Verity Snow

More than two years after BlackRock ran into criticism from US Republicans over its focus on ESG investing, the world’s largest money manager is attempting to change the subject. Elsewhere, carbon markets are still facing problems as a wave of reports show that many projects deliver fewer climate benefits than advertised.

Hundreds of ESG funds are being wound down as the investment strategy continues to battle regulatory headwinds. In Q3 alone, European investment firms liquidated or merged over 100 sustainability focussed funds. In the US, oil companies are coming under fire as an investor group pushes for greater transparency on their long-term liabilities.

There has been growing interest from big banks in biodiversity credits to tackle nature loss, with the World Bank estimating that damages to the ecosphere could cost $2.7 trillion a year. In the aftermath of Hurricane Milton, investors are more attentive than ever to climate risks facing physical assets.

Climate is on the agenda this week as investors in catastrophe bonds gird themselves for substantial losses following Hurricane Milton. As COP29 approaches, business leaders rally for support ahead of this year’s conference, despite many global companies backtracking on climate commitments.

Many of the technologies needed to decarbonise industry already exist says McKinsey. If they were deployed at scale, they could reduce up to 90% of global greenhouse gas emissions. Difficulties in defining carbon credits could hinder their rollout, as lawyers push for a legal definition to be agreed.

California files a lawsuit against ExxonMobil, making it the first major state to hold an oil major accountable for plastic pollution. As Climate Week in New York draws to a close, conversations at this year’s event were tainted by growing sentiment that current net zero goals are near impossible to achieve.

ESG as it stands will not combat climate change, reported the FT this week. Researchers suggested a new approach that places execution - not intention - at its core. Meanwhile, industry leaders reiterate they will only consider energy transition investments if profitable.

This week it emerged that Morgan Stanley had quietly shelved a central pillar of its sustainability strategy, and more scandals are uncovered in the carbon credit market as more projects are shown to have exaggerated green claims. Elsewhere, left-leaning activists are wringing their hands over the slide in corporate efforts to tackle ESG issues.

This week’s top ESG story was the lawsuit filed against Texas officials over the state’s anti-ESG legislation introduced in recent years. Elsewhere, EU sustainable investment funds have more than doubled their defence holdings since the start of the Ukraine war while increasing climate-related disaster costs are forcing insurers to take on more risk.

Fund managers are increasingly including oil, gas, and mining stocks in ESG portfolios, reflecting a broader ESG strategy rethink. Meanwhile, biodiversity-focused financial strategies are lagging behind those focussed on cutting greenhouse gas emissions and impact investment is once again under the spotlight as investors are encouraged to rethink their expectations.