ESG risk oversight

2023 could be a critical year for ESG risk oversight. There seems to have been a much greater focus on this topic in the last few months; a number
of papers have been published on it recently, for example. Much of this work has been on emissions, particularly on how companies in funds’ portfolios are or should be measured.

Taxes on emissions are becoming more extensive. That applies particularly in the US where there isn’t yet a federal carbon tax (although several states have their own). The risk of investing in companies with relatively high emissions continues to grow as the penalties are increased for doing so. This is going to become a bigger topic for fund boards to address. The legislation and penalties are only going to get stronger.

Fund directors would love to be presented with a simple and clear set of numbers, conforming to an agreed industry standard, which could be used to inform them how much carbon the holdings in a fund’s portfolio emits.

Unfortunately, it is not as simple as that.

To read more on this story see the February edition of The NED.