Recalibrating investor action on climate change

The European Union's Sustainable Finance Disclosure Regulation (SFDR) is one of the most important frameworks in the ESG fund space, and one of the biggest headaches. Since the European Commission seized the chance to turn the regulation into a truly usable system as part of its simplification agenda, investors have been nervously awaiting the finalised changes. In this episode, senior reporters Khalid Azizuddin and Dominic Webb discuss the proposed reforms, some of the key concerns raised by investors from sovereign bonds on fossil fuel exclusions, and how the European Parliament and Council of the EU positions are shaping up. They also set out how trilogue negotiations between Council, Parliament and Commission may play out, and what political pitfalls lie in wait as Parliament develops its final position.

Have investors overstated their ability to drive climate action? Have top-down, targets-driven models of decarbonisation taken the industry down a blind alley? And if so, where should sustainability-minded asset owners and managers refocus their efforts? A new report from the LSE argues for a reappraisal of the topic, based on an acceptance that investor action on climate will be dependent on government policy and technology development. In this episode, editor Lucy Fitzgeorge-Parker speaks with Tom Gosling, the report's co-author and professor in practice and director of the Initiative in Sustainable Finance at the London School of Economics, about what this recalibration means in practice – and whether the responsible investment community is ready for it. Key topics include the future of corporate net-zero targets, the challenges of supporting the energy transition in emerging markets, and the practicability – or otherwise – of policy engagement on climate by institutional investors.

With attacks on shareholder rights on both sides of the Atlantic and widespread rollbacks, rescissions and retractions of sustainability commitments, the relationship between investors and their portfolio companies is increasingly turbulent. In this episode of The Responsible Investor Podcast, Dominic Webb speaks to Sallie Pilot, managing director of the Investor and Issuer Forum, a UK-focused initiative aiming to improve the interactions between investors and listed companies in the country. The pair discuss how to improve conversations along the investment chain, some of the pain points in the relationship and how to strike a balance between equity market competitiveness and investor rights and information needs.

Transition finance investment products continue to gain popularity among investors, according to recent ESG fund flows reports. Yet it is not always possible to establish whether capital is being funnelled into the critical activities needed to transform carbon-intensive sectors. In this episode, Navindu Katugampola, global head of sustainability at Morgan Stanley Investment Management, explores best practices on transition finance based on his experience overseeing the $1.9 trillion US fund manager's activities in the area. Key topics discussed include what to look for in company transition plans, regulatory and policy developments, and the climate transition's regional characteristics.

Asset managers are under pressure to respond to a wide range of client demands on sustainability issues, from stewardship to decarbonisation, while grappling with a rapidly changing policy landscape. In this episode of The Responsible Investor Podcast, Wendy Cromwell, who heads up sustainable investment at Wellington Management, tells Elza Holmstedt Pell how the US giant navigates this, and how conversations with asset owners are evolving. This wide-ranging interview digs into engagement expectations, US policy changes, addressing physical climate risks, and the intersection between sustainability and key global investment themes.

In recent years, investors have increasingly been trying to work out how to best address deforestation in their portfolios.  How has action evolved over the years? What has been the impact of changes in the regulatory environment, in particular the EU’s deforestation regulation? And to what extent, is it currently possible to set deforestation-free portfolio targets?  Responsible Investor’s nature reporter Gina Gambetta sits down with Graham Stock, senior sovereign strategist, emerging markets at BlueBay Asset Management, to dig into these topics.  Stock is also the co-chair of the Investor Policy Dialogue on Deforestation (IPDD). Launched in 2020, the initiative involves investors engaging with policymakers in Brazil, Indonesia, the UK, US and Europe.  He gives behind-the-scenes insight into how the IPDD came into being, what the experience has been like so far, and how he sees it continuing to evolve going forward.

Investors are urgently seeking to understand how their portfolios will be affected by physical climate risks in the wake of more frequent extreme weather and regulatory changes. Climate risk data, and the related topic of adaptation and resilience, has also been a key focus of Responsible Investor's editorial content this year. We most recently published deep dives on both physical risk data and risk management as part of our COP30 Report. In this episode, Khalid Azizuddin speaks to Nick Stansbury, head of climate solutions at the asset management arm of Legal & General, about the challenges of working with data on physical climate risk.

Just over two years ago, the European Commission launched the first step in the long road to reform of the EU Sustainable Finance Disclosure Regulation (SFDR). On 20 November, the Commission's proposed amendments to the law were released. These will introduce concrete product categories and do away with both entity-level PAI reporting and the definition of "sustainable investment". In this episode, Dominic Webb talks to Anne Schoemaker, head of regulatory and investment selection solutions at Morningstar Sustainalytics, and Dennis Baas, head of sustainability strategists at Allianz Global Investors, about the review, how it may affect the market and the next steps for SFDR.

With 2050 on the horizon and a challenging political and economic environment for companies looking to hit net zero, engagement on climate change is more important than ever. As part of its new climate and investors focus, Responsible Investor has published a series of articles looking at the future of climate engagement ranging from how climate collaborations are evolving to engagement with hard to abate sectors and how investors are responding to an increasingly challenging environment. In this episode, senior reporters Dominic Webb and Gina Gambetta discuss their findings and how investors across the world are evolving their approaches to climate stewardship.

Climate engagement has been on investors’ agendas for more than a decade. So what progress has been made in that time? What have we learned about what works and what doesn’t? And, crucially, what does that mean for how we move forward? To explore these questions, our editor Lucy Fitzgeorge-Parker sat down with sustainability and stewardship veteran Colin Melvin of Arkadiko Partners. As co-author of the Principles for Responsible Investment and founder of engagement specialist Hermes EOS, he has been at the forefront of conversations on climate and corporate action for 20 years. In this episode, he discusses climate engagement in the era of ESG backlash, the role of fiduciary duty, how to prioritise corporate engagements, and the dangers of separating sustainability from core investment practice.