Take Five: With Science on our Side
This week, President Xi Jinping took full advantage of an opportunity to claim global leadership.
China’s crisis – President Xi Jinping committed China to an all-economy and all-greenhouse gases climate strategy at a virtual meeting of global leaders co-chaired by the UN and COP30 hosts Brazil. Like most countries, China has yet to submit its nationally determined contribution (NDC) to the Paris Agreement for the five years to 2035, but Xi’s comments are seen as an indicator of his appetite for global leadership on climate policy. Throwing shade on the US, which did not attend the forum, Xi noted the severe impacts on the international order caused by an unnamed country’s enthusiasm for “unilateralism and protectionism”, and called on all others to “respond to the climate crisis through multilateral governance”. Earlier this week, the US unveiled plans to impose swingeing tariffs on imports of solar panels from Southeast Asia, alleging use of Chinese subsidies. China also recently confirmed the timelines for its emission trading system to be extended to include cement, steel and aluminium. Brazilian President Luiz Inácio Lula da Silva used the meeting to encourage attending political leaders – which included the European Commission’s Ursula von der Leyen – to publish ambitious NDCs ahead of COP30. UN Secretary General António Guterres insisted: “No group or government can stop the clean energy revolution. Science is on our side – and economics have shifted.”
Greater expectations – New York City Comptroller Brad Lander outlined new expectations for the climate policies of asset managers responsible for investing US$208 billion on behalf of three of the city’s pension funds. On Monday, he detailed the requirements for credible net zero transition plans from managers servicing the New York City Employees Retirement System, the Teachers Retirement System, and Board of Education Retirement System, which are due by the end of June. The three schemes adopted a joint Net Zero Implementation Plan in 2023 and recently announced a 37% collective reduction in greenhouse gas emissions. Lander told CEOs they should engage portfolio companies to drive real economy decarbonisation, incorporate material climate change-related risks and opportunities in investment decision-making, and adopt a systematic stewardship strategy that “addresses prioritisation and escalation of engagement and voting to advance decarbonisation”. The letter also outlined the expectations managers should set for portfolio companies, including Scope 1-3 reporting and target setting. The move follows a similar exercise in expectation-setting on climate stewardship, led by three UK-based asset owners, which laid out five principles for asset managers to follow. “Even as political forces attempt to reverse progress, I am committed to pushing forward with bold action to confront the intensifying climate risks we face,” said Lander, who is running for New York mayor. Landers’ point was underlined by the news that the Department of Labor is minded to rescind a Biden-era rule that allows ESG factors to be considered by fiduciaries of private-sector retirement plans.
Get a room – The UK’s energy transition was in the spotlight this week, as its government co-hosted a two-day summit on energy security. Ahead of the event, newsflow suggested the UK was adopting a similar homegrown approach to its renewables supply chain as the US, albeit without recourse to the eye-watering tariffs mentioned above. First, it was reported that Energy Secretary Ed Miliband would prevent state-owned power utility Great British Energy from using solar panels produced via slave labour. Then his department said it was fast-tracking £300 million (US$400 million) of investment in offshore wind supply chains, with the aim of boosting domestic jobs and catalysing investment. The event also prompted a written exchange of views between policymakers and the private sector. In an open letter, the former asked the latter to support the UK government’s plans for clean power system by 2030, citing far-reaching reforms including to grid connectivity. Meanwhile, 130 firms and investors took out a full-page advert in the Financial Times to declare their readiness to support governments’ renewables ambitions – so long as the right policies are in place. It’s some comfort to know the public and private sectors are on the same page, more or less, if not in the same room.
He who hesitates – New data this week revealed that the ESG backlash has finally arrived in Europe, with investors pulling US$1.2 billion out of sustainable funds in the region. According to Morningstar Sustainalytics, Q1 2025 was the first quarter in which Europe had suffered net outflows since 2018, contrasting with inflows of US$20.4 billion in Q4 2024, and contributing to record global withdrawals of US$ 8.6 billion. Regulatory deadlines in the UK and EU aimed at stamping out greenwashing prompted a rash of rebranding activity, meaning that there were fewer funds available to investors that were labelled as sustainable. But policy shifts were seen as playing a big role, with the incoming US administration effectively declaring war on ESG – not to mention DEI – and Europe reassessing its priorities, driven by the need to provide for its own security. “For some European investors, the rollback in ESG commitments by US firms has created hesitation, undermining the sense of global alignment on climate and sustainability goals,” said Morningstar, acknowledging that performance concerns also played a role.
Our common home – The death of a spiritual leader is not always an event of great moment for investors, but the passing of Pope Francis on Easter Monday will have been marked as such by many who factor social and environmental issues into their investment decisions. In his second encyclical (titled Laudato Si’), published in the same year that the Paris Agreement was adopted, Pope Francis called on all people to take responsibility for “our common home”. He followed this up with meetings with energy industry executives, an address to COP28, and persistent support for consideration of long-term responsibilities – including to future generations – over short-term gains. Pope Francis also took his message beyond his own church, convening 50 religious leaders across faiths to issue a shared climate statement in 2021. Importantly, his approach gave equal weight to the social and the environmental. As he wrote in Laudato Si’: “The urgent challenge to protect our common home includes a concern to bring the whole human family together to seek a sustainable and integral development, for we know that things can change.”
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