ISS ESG, the sustainable investment arm of ISS STOXX, enables investors to develop and integrate sustainable investing policies and practices, engage on responsible investment issues, and monitor portfolio company practices through screening solutions.
As the COP28 Conference meets to consider responses to climate change, policymakers, companies, investors, civil society organizations, and other stakeholders similarly face the challenge of managing climate-related risks and opportunities. This report reviews an array of issues that may be significant for investors concerned with climate change.
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Key chapters from the report include:
- Climate Change Regulation and Standards in 2023: CSRD/ESRS, ISSB, and U.S. Legislation Climate change regulation and standards continue to expand, and the notable emergence of the European and global disclosure standards opens opportunities for greater transparency on companies' climate-related activities.
- Corporate Climate Governance: A Subject of Growing Investor Scrutiny Climate governance faces growing investor scrutiny and is increasingly being incorporated into frameworks such as the Climate Action 100+ (CA100+) and the Net Zero Investment Framework (NZIF). Companies seeking resilience against climate change and compliance with current climate governance recommendations may consider governance measures such as board oversight of climate-related risks and opportunities, linking executive remuneration to climate performance, and retaining senior leadership with adequate climate skills. Available evidence suggests climate governance measures are positively associated with GHG emissions disclosure and progress towards Net Zero.
- Terms of Engagement: Investor Challenges on the Road to Net Zero The twin goals of both decarbonizing a portfolio and reaching alignment and engagement targets can be in tension with each other. While switching funds to low-emitting sectors is one route to rapid decarbonization of a portfolio, the negative impact of such a strategy on a portfolio's alignment progress should also be considered. This is particularly so when existing investments may reside in high-emitting-sector leaders that may also have a highly developed and mature strategic approach to mitigating climate change and to strategically achieving Net Zero.
- A Guide to Climate Scenario Analysis: A Framework of Guiding Principles Climate scenario analysis can support the re-direction of capital and re-alignment of portfolios with science-based emissions-reduction pathways. Financial institutions can use such pathways to explore a range of possible futures and the implications for their strategies, plans, and investments. ISS ESG provides a framework to assess different emissions-reduction pathways and to explore five leading Net Zero pathways. It also examines barriers to wider adoption of climate scenario analysis, such as how differing sectoral and geographic granularities constrain the application of climate scenario analysis to different companies.
- Climate Controversies: How Safe Is Your Investment? This chapter provides an overview for investors of the types of risks that could occur across various stages of a fossil fuel-based or industrial project. Companies directly or indirectly involved in such projects may receive increased scrutiny from regulatory authorities, civil society, and investors. Risks such as controversies, norms violations, and transition and physical risks may arise.
About ISS ESG Climate Solutions: Use our Climate and Nature solutions to help you gain a better understanding of your exposure to climate-related risks and gain insights to safeguard your investment portfolios. Our solutions include Emissions Data (Scope 1,2, & 3), Physical and Transitional Risk Data, Scenario Data, Issuer Temperature Score, Potential Avoided Emissions, Carbon Risk Rating, Issuer Level Net Zero Alignment Data, Biodiversity Impact Assessment Tool, and Water Risk Rating.
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