targets to

• Reduce carbon emissions by 43% compared to 2005 levels by 2030;
• Reach net-zero by 2050.

Meanwhile, the country is considering to launch 29 new coal projects. These projects, if all operating at full capacity, will cause more than 250 million tons of CO2 emissions every year, climate campaign Move Beyond Coal found.

In 2019, each person in Australia accounted for 15.2 Mt of emissions on average, ranking 10 in all countries.

*Three banks’ carbon emissions of 2021 (tonnes) Source: Company reports, MioTech Research

*Top10 countries by per-capitia emissions in 2019 (Mt) Source: Climate Watch

Australian gov violated islanders’ rights for failing to protect them from climate change: UN

The United Nations Human Rights Committee ruled last week that the Australian government had failed to protect islanders from the effects of climate change and violated the rights of people living on four islands in the Torres Strait, Nature reported. The Committee has ordered it to pay for the harm caused, making the first successful case of this kind.

*The Torres Strait; Source: Australian Government

The islanders said their land and culture are being threatened by rising sea levels, including the loss of traditional food sources due to salty sea water. The Australian government had failed to build the seawalls needed for the communities to adapt to climate change. But the Committee rejected the claim that Australia had violated the islanders’ “right to life with dignity”, as they think the situation has not reached such a high level.

The decision is not legally binding, but as the first successful case linking climate change to human rights that has been presented to the Human Rights Committee, Australia should have felt its weight as it is a proof that the UN’s international experts considered the government breached the international treaty. Notably, the government of Denmark recently pledged just over USD 13m to developing countries that have suffered damage from climate change.

Australian fund manager closes on its first fund investing in indigenous impact

Sydney-based New Harvest Investment Management is near the first close for its Indigenous Impact Investment Fund, Agri Investor’s report reveals. The fund has received seed commitments from Australian financial institutions and family offices.

The fund was expecting to hold a first close on AUD 150m (USD 90m) before the end of this year and raise additional funds to a total financing of AUD 500m (USD 310m) , according to people familiar with the matter. The fund looks to invest in farmland assets and reach equity partnerships with indigenous owners who will operate the farmlands. The fund will only invest in those that are not already held by the indigenous. The fund plans to invest in protein production, wool production, cropping, decarbonisation and biodiversity projects across the farmlands.

Investments made by the fund will expand the scale of assets for indigenous people and create value for both the fund investors and the indigenous.

On the institution side, the new fund is aiming for a total return of over 10%, comprised with:

• 4.5-6 percent from asset operations;
• 1.5-2.5 percent in value uplift from vertical integration and participation in the creation of Australian Carbon Credit Units;
• and 4-5 percent in capital growth and infrastructure development.

More than 80% of the companies report on at least one TCFD recommendation

The Taskforce on Climate-related Disclosures (TCFD) has published its annual Status Report for 2022 based on input from artificial intelligence review of reports from 1,434 companies in 2021.

80% of the companies has made disclosures on at least one of the total of 11 items in the TCFD framework (or TCFD recommendations). 40% of the companies disclosed in line with at least five items, while only 4% of them met all the TCFD requirements.

Reporting rates rose in all the regions in the past year. European companies achieved an average reporting rate of 60% across all the recommended disclosures in 2021, higher than the 2019 level than 23 percentage points. The average level of disclosure of companies in APAC was 36%, rising by 11 percentage points, and that for North America was 29%, rising by 12 percentage points.

Across all the companies, 44% disclosed their scope 1, 2 or 3 emissions.

*TCFD 2022 Status Report

Sustainable investing in a week: BlackRock launches new fund, global impact Investing hit USD 1.2tr…

Last week, BlackRock launched a Global Corporate ESG Insights Bond Fund, providing investors with exposure to “investment grade” bonds globally, while aligning with ESG-related targets. At its launch, the fund has received an initial commitment of GBP 500m (USD 560m) from UK pension giant “Scottish Widows”. The fund will aim for its portfolio carbon intensity score to be 50% lower than the benchmark index.

A recent research by Global Impact Investing Network (GIIN) found the market size of global impact investing has reached nearly USD 1.2tr the first time it is above one trillion dollars. Amit Bouri, co-founder of GIIN said while this news is a positive signal for impact investing, “it is also a call for further action” in order to deliver Sustainable Development Goals by 2030 and net-zero emissions by 2050.

HSBC AM has launched a new ESG money market fund “HSBC US Dollar ESG Liquidity Fund”. It plans to seek attractive issuers in the money market with the use of ESG scores and ESG screening criteria. This follows the launch of HSBC Sterling ESG Liquidity Fund, which has surpassed GBP 1bn (USD 1.1bn) in managed assets.

London Stock Exchange Launches Voluntary Carbon Market

The London Stock Exchange has announced the launch of its voluntary carbon market (VCM), with the publication of the final admission and disclosure standards for VCM designation, ESG TODAY reported.

The announcement marks the establishment of the first public markets capital raising solution for the voluntary carbon market, aimed at directing finance to climate mitigation projects that provide carbon credits, providing market access to investors and corporates, while applying public market regulation and disclosure obligations.

Amazon-backed Rivian recalls almost all of its trucks over defect

*Rivian price movement since IPO (USD)

Source: Yahoo Finance, MioTech

According to Financial Times, Amazon-backed Rivian’s shares tumbled by 7.3% last Monday to a three-month low after it announced a recall of almost all of its vehicles due to a defect.

This marks the second in a month by an electric vehicle start-up, after Arizona-based Nikola recalled all 93 of the trucks it has built due to an improperly installed seatbelt.

Analyst says that Rivian’s recall marks a slight step back the company must overcome. Rivian now has a market capitalization of almost $30bn, or about one-third of the valuation it reached when it floated in November 2021.

CONNECTING WORKPLACE

ERM divided Asia Pacific business into two

Nat Vanitchyangkul

Liew Wei Chee

The London-based consultancy has undergone a restructuring, splitting the Asia-Pacific region into two sub-regions – Asia, New Zealand and Australia, coupled with a series of personnel appointment:

Nat Vanitchyangkul, previously the Business Unit Managing Partner for South and Southeast Asia, has been appointed Asia CEO, based in Bangkok;

Liew Wei Chee has been promoted to Vanitchyangkul’s former role;

Michael Gaggin will lead New Zealand & Australia business through his current role of ANZ Business Unit Managing Partner.

Gillian Tan to be Chief Sustainability Officer for Singapore’s MAS

Gillian Tan

The Monetary Authority of Singapore has appointed Gillian Tan as its new Chief Sustainability Officer. Tan joined MAS in 2015, and her most recent role before this appointment was Assistant Managing Director, according to ESG TODAY.

Dr. Darian McBain, the current sustainability chief at MAS is leaving this December.

Andy Chan joins Hong Kong’s central bank as climate risk manager

Andy Chan

Hong Kong Monetary Authority has appointed Andy Chan as its new climate risk manager in the Banking Supervision team.

Andy Chan was a management consultant at Capco. He also spent time in the sustainability divisions of PwC and EY.