Month: January 2019

Posted on

IOSCO Statement on Disclosure of ESG Matters by Issuers

https://www.iosco.org/library/pubdocs/pdf/IOSCOPD619.pdf

The International Organization of Securities Commissions (IOSCO) is this month publishing a statement setting out the importance for issuers of considering the inclusion of environmental, social and governance (ESG) matters when disclosing information material to investors’ decisions.

The statement does not supersede existing laws, regulations, guidance or standards or relevant regulatory or supervisory frameworks in specific jurisdictions, or any IOSCO Principles.

I. Introduction

As underlined by IOSCO in its Objectives and Principles of Securities Regulation, securities regulation has three key objectives: protecting investors, ensuring that markets are fair, efficient, and transparent, and reducing systemic risk. IOSCO Principle 16 states that issuers should provide “full, accurate, and timely disclosure of financial results, risk, and other information which is material to investors’ decisions.” With regard to this Principle, IOSCO emphasizes that ESG matters, though sometimes characterized as non-financial, may have a material short-term and long-term impact on the business operations of the issuers as well as on risks and returns for investors and their investment and voting decisions.

II. Developments in the disclosure of ESG information

Disclosure of ESG information in the market has increased in recent years. Examples of ESG matters that issuers are disclosing include environmental factors related to sustainability and climate change, social factors including labor practices and diversity, and general governance- related factors that have a material impact on the issuer’s business.

Posted on

PGE: The First Climate-Change Bankruptcy, Probably Not the Last (WSJ)

http://PG&E: The First Climate-Change Bankruptcy, Probably Not the Last

PG&E Corp.’s PCG 13.68% bankruptcy could mark a business milestone: the first major corporate casualty of climate change. Few people expect it will be the last.

California’s largest utility was overwhelmed by rapid climatic changes as a prolonged drought dried out much of the state and decimated forests, dramatically increasing the risk of fire. On Monday, PG&E said it planned to file for Chapter 11 protection by month’s end, citing an estimated $30 billion in liabilities and 750 lawsuits from wildfires potentially caused by its power lines.

The PG&E bankruptcy could be a wake-up call for corporations, forcing them to expand how they think about climate-related risks, management consultants and other experts said.

Previously, companies mainly worried over risks from new governmental regulations related to climate change, said Christophe Brognaux, a managing director at Boston Consulting Group. The PG&E case makes clear that companies also have to worry about sudden, and potentially unexpected, impacts to their core assets and liabilities, he added. 

“Physical risks have only recently manifested themselves. This is a fairly new development,” said Bruce Usher, a professor at Columbia University’s business school who teaches a course on climate and finance. “If you are not already considering extreme weather and other climatic events as one of many risk factors affecting business today, you are not doing your job.”

Posted on

Impact investing: A multitrillion-dollar market in the making (Pitchbook)

https://pitchbook.com/news/articles/impact-investing-a-trillion-dollar-market-in-the-making

This, Cohen believes, will ultimately lead to an impact ecosystem that has the potential to cover all major assets classes and create the emergence of a multitrillion-dollar market within the next 10 to 12 years.So, if you add it all up, we are talking about tens of trillions, perhaps $30 trillion by 2030.”

Impact investing has been gaining traction over the last decade, as investors, consumers, and—to an extent—policymakers come to recognise that new ideas are needed in order to address some of the largest societal and environmental challenges facing humankind.

However, as is often the case with new ideas, impact investing continues to face big challenges and misconceptions. How to actually define this type of investing is one of those challenges, while the biggest obstacle perhaps remains the general belief that doing good with investments will almost always result in lower-than-market-rate returns.

But according to Cohen, at least, the scepticism is due to a somewhat dogmatic approach by traditional practitioners. “Many people have the notion that optimising risk and return is sacrosanct, and therefore refuse to even contemplate any alteration to the system which might affect their two dimensions of the decision-making process.

“The reason I am putting weight behind this is that if we can apply the usual tools of financial analysis—such as price-earning ratios and return on equity—on an impact-weighted basis, then we will have the most versatile set of tools to be able to make comparisons between companies. This is a huge, but totally achievable goal.”

According to Cohen, the impact revolution will be driven to a large extent by consumers, contributors to pension funds and asset owners. Living in times of systemic challenges such as extreme poverty, geopolitical tensions and environmental disruption on a global scale appears to be leading a growing part of the western population to question, if not outright challenge, the status quo.

This, Cohen believes, will ultimately lead to an impact ecosystem that has the potential to cover all major assets classes and create the emergence of a multitrillion-dollar market within the next 10 to 12 years.

“This is not a dream. If you look at the potential application of agreed impact principles across all asset classes, the numbers are absolutely huge. It is not a stretch to imagine that in a few years’ time a small percentage of the public markets, government and corporate debt, private equity and venture capital will all be investing under the agreed impact principals. So, if you add it all up, we are talking about tens of trillions, perhaps $30 trillion by 2030.”