ABOUT WWF
WWF is one of the world’s largest and most experienced conservation organisations, with over 5 million supporters and a global network active in more than 100 countries. WWF’s mission is to stop the degradation of the planet’s natural environment and to build a future in which people live in harmony with nature.
WWF has worked with the finance sector for more than a decade via innovative collaborations that seek to integrate ESG (environmental, social and governance) risks and opportunities into mainstream finance so as to redirect financial flows to support the global sustainable development agenda.
Our approach to sustainable finance leverages WWF’s conservation expertise – as well as our partnerships with companies on key issues such as water, energy, climate and food – to drive sustainability. Positioned at the cutting-edge of sustainable finance internationally, WWF contributes directly to leading initiatives, including the European Commission’s Technical Expert Group on Sustainable Finance and the development of international green bonds standards.
WWF also works directly with some of the largest asset owners in the world on decarbonising investment portfolios. This has allowed us to strengthen lending and investment criteria for key industry sectors, provide insights and data on environmental and social risks, fulfil critical research gaps, help unlock innovations in sustainable finance products and convene key stakeholders to progress the sustainable finance agenda.
The Sustainable Finance team within the WWF, made up of over 80 professionals globally, is key to driving this agenda into mainstream financial markets by collaborating with investors, asset allocators, banks, regulators and other relevant industry bodies globally.
This Today’s Trustee Special Edition supplement has been sponsored through the WWF Sanlam Partnership.
“The nature of business is changing as sustainability is being integrated into everything a business does.” – WWF South Africa
Today’s global environmental and social challenges we face are too big, too interconnected and too urgent for any one organisation to solve alone. Business drives much of the global economy, so companies and investors have a specific responsibility to ensure that the natural resources and ecosystems that underpin their businesses are used sustainably.
The WWF Sustainable Finance team works with financial institutions to ensure that environmental opportunities and risks are being integrated into the decision-making process by both companies and investors. The incorporation of ESG issues into mainstream business will lead to more sustainable investment opportunities being created and financial institutions becoming better stewards of the world’s natural resources. Increasingly, the financial services industry is recognising that ESG issues can
— and do — have financial implications.
WWF Sanlam Partnership
The WWF Sanlam partnership, established in 2007, was created to encourage South African business, society and government to focus on water scarcity and security. This has resulted in the funding of several successful fresh water and marine projects aimed at preserving South Africa’s water systems. The partnership has seen significant success in highlighting the linkages between better management of water risk, and driving better insurance and investment management.
“Since its launch in 2007, the WWF Sanlam Partnership has been described as a highly innovative, visionary and pioneering partnership. In our view, it has not only delivered significant conservation impact, but has also delivered a strong institutional foundation and innovative approach upon which to build.
It continues to provide a unique platform for leaders to address the management of our finite water resources.”
Morné du Plessis, CEO: WWF South Africa
WWF’s vision is to inspire people to live in harmony with nature. We need to plan and build our future economic growth in harmony with our water source areas. We hope that through the WWF Sanlam partnership and in partnering with other like-minded partners in this space, South Africans will develop a better understanding and appreciation of our country’s water challenges and our different roles in ensuring a water-secure future for our country.
Resilient and Sustainable Investment portfolios: Frameworks for Responsible Investment
In a new report by WWF titled Resilient and Sustainable Investment Portfolios the focus is on tools and frameworks for asset managers. While all actors in the financial system have a role to play, asset managers wield considerable influence as shareholders over multiple companies across a range of sectors and geographies. Via financial decision-making processes, from stock selection, monitoring, engagement and proxy voting, through to the development of green investment products, asset managers can encourage companies to adopt science-based sustainability practices that will ensure businesses operate within planetary boundaries and contribute to sustainable development.
The goal of this report is to support the asset management industry in this regard by providing a framework that outlines WWF’s perspective on responsible investment for listed equities — one that is not only holistic in its procedural rigour but rooted in the scientific consensus and criteria underlying the environmental and social issues at hand.
A handful of leading asset managers globally have recognised this potential and are integrating sustainability, or ESG, factors into their core businesses using science-based criteria — what we refer to as responsible investment. They understand that by doing so they can provide part of the solution to, rather than exacerbate, the crisis facing humanity, and simultaneously improve their ability to manage risk and returns to create resilient portfolios. As such, they have taken significant steps to addressing sustainability through their investments. However, there remains room for industry leaders to improve by more deeply incorporating science into decision-making processes and an urgent need for the rest of the industry to catch up.
By making use of the framework for either self-assessment or benchmarking against peers, multiple stakeholders along the investment supply chain can help move the asset management industry forward on responsible investment. In doing so, financial capital can be deployed in a way that protects and preserves both natural and social capital.
To this end, WWF-SA and Six Capitals ESG Advisory have formed a strategic partnership which supports the integration of the “E” in ESG. This initiative will see WWF-SA and Six Capitals ESG Advisory jointly develop Environmental metrics, standards, advice, reporting and investment solutions that support the South African investment industry in the transition towards an improved model of environmental stewardship. Examples of other criteria, frameworks and tools that the investment industry can use in their assessment and integration of the E in ESG can be found on
page 4.
Retirement funds and asset owners can use these frameworks to:
- Assess if the environmental and social impacts related to the deployment of their capital aligns with their values and those of their beneficiaries;
- Understand if asset managers are incorporating science-based criteria to maximise investment portfolio resilience to climate and other ESG risks;
- Enhance sustainability criteria and improve transparency around expectations from external managers in their investment mandates;
- Complement consultant assessments and benefit from a more complete perspective when evaluating external managers’ responsible investment capabilities and awarding mandates;
- Form the basis for engaging with external managers over performance on responsible investment.
Asset managers (including internal managers of asset owners) can use these frameworks to:
- Assess their own responsible investment capabilities and identify gaps and areas for improvement;
- Demonstrate how their investment decisions and engagement activities can influence portfolio companies to adopt more sustainable operating practices and increase the resilience of their business models;
- Structure and improve disclosures on responsible investment, thereby improving accountability to stakeholders, including clients, shareholders, regulators and civil society.
REFERENCES:
WWF Sustainable Finance Report 2019: ‘Resilient and Sustainable Portfolios: A Framework for Responsible Investment’ available online: https://tinyurl.com/y2vlramw
http://wwf.panda.org/our_work/finance/
There are numerous science based criteria, tools and methodologies for assessing and integrating environmental and social risks into the investment process, and the table below lists several widely used examples. Investors that use them fundamentally improve their ability to price risk and allocate capital in ways that are consistent with supporting sustainable development while protecting natural capital and strengthening portfolio resilience. These criteria, tools and methodologies address varied issues, and many link data on companies’ physical assets (e.g. plants, mines, concessions, infrastructure, etc.) with scientific data on environmental or social issues. This permits users to assess a company’s exposure to such risks, often in geospatially explicit ways, and often in terms of financial impacts. – WWF Resilient and Sustainable Portfolios 2019.
Summary of science based criteria, tools and methodologies for assessing environmental risks
SOURCE
WWF Resilient and Sustainable Portfolios 2019 page (17)
http://awsassets.panda.org/downloads/wwf_sustainable_finance_report.pdf