The latest developments in the ESG space.

Standard Chartered
Standard Chartered has issued its first green guarantee for China Energy Engineering Shanxi Electric Power Engineering Company in Oman, tapping into the kind of China-Middle East cooperation the bank has engaged in elsewhere.

The guarantee provided by Standard Chartered is for a solar project in Oman, where CEEC-SEPEC is the main EPC contractor. 

“This partnership not only strengthens economic ties but also paves the way for future opportunities and reinforces the commitment of China and Oman to collaborate on fostering sustainable growth,” the bank said.

Kroll
Firms with strong ESG scores earned an average annual return of 12.9 per cent, beating the average 8.6 per cent annual return earned by “laggards” – a 50 per cent premium in terms of relative performance by top-rated ESG companies, Kroll, the risk and financial advisory solutions firm, said in a global study.

The findings came in Kroll’s ESG and Global Investor Returns Study, which examines the relationship between historical returns of publicly traded companies and their ESG ratings globally. Kroll analysed data on more than 13,000 companies.

In Asia, ESG “leaders” earned an average annual return of 11.6 per cent, which is double the 5.8 per cent earned by “laggards.” However, 38 per cent of Asian companies were rated as ESG laggards, with only 6 per cent being considered leaders (as of December 2021). In contrast, North America had 17 per cent laggards, while Western Europe had 6 per cent.

ESMA
Europe’s markets' watchdog is sticking to its plan to restrict the use of “ESG” and “sustainability” in fund names, shrugging off of criticism from asset managers, Bloomberg reported. 

The European Securities and Markets Authority wants asset managers to know that it won’t abandon its proposal, the report said.

Major firms such as BlackRock – which has been a vocal ESG firm in its marketing – Amundi and the asset management unit of Goldman Sachs, have described parts of ESMA’s plan as potentially unworkable in their responses to an ESMA consultation earlier this year, the report continued.

“If fund managers don’t like the fact that they would have to commit to certain criteria for terms’ use in the name, they just don’t have to use those terms in the name,” Patrik Karlsson, senior policy officer for investment management at ESMA, was quoted by the news service as saying in an interview.

With controversies over ESG investing refusing to die down because some “green” funds underperformed in 2022, and “greenwashing” scandals, the topic has taken on a harder political edge. Russia’s invasion of Ukraine, spiking energy costs, supply chain disruption post-Covid-19, and the impact of net zero policies on energy prices have made ESG investing harder to sell to investors. In the US, for example, some states have sued asset managers such as BlackRock for allegedly compromising performance. One of the candidates for the Republican presidential ticket, Vivek Ramaswamy, argues in books such as Woke Inc that ESG distorts the corporate world and damages end-investors. For a contrary view, see this editorial by US correspondent Charles Paikert.

According to FTSE Russell: "In 2022 most SI [sustainable investing] indices indeed underperformed their benchmarks, after significant outperformance in 2020 and 2021. However, in both equities and the fixed income, it is noticeable that the most visible, ‘greenest’ areas of SI, green economy equities and green bonds were the areas of the largest underperformance."