Munich Re Exits Net-Zero Insurance Alliance Citing Antitrust Risk
Welcome to this week’s ESG policy roundup. A home to find out some of the week’s headlines in the ESG world.
The Glasgow Financial Alliance for Net Zero (GFANZ) alliance is a UN-backed coalition of financial institutions aimed at achieving global net-zero emissions by 2050. This week, Munich Re's departure from the NZIA follows Vanguard's exit from the Net-Zero Asset Managers initiative in December 2022, marking a second high-profile exit from a GFANZ. In our policy roundup, we bring you some of the latest developments in ESG policy from different regions and sectors and highlight their implications and opportunities for the green market. The past week has seen several key developments from ESG and Net Zero alliances in response to global trends, this week:
The Net Zero Asset Owner Alliance (NZAOA), a group of institutional investors calls for an end to financing of oil and gas projects
Siemens Energy, a German multinational energy company that specializes in providing sustainable energy solutions, has successfully placed its first-ever Green Bond with a nominal value of EUR 1.5 billion.
Munich Re has exited the Net-Zero Insurance Alliance citing anti-trust risk
Climate Action 100+, a global investor-led alliance, has announced its updated Net Zero Company Benchmark 2.0, which has a "stronger focus" on emissions reductions, alignment with 1.5°C pathways, and the robustness of transition plans
European Solar PV Industry Alliance unveils Industrial Action Plan to drive the industry forward
ESG alliances are formed to collaborate and share knowledge and resources to advance their environmental, social, and governance goals. Essentially, they are formed to drive positive change, create value for stakeholders, and promote a more sustainable and equitable future. Alliances are forming globally and signal moves in the right direction for ESG.
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$11 Trillion Investor Group Calls for End to Financing New Oil and Gas Projects
The Net Zero Asset Owner Alliance (NZAOA), a group of institutional investors committed to net-zero greenhouse gas (GHG) emissions by 2050, has released a "Position on the Oil and Gas Sector." According to the NZAOA, the position is based on frameworks including the Intergovernmental Panel on Climate Change’s 1.5°C scenarios and the International Energy Agency's Net Zero by 2050 Roadmap.
The position calls for investors to only allow for investments in new oil and gas infrastructure under “exceptional circumstances,” with investments limited to existing fields. The paper also emphasizes the need for asset owners to engage with asset managers to support climate action.
The NZAOA's position guides investors to engage with oil and gas companies on the need to set climate goals, with an expectation for emissions reduction targets to align with global climate goals. The paper also sets expectations for policymakers and regulators to facilitate reduced demand for oil and gas and increased alternative energy supply, through actions such as carbon pricing mechanisms and funding innovation.
NZAOA Chair and Allianz SE Board Member Günther Thallinger emphasized the need for change in the provision and consumption of energy, including the phase-out of non-renewable sources like oil and gas.
The NZAOA has grown to 85 members with over $11 trillion in assets under management, and its new position paper highlights the organization's commitment to transition investment portfolios to net-zero GHG emissions by 2050.
Munich Re Exits Net-Zero Insurance Alliance Citing Antitrust Risk
Munich Re, the world's largest reinsurer, announced that it will be leaving the Net-Zero Insurance Alliance (NZIA) over concerns of antitrust risk. The NZIA was established in 2021 with the aim of helping insurance companies transition to net-zero greenhouse gas (GHG) emissions. The alliance requires signatories to transition their underwriting portfolios to net-zero GHG emissions by 2050, and to engage with clients on climate action.
Despite exiting the NZIA, Munich Re remains committed to its climate targets, including reducing GHG emissions related to its investment portfolio by 29% by the end of 2025 and achieving net-zero GHG emissions in its operations by 2030. In October 2022, the company announced that it would no longer provide insurance coverage or investment for new oil and gas projects.
Munich Re's departure from the NZIA follows Vanguard's exit from the Net-Zero Asset Managers initiative in December 2022, marking a second high-profile exit from a Glasgow Financial Alliance for Net Zero (GFANZ) alliance. The GFANZ is a UN-backed coalition of financial institutions aimed at achieving global net-zero emissions by 2050.
Munich Re CEO Joachim Wenning stated that the company will pursue its climate ambition to reduce global warming individually, citing limited opportunities to pursue decarbonization goals collectively among insurers worldwide without exposing the company to material antitrust risks. Wenning emphasized the company's commitment to scientific recommendations and decarbonizing even faster than what is required to reach net-zero by 2050.
Munich Re's exit from the NZIA highlights the challenges of collective climate action among financial institutions, and the need for companies to pursue their decarbonization goals individually.
Siemens Energy Issues EUR 1.5 Billion Green Bond for Sustainable Finance
Siemens Energy, a German multinational energy company that specializes in providing sustainable energy solutions, has successfully placed its first-ever Green Bond with a nominal value of EUR 1.5 billion. This is an important step in its efforts to integrate sustainability across its business operations. The Green Bond has two tranches with a total order book across the two tranches of approximately EUR 5.5 billion. Proceeds from the bond placement can only be used for projects and activities that meet eligible Environmental, Social and Governance (ESG) criteria.
Siemens Energy will use the bond's proceeds to re-finance existing debt of Siemens Gamesa Renewable Energy, a key player in the wind-power business in which Siemens Energy holds a 97.79% majority stake. Portions of the net proceeds may also be used to refinance the acquisition of outstanding shares of Siemens Gamesa by Siemens Energy. The issuance is part of Siemens Energy’s Green Bond Framework, established in January 2023 to further develop its sustainable finance vision.
Maria Ferraro, CFO of Siemens Energy, emphasized the company's focus on ESG, stating that "Driving sustainability across our own portfolio and operations will drive profitable growth." The Green Bond Framework has been verified by independent ESG ratings agency Sustainalytics, aligning with the International Capital Market Association’s Green Bond Principles 2021.
The successful issuance of the Green Bond marks the capital markets' confidence in Siemens Energy's strategy to become a leader in the energy transition. While a framework for EU-labeled Green Bonds has been agreed to by the European Union for bonds that meet the requirements of the EU taxonomy for sustainable activities, it has yet to be formally approved by the EU Parliament and its member states, rendering the label unavailable for currently issued bonds.
Siemens Energy's Green Bond is a significant step towards promoting sustainable finance and integrating ESG into business operations.
European Solar PV Industry Alliance Unveils Industrial Action Plan to Drive Industry Forward
The European Solar PV Industry Alliance, co-led by EIT InnoEnergy, has attracted over 110 new members across 17 countries since its launch in December 2022. The Alliance aims to develop an industrial action plan to re-develop, de-risk and accelerate the PV industry in Europe across all segments of the value chain, from silicon to modules.
Four project working groups, focused on Non-Pricing Conditions, Supply Chain, Financing and Skills, have been established to form a consolidated plan that will support the EU Green Deal Industrial ambitions to develop an industry to supply an annual capacity of 30 GW by 2025, adding 60 billion Euros of new GDP every year in Europe and creating over 400,000 new jobs.
The project working groups consist of key industry players, such as Carbon, Enel Greenpower, Engie, IBC, Meyer Burger Technology AG, and Wacker Chemie AG. Their action plan will be announced at the Intersolar Europe event in Munich, scheduled to take place between June 14-16th.
Javier Sanz, EIT InnoEnergy’s Thematic Leader Renewable Energies and ESIA lead, stated that they are excited to see the outcomes of the project working groups and are delighted to see the incredibly rapid progress of the EU Solar PV Industry Alliance.
The Alliance, created by the European Commission, facilitates an innovation-led expansion of a resilient industrial solar value chain in the EU, particularly in the PV manufacturing sector. Its Steering Committee is made up of the European Commission, EIT InnoEnergy, Solar Power Europe, and the European Solar Manufacturing Council. The Alliance aims to support the growth of a European industry that is developing and commercializing breakthrough technologies, leading to more innovative, efficient, circular, and sustainable products, making the EU’s climate and energy objectives more attainable.
The European Solar PV Industry Alliance’s aim to reshape the industry is a significant step towards achieving the EU Green Deal Industrial ambitions, ensuring a more sustainable and greener future.
CA100+ Unveils Updated Net Zero Company Benchmark, Driving Greater Company Ambition
Climate Action 100+, a global investor-led alliance, has announced its updated Net Zero Company Benchmark 2.0, which has a "stronger focus" on emissions reductions, alignment with 1.5°C pathways, and the robustness of transition plans. The benchmark, launched in March 2021, assesses the performance of focus companies against the initiative’s three high-level goals: emissions reduction, governance, and disclosure. CA100+ said that the new benchmark has been enhanced to drive greater company ambition and follows an extensive consultative process involving feedback from 125 investors and stakeholders.
The Net Zero Company Benchmark 2.0 has added a new disclosure indicator for historical emissions reductions, as well as "significant" amendments to indicators covering decarbonisation strategy, capital allocation, policy engagement, and just transition. The indicator on historic emissions reductions examines whether a company has reduced its emission intensity in the past year and past three years and whether those emission reductions are in line with a 1.5°C pathway for its sector.
The benchmark is divided into the disclosure framework, which looks at company disclosures and their robustness, and alignment assessments, which examine companies’ alignment with Paris Agreement goals. The updated benchmark has added new metrics to the alignment assessments, including for utilities that look at whether companies are decarbonizing at an asset level, substituting high-carbon capacity for low-carbon capacity renewables.
CA100+ has looked to respond to the expansion of its capital allocation indicator, as companies have "historically underperformed" in this area. The new indicator looks at whether companies are allocating money to climate solutions, products, or services that will decarbonize the economy.
The next round of company assessments against the Net Zero Company Benchmark 2.0 is due to be released in the September-October timeframe. The benchmark updates form part of the initiative’s drive to "enhance all of its processes" as it prepares for the next phase, which runs from mid-2023 until 2030, and identifies investors' actions relevant to policy and real economy engagement opportunities across these sectors.