Report accuses major multinationals of greenwashing

Some of the world’s biggest companies, including Samsung, Amazon, Nestlé and Uniqlo make “misleading” claims about their plans to combat global warming and are likely to miss their own targets, a report claims.

The four multinationals were among those whose climate plans were assessed as being of “low” or “very low” integrity. The 2023 Corporate Climate Responsibility Monitor, an annual assessment produced by non-profit Carbon Market Watch, reviewed 24 major companies with links to the Race to Zero campaign.

Each of them has endorsed the Paris treaty target of capping global warming at 1.5 degrees Celsius, and aligned themselves with UN-backed campaigns to ensure that business plays its part in decarbonising the global economy.

Staying within that critical temperature threshold will require reducing global greenhouse gas emissions 45% by 2030, and reaching “net zero” -- with any residual emissions balanced by removals -- by mid-century, the UN's Intergovernmental Panel on Climate Change (IPCC) science advisory panel has said. But the 2030 pledges of 22 of the 24 companies that made them would only take 15% off their collective emissions, the report found.

Only Danish shipping and logistics group Maersk was judged to have a climate plan with “reasonable integrity”, while those of eight corporate giants -- including Apple, Google, Microsoft and steel-conglomerate ArcelorMittal -- were judged to have “moderate integrity”.

Swedish fast-fashion retail giant H&M, also in this tranche, has very ambitious emissions reduction targets, but parts of its green strategy could undermine them, the report found.

Of the other 15 companies, the climate claims of 11 were found to have “low integrity” and four -- American Airlines, Samsung Electronics, French retail food giant Carrefour, and JBS, the largest meat processing company in the world -- were all tagged with “very low integrity”.

Carrefour objected to its ranking, saying the company had set emissions reduction goals across its entire value chain, and was the only large French food retailer ready to cut off suppliers lacking their own climate strategies.

At least 18 of the companies assessed plan to rely “heavily” on offsetting their emissions by planting trees and through similar projects designed to remove carbon from the atmosphere. The report says that this is problematic as trees do not lock away carbon for long enough and there is not enough room on the planet for targets to be met in this way.

It also says that companies often do not count all “scope 3” emissions. This includes elements such as the carbon produced by their suppliers, the transport companies that they use and the companies that deal with their waste.

Amazon has pledged to reach net zero by 2040, but the report calculates that when all the emissions linked to the company are counted, it is on course for a 16% reduction, at most, by 2030. Nestlé is targeting a 50% reduction in carbon emissions by 2030, but the report calculates that its plan will cut its full emissions footprint by 16-21%.

Lindsay Otis, of Carbon Market Watch, commented: “By making such outlandish carbon neutrality claims, these corporations are not only misleading consumers and investors, but they are also exposing themselves to increasing legal and reputational liability.

“Instead, they should implement ambitious climate plans to reduce their own emissions, while financing action outside of their own activities, without claiming that this makes them carbon neutral.”

China to keep lead in green bond market

China, the world’s biggest polluter is expected to issue more green bonds in 2023 and stay a dominant global player in the green finance market as it seeks closer alignment with international standards predicts Standard & Poor’s market intelligence service S&P Global.

Report authors  John Wu and Rehan Ahmad say that the nation, in which so-called nonaligned bonds account for a substantial portion of total green financing, is seeking to adopt globally accepted norms to attract a wider pool of capital. The latest version of China's rules, updated in mid-2022, have further aligned with the standard of the International Capital Market Association’s (ICMA) Green Bond Principles (GBP) by requiring issuers to use 100% of proceeds on environment-protection projects, against 70% previously.

The move will “increase the pace of international alignment as new bonds are issued and existing nonaligned bonds are refinanced,” said Gloria Cheung, capital markets partner at law firm Linklaters. “If we look at the current volume of Chinese green bond issuances that are nonaligned, the potential for conversion is immense.”

In 2022, China issued the highest amount of green bonds aligned with the commonly accepted global definition, totalling US$76.25 billion, according to data from Climate Bonds Initiative an international organisation working to mobilise capital for climate action. Germany was second with US$60.77 billion. China is expected to issue US$90 billion to US$100 billion of green bonds in 2023, said Eric Luk, climate and sustainability director at Deloitte

China also is working with the European Union on a common taxonomy to harmonise definitions on what constitutes green activities recognized bilaterally to facilitate cross-border issuance and investment.

"More supportive policies will be introduced and the market will be more standardized," said Jianheng Chen, an analyst at CICC Research, pointing to regulatory changes in China. He expects sectors such as renewable energy, driven by the development of the new economy, local government financing vehicles, electricity and banking to see the highest green bond issuance in 2023.

The People’s Bank of China (PBOC) also is encouraging banks to step up their green financing by issuing or investing in more green bonds. Under the central bank’s green finance evaluation system, banks will be assessed according to the proportion of green bonds to total assets, and the year-over-year change in the total value of such holdings.

Financial institutions are likely to maintain strong issuance of green bonds and such issues are expected to make up the bulk of their volumes, said Cheung. “Companies in the battery, electric vehicle and renewable energy sectors, too, will be among issuers, though sizes will be relatively smaller," Cheung added.

Apart from China, Luk reports that other Asian countries including. Japan and India are stepping up green bond sales as major economies in the region seek to address climate change.

“Supportive government policies, friendlier environment to investors and well-functioned financial markets are conducive to another year of growth in green bond issuance in China and the [Asia-Pacific] region,” Luk said.

Countries in Asia-Pacific issued US$120.83 billion of green bonds in 2022, down 2.5% year over year but a much smaller decline than the 32.5% drop in Europe, and the 43.2% fall in North America, as rising interest rates depressed the overall bond market. Japan and India ranked seventh and 10th, respectively, on the global league table of green bond issuance in 2022.

Money managers unconvinced that inflation will be tamed

Despite claims that the recent surge in Inflation to 40-year highs across many countries has peaked, several of the biggest money managers warn that it is likely to be more than a temporary blip.

BlackRock, AllianceBernstein Holding and Pacific Investment Management (Pimco) warn the market may be too sanguine on the pace of price growth. While they agree that inflation is likely to slow — supply bottlenecks have eased and commodity prices have dropped – they caution on the pace and magnitude of the deceleration traders are pricing in.

“People seem to see inflation coming down and think they don’t need inflation protection anymore even if the rate is still high,” said John Taylor, director of Global Multi-Sector at AllianceBernstein. “They are underestimating the structural shifts that could lead to a higher inflation regime such as deglobalisation and labour shortages.”

Bloomberg reports that medium-term inflation expectations in the US — as shown by the gap in yields between regular five-year bonds and ones that are inflation-protected — have shrunk to 2.5% from last year’s peak of 3.76%. A similar measure for global markets shows expectations are now below 2%, down from 3.12% in April — the highest in at least 10 years.

While some of the market moves pointing to an inflation slowdown have faded, the expected rate is still well below BlackRock’s forecasts. The world’s biggest asset manager sees the pace averaging around 3.5% over the next five years and settling below 3% beyond that as an ageing population shrinks workforces, geopolitical fragmentation reduces economic efficiency, and nations move to a low-carbon industrial model.

“Our view on the structural shifts means inflation will be higher than what we got used to before the pandemic,” said Wei Li, BlackRock’s chief investment strategist. “The reversal of goods prices means getting inflation down from its June 2022 peak of 9.1% to around 4% will be the easy bit. Getting it to settle below 3% will likely be much harder.”

BlackRock is sticking with its recommendation that investors stay overweight in inflation-linked bonds. AllianceBernstein recently increased its exposure to the US Treasury’s Inflation Protected Securities (TIPs), while Pimco also bought US index-linked bonds to hedge against the danger of higher-than-expected price growth.

As the inflation debate rolls on, Pimco portfolio manager Alfred Murata recommends hanging on to TIPs and keeping in mind that some key price components will stay stubborn.

“Some key categories will remain ‘sticky,’ including wage, shelter, and rent inflation,” Murata wrote in a note. “It will take longer for inflation to approach the Fed’s 2% target. Yet, the market is pricing in a far more rapid drop in inflation – to slightly above 2% by summer.”

Emirates plans a CBDC to promote digital payments

The Central Bank of the United Arab Emirates (CBUAE) has announced plans to introduce a central bank digital currency (CBDC) to facilitate both domestic and international transactions.

The deployment of a digital dirham is one of nine key initiatives of the UAE’s new Financial Infrastructure Transformation (FIT) programme to accelerate digital transformation of the financial services market.

In the first stage of the programme, the CBUAE plans to set up several digital payment infrastructures and services that involve the launch of a CBDC for “cross-border and domestic uses”, among others. Plans for the FIT programme comes after the CBUAE announced last month that it will launch an instant payment platform (IPP) in Q1 2023.

In a statement, the CBUAE said: “These digital payment initiatives will drive financial inclusion, promote payment innovation, security and efficiency, and achieve a cashless society.” Launching a CBDC will “address the problems and inefficiency of cross-border payments and help drive innovation for domestic payments respectively.”

In addition, the bank intends to launch a card payment platform under the FIT programme to promote the growth of e-commerce and digital payments across the country.

CBUAE governor Khaled Mohamed Balama told Gulf Business: “The FIT Programme embodies the directions and aspirations of our wise leadership towards digitising the economy and developing the financial sector.

“We are proud to be building an infrastructure that will support a thriving UAE financial ecosystem and its future growth.”

Carbonplace gets US$45 million funding from global banks

Carbonplace, a carbon credit transaction network, has secured US$45 million in seed funding from nine international banks – BBVA, BNP Paribas, CIBC, Itaú Unibanco, National Australia Bank (NAB), NatWest, Standard Chartered, SMBC and UBS – which each invested US$5 million.

Carbonplace is expected to debut later this year and will connect buyers and sellers of carbon credits through their banks.

As businesses look to use the credits to achieve net-zero emissions objectives, demand for carbon credits—which are produced through projects such as planting trees or using cleaner cooking fuel—is anticipated to grow strongly.

Currently, the credits are frequently exchanged via commodities exchanges and bilaterally on a project-by-project basis.

“The capital injection represents a commitment from some of the world’s largest financial institutions, which account for nearly US$9 trillion in total assets, to achieve Carbonplace’s vision of accelerating corporate climate action by providing transparent, secure and accessible carbon markets,” the firm said in a statement.

Carbonplace plans to use this funding to scale the platform and its team, expand service offerings to a larger clientele of financial institutions, and establish collaborations with other players in the carbon market, such as global markets and registries.

Carbonplace’s chief technology officer (CTO) Robin Green told Reuters that later this year, the banks’ business clients will have access to the credit platform and in the future, retail customers may also have access to it.

The firm has named Scott Eaton, who previously headed software company Algomi, as its CEO and it will have its headquarters in London.

Eaton said: “With Carbonplace, we are transforming the way that carbon credits are bought, distributed, held and retired. I am excited to take this company to the next level of its evolution, and to help unlock its massive potential to drive significant economic and social value by opening the carbon markets up to the world.”

The Carbonplace platform was formally launched a year ago, following a pilot in August 2021 by four founding banks: NAB, NatWest, CIBC, and Itau Unibanco.

Asset manager Osmosis to run US$4.5 billion ESG strategy for Dutch Pensioenfonds

UK boutique asset management firm Osmosis has won the contract to manage a US$4.5 billion sustainable investment strategy for the Dutch state pension fund Pensioenfonds PGB, reports the Financial Times.

The strategy has been designed to invest in firms that offer improved outcome on various parameters such as carbon emissions, water consumption and waste production. It also aims to provide environmental aids and greater returns than the ones fixed by MSCI World index.

Osmosis CEO and co-founder Ben Dear said that investors do not have to compromise on financial gains in order to comply with goals to reduce emissions and other targets related to environment in their portfolios.

“The mandate will target better risk-adjusted returns by investing in resource-efficient companies [that] will also deliver an immediate reduction of more than 50% in carbon emissions, water consumption and waste creation relative to the Pensioenfonds PGB current equity portfolio,” he added.

The latest mandate doubles Osmosis’ assets under management to US$9 billion. The firm has been operating similar environmental, social, and governance (ESG) strategies on behalf of Oxford University’s endowment fund, Australia’s Commonwealth Superannuation as well as Danish pension fund PKA and Imas Foundation.

The pension fund noted that the newly awarded contract is part of its new climate action plan. Approved in December, the plan aims to reduce carbon emissions by half across its listed equity portfolio by 2030.  

Citi nears sale of Mexican bank Banamex

Citigroup is nearing the sale of its Mexican retail bank Banamex, in a deal that could value it at up to US$8 billion according to reports, despite government interference deterring potential bidders and driving down the price of the unit.

Billionaire Germán Larrea, who owns Mexico’s largest mining company Grupo México, is in exclusive talks to purchase Banamex, according to three people familiar with the matter.

Larrea’s offer is likely to value Banamex at between US$6 billion and US$ 8billion, depending on how the deal is structured, they said, below the US$10 billion or more predicted by some of the more bullish analysts. In January 2022, Bank of America analysts suggested that the “franchise could be worth US$12.5 billion- US$15.5 billion”.

The same people warned that negotiations, while advanced, were ongoing and there was no guarantee a deal would be agreed. A rival bid by Mexican bank Banca Mifel with backing from private equity fund Apollo also reached the later stages of negotiations but Citi chose to continue with Larrea, they added.

Two of the people with direct knowledge said Grupo México and Citi were discussing the US bank holding on to a stake in Banamex until it could later sell it on in an initial public offering. Bloomberg first reported the possibility.

“We are in an active dialogue and continue to pursue a dual process that includes both the sale of the consumer business, as well as potential for an IPO. We are pleased with our progress and remain committed to pursuing a path that maximises value for our shareholders,” said Citi.

Citi bought Banamex in 2001 when it was Mexico’s second-largest bank with a long prestigious history. However, in the two decades since, Banamex has slipped to fourth place, with insiders blaming poor decision-making around operations and stricter US regulatory requirements.

Interventions by President Andrés Manuel López Obrador and internal problems in the Mexico unit made two early potential bidders – Spain’s Santander and local lender Banorte – re-evaluate the cost of the deal, according to two people directly involved in negotiations. Both banks are now out of the process. Days after the announcement that Citi was exploring a sale, López Obrador made clear he preferred a Mexican buyer for the nearly 140-year-old bank.

Western sanctions “undermine multilateral anti- money laundering work”

Western sanctions imposed on Russia in response to its invasion of Ukraine have unintended consequences by limiting the country’s contribution towards multilateral anti- money laundering efforts, claims the head of Russia’s financial monitoring service.

Writing in the US magazine The National Interest, Yury Chikhanchin, Director of the Federal Financial Monitoring Service of the Russian Federation says that Russia's contribution to the security of both regional and international financial systems is significant and that “politicising and effectively dismantling these systems by limiting Russia's role in multilateral anti-money laundering (AML) efforts carries enormous risks.”

Chikhanchin argues that Russia has always been committed to strict compliance with its obligations in combating criminal proceeds. “For 20 years as a member of the Financial Action Task Force (FATF), we have managed to develop one of the world’s most advanced AML regimes.

“Additionally, over recent years, the Russian Financial Intelligence Unit has accumulated unique experiences that it has willingly shared with all interested countries. In order to boost the capacity of law enforcement agencies, a number of educational programmes are being actively fulfilled for experts from Central Asia, Latin America, and Africa.”

This progress has been reversed in the past year, says Chikhanchin. “It appears that authors of anti-Russian initiatives, in a bid to “expel” Russia from everywhere, have completely lost touch with reality and forgotten about the dangerous consequences of dismantling the global AML/CFT (Combating the Financing of Terrorism) system.”

Notably the article does not express any contrition for the war, the author referring to sanctions as being “in retaliation for our desire to put an end to multi-year flagrant injustice in Ukraine”.