G20 urged to drive higher environmental, social investing practices

  • OECD cites “considerable challenges”
  • Calls for extra transparency on ESG rankings
  • Comes forward of October G20 assembly

LONDON, Oct 4 (Reuters) – The world’s largest economies must do extra to make sure environmental, social and governance-related rankings and investments are efficient within the transition to a low-carbon economic system, a report from the OECD on Monday mentioned.

Launched forward of an October assembly of the G20, the report mentioned whereas the drive to take a position utilizing ESG standards might assist worldwide local weather targets, “considerable challenges” wanted to be overcome.

Specifically, the report highlighted the wide range of approaches to assessing ESG points, inconsistent information and an absence of comparability between ESG ranking methodologies.

“These competing dynamics and challenges associated with ESG rating and investing could compromise market integrity, erode investor confidence, and mask the extent of environmental and climate-related impacts of investment decisions,” the report mentioned.

“Ultimately, challenges could constrain the pace and scale of the capital allocation needed to achieve tangible progress to support long-term value and a transition to low-carbon economies.”

The report follows the opening of a session by the International Organization of Securities Commissions on ESG rankings in July and comes forward of the subsequent spherical of worldwide local weather talks in November. learn extra

The OECD known as on governments to make sure world transparency, comparability and high quality of core ESG metrics.

Specifically on environmental rankings, the report mentioned rankings suppliers appeared to position much less weight on destructive environmental impacts and extra on company disclosure of insurance policies and targets, with little evaluation of their affect.

With rankings suppliers typically utilizing numerous sub-category scores, the OECD known as for better readability over the that means of such scores, to raised assist buyers.

Investors have been additionally being held again by points together with “inadequate” information on internet zero pathways, the dearth of coverage readability concerning carbon pricing and assist for renewables and an absence of merchandise and measurement instruments to permit buyers to align portfolios with particular local weather targets.

“Overall, greater international co-operation is needed to ensure that ESG and climate transition-related practices progress in a manner that ameliorates the current market fragmentation, and strengthens investor confidence and market integrity.”

Reporting by Simon Jessop;Editing by Elaine Hardcastle

Electricity pylons are seen in front of the cooling towers at the Lethabo Thermal Power Station,an Eskom coal-burning power station near Sasolburg in the northern Free State province, March 2, 2016. REUTERS/Siphiwe Sibeko/File Photo/File Photo