A Step Closer to ESG Standardization

Green Finance Advisor of Friends of the Earth (HK)

Financial markets are based upon a framework of financial reporting where market participants can determine whether one security is more attractive versus another, and on the whole be able to allocate capital to its most efficient use. The framework relies on standards maintained by bodies such as the International Accounting Standards Board (IASB) and the Financial Accounting Standards Board (FASB), coupled with commonly accepted valuation methodologies such as the discounted cash flow and relative valuation models, markets are able to determine with some accuracy which securities will receive the most favorable funding rate, and thus lower cost of capital.

The same could not be said about Environmental, Social, and Governance (ESG) investing, and yet this very standardization is the key to making companies behave responsibly, as it enforces a real cost to companies should they be less well rated than their peers in ESG factors in the form of higher required rates of return. There have been attempts towards standardization of Responsible Investment (RI), and we should now be familiar with the United Nations sponsored Principles for Responsible Investment (PRI), first launched in 2006. However, while the PRI sets the tone towards responsible investing overall, it may lack detailed implementation guidelines for specific segments of the market for it to be applicable. Under the auspices, in March 2021 the Standards Board for Alternative Investments (SBAI is an international standard setting body for the alternative investment industry and sets the voluntary standard of best practices and practices endorsed by its members) launched its own Responsible Investment Policy Framework specifically helping alternative asset managers to document and demonstrate ESG investing with clear standards.

Broadly, the policy framework provides guidance on the following:


Integration of RI-related factors into investment processes, where financially material, is a growing expectation by allocators. The key distinction between this and other RI approaches is that RI factors are not used to pre-define an asset universe. (SBAI RI Working Group, 2021).


Exclusion and inclusion are not mutually exclusive and some combination of the two may be used as an RI Approach. Impact investing with the specific goal of delivering meaningful societal or environmental outcomes is growing in popularity. It requires clear and measurable impact goals, such as alignment with the UN Sustainable Development Goals. (SBAI RI Working Group, 2021).


Voting can be a key part of an approach to RI. Managers should have policies on how to vote on matters directly related to RI. Engagement has traditionally been viewed through a direct lens where managers attend company meetings where they can push for change. Managers outside of these strategies can approach engagement at a more holistic level by engaging with regulators, exchanges, and industry organizations such as the SBAI. (SBAI RI Working Group, 2021).


Being a responsible investor is not limited to the investment process. There are many other ways that managers can demonstrate commitment to RI-related goals. This may include organizational initiatives to address environmental, social, and governance issues. Firms should also consider their behavior in and impact on the market to ensure that they contributing to reliable and fair markets. (SBAI RI Working Group, 2021).


This process starts with defining measurable goals to monitor the product in relation to the stated RI objectives. This may include benchmarking or tracking of ESG ratings in the portfolio over time. Oversight of the process will be key to governance and may require specific knowledge and understanding of the issues; therefore, training (or the hiring of experienced talent) will likely be required. Disclosure to investors is also critical. It is becoming a minimum expected standard for managers to have a detailed RI policy in place. The level of detail required in a policy will be dependent on a number of factors such as whether the product has an ESG focus or not. The SBAI Toolbox memo provides a detailed framework of the types of disclosures that should be included within an RI Policy. (SBAI RI Working Group, 2021).

Whilst this is by no means a comprehensive measurement standard such as those set by IASB and FASB, it is still a move towards more standardization in the responsible investing quest. As each market segment comes up with its own applicable and implementable standards, this blog post certainly looks forward to a global standard in the realm of responsible investing that is as robust as those promulgated by the accounting standards setting bodies.


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【意見交流園地】馮健鏗 Ryan Fung

失控的碳排放,是全球暖化的禍首,全球科學家唯有多管齊下去解決這項難題,在海陸空應用不同科技。當中部分技術專注於碳捕集,部分則主動出擊,應用「負排放技術」(negative emission technology),把空氣中的二氧化碳吸收並轉化。

澳洲農業科技公司 Soil Carbon Co 就專注「改造」泥土,研究把一種特定真菌應用在種子上,真菌在播種時會散播至泥土並通過光合作用成長,然後轉化成一種名為 Melanin 的黑色素物質,吸收空氣中的二氧化碳。

這間企業一半是追求盈利的初創公司,另一半則是非牟利的科研機構,並於 2020 年 6 月進行種子輪融資(seed funding),不但獲得李嘉誠的私人投資旗艦維港投資入股,更得到澳洲政府的潔淨能源金融公司(CEFC)支持,在農業層面推動農夫與研究機構合作,解決氣候變化問題。

對這間公司最深刻的印象,是兩年前在澳洲與創辦人 Guy Webb 的親身對話。當時他提到 Soil Carbon Co 技術成本低廉且易於採用,並形容其易於規模化(scalable),「配套」(infrastructure)是全球的農民,有能力在短時間內減少大量二氧化碳,「以穀類作為例子,全世界共有 7.31 億畝地方種植穀類,假設全面應用 Soil Carbon Co 的技術,每年即可吸取 8 公噸碳,既對泥土營養有幫助,亦可以減少企業的排碳相關開支。」

事實上,全球也埋首解決碳排放問題。語不驚人誓不休的 Tesla 創辦人 Elon Musk,也懸賞 1 億美元,希望找出最佳的碳捕集技術;而全球現時正進行約 20 多項碳捕集工程,逐漸促使重度污染的行業,如鋼鐵、水泥、化工等正視問題,以「逃過」被投資者以 ESG(環境、社會及管治)之名施壓。

除了在陸上花功夫,能源巨企如英國石油(BP),也研究把碳排打進海底,計劃於工廠與煉油廠密集度最高的 Teesside 地區,統一收集碳排和收費,把防污變成一盤生意,並獲英國財政大臣辛偉誠支持,不但把 Teesside 列為八大自由港之一,更撥款 8 億英鎊在不同地區專注發展碳捕集。


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看信報的畢老林,提到S&P500的ESG (環境,社會及管治) 指數,Altria及Philip Morris兩大煙草股都打入了十大,令他感到異常震驚。他的解釋是可能由於ESG報告是由三大板塊組成,這類公司可能用了很多方法拉上補下,他們的高分是由於在當中走棧避重就輕而成。


現時各大評分機構對公司的ESG評分,是根據數個ESG的國際報告標準,與及他們的ESG 報告所披露的資料而作出,報告的標準並沒有考慮公司的業務類型,亦即是說,Philip Morris如果生產煙草所用的能源比同業低,排放比同業低,他就能在環保得到高分,與他所處行業完全無關,在下自己為上市公司撰寫了過百份ESG 報告,也曾為大學造過數百份ESG 報告的分析,我想說的是, 金沙賭場是在下見過所有公司的ESG 表現中,是其中最好的一間公司,他們的ESG 報告絕對配得上接近滿分。他們相對同業無論能源效益,社會責任等,毫無疑問都是頂級的。

以純投資角度,我對這類公司沒任可偏見,但我也清楚知道,近年ESG基金如雨後春筍般出現,一大批散戶與新生代,他們對環保對社會責任有承擔,甚至認為投資理念比回報更重要 (在這裡我並非想暗示環保投資回報較低,現實亦非如此),所以ESG基金成為現今寵兒,但我百分百肯定,絕大部分主動投資ESG 基金的散戶,若發現自己投資組合內有Philip Morris或金沙,一定會感到痛心疾首。

在下完全沒有勸說各位遠離ESG投資的意圖,只是想提醒各位帶眼識人,滿口佛聖經佛經的人不代表人品出眾,各位若真要投資ESG基金,最重要的是必須清楚讀通基金的投資文件,ESG基金和其他基金一樣,他們不少是ETF基金,會用某個指數或一籃子指數做標杆,然後以程式投資法投首數十得分最高的公司,因為程式投資不用人手管理,所以管理費低廉,成為近年大基金的主要投資方法。另外有些基金,他們會將ESG分數作為參考, 再經他們的負面篩選,將違反他們投資理念,如煙、酒、賭、色情、武器生產等事先剔除,才會對前排的公司進行投資,也有一些公司,他們會在ESG指數內的公司,進行積極分析,最後選擇對地球有益的公司,才進行投資,但很明顯,要經人腦進行篩選的投資,管理費必然會較高昂。但說到底,花時間讀通文件,要帶眼識人,勿將痴心錯付,才是投資之道。

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Do the Asset Managers Walk the Talk on PRI?

Green Finance Advisor of Friends of the Earth (HK)

A recent research conducted by Dutch investment manager Robeco’s Wilma de Groot and Jan de Koning, and Sebastian van Winkel of the Erasmus School of Economics, suggests that asset managers continue to predominantly vote against social and environmental proposals. Their results have important implications for investors striving for direct impact on the sustainability agenda of corporates.

They investigated asset manager characteristics that influence ESG voting patterns using a decade of voting data with more than 20 million observations. Not only did they found that Asset managers predominantly vote against social and environmental proposals, most ironically, asset managers who have signed up to the United Nations-backed Principles for Responsible Investment (PRI), a network in which membership means you are pledging to support ESG as part of your investing strategy, are nevertheless failing to do so as well.

The PRI was started in 2006 with the stated mission of encouraging action that benefits “the environment and society as a whole.” But shareholder voting records reveal that’s just not happening. Only 35% of PRI signatories backed U.S.-based environmental resolutions as recently as 2018, and only about 24% voted in favor of social proposals.

“In order to ‘walk the walk’ instead of ‘talking the talk’, asset owners can encourage their managers to increase the number of proposals filed on environmental and social topics. This may be an important first step as the currently low figures could be sending a negative signal to directors about the importance of these issues. Asset owners can also make the assessment of sustainable voting practices an integral part of their manager selection, due diligence and monitoring,” de Groot adds.

The PRI has subsequently released a new investor guidance for voting on shareholder resolutions, urging investors to see voting not necessarily as part of an escalation strategy but rather as a tool for clear, effective and accountable investment stewardship.

“Greenwashing” could be everywhere, whether it is your MPF, mutual funds, or ETF, which labelled them as Green or ESG focused, or a stock or bond issue, or even Asset owners and asset managers which claimed themselves as environmental friendly. ESG conscious investors should definitely pressure the asset managers to do better and walk the talk!

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Tech Giants Redeeming Themselves with Green Investments?

Alexandra Tracy, Green Finance Advisor of Friends of the Earth (HK)

In the sustainability Olympics, big tech doesn’t usually score very high. Growing concerns about privacy and use of consumer data have been exacerbated by accusations of partisanship and censorship, with recent actions by some firms calling attention to how much control they have over social media and communications. This comes on top of years of controversy about how little tax many of these companies pay and whether this is fair.

Then there are the significant environmental impacts associated with the tech sector, from mining for key manufacturing inputs to disposing of unwanted devices. In 2019 alone, people discarded 53 million metric tons of electronic waste. Meanwhile, the exponential growth of energy use in data centres around the world, a rapidly expanding source of carbon emissions, highlights the need to address the industry’s contribution to the overall carbon footprint. Amazon, Google, Microsoft, Facebook and Apple together use as much power in a year as New Zealand!

Perhaps paradoxically, tech companies have announced some of the most ambitious climate targets in the world. Starting with Google in 2010, the big names have been signing large clean energy deals to power new data centres, and seem now to be looking to outdo each other in their green aspirations.

This can be seen also in the sizeable investment commitments that these companies have been announcing over the last year. In January 2020, Microsoft launched a Climate Innovation Fund, which will invest US$1 billion into accelerating existing climate solutions and creating new technologies. Later in the year, Amazon revealed its Climate Pledge Fund, a US$2 billion venture capital programme for sustainable technologies. This followed on the heels of the announcement by its founder, Jeff Bezos, of his Earth Fund, which he will kick off with US$10 billion.

Most recently, Apple has just announced a US$200 million fund dedicated to supporting nature based solutions to climate and environmental challenges. Its Restore Fund, a joint venture with Conservation International, will invest in forestry projects that aim to reduce carbon emissions and restore biodiversity. This is important to the company’s efforts to meet its pledge of carbon neutrality by 2030, as more sustainable management of forests will sequester carbon from the atmosphere which can offset part of Apple’s carbon footprint. 

While commentators may be sceptical about some of the motivations behind these plans – and, indeed, raise questions about carbon offsetting by large corporates – any initiatives that will mobilise capital into those areas where it is most needed should be welcomed.  Apple is open about the fact that one of the additional aims of the Restore Fund is to make a financial return on sustainable timber production. We need more interventions like this to demonstrate to the market that you can successfully address carbon challenges and make money at the same time.

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