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Political Science > Environmental Policy

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Cover IMF Staff Country Reports
Sweden: Financial Sector Assessment Program–Technical Note on Supervision and Disclosure of Climate-Related Risks
International Monetary Fund. Monetary and Capital Markets Department
Swedish banks are in general mainly exposed to the effects of climate change through loans that are collateralized by real estate properties and lending to high-emission industries.
Keywords:
transition risk; Sweden FSAP; government initiative; sustainability issue; aggregate risk; EU taxonomy regulation; CLIMATE-RELATED risk; Climate change; Climate policy; Greenhouse gas emissions; Global
Cover Selected Issues Papers
Assessing Recent Climate Policy Initiatives in the Netherlands: NETHERLANDS
The Netherlands has committed to the EU’s ambitious targets for cutting greenhouse gas emissions by 2030 and emissions neutrality in 2050 but at the same time is also vulnerable to sea-level rise and flood risks. This paper reviews recent mitigation policy initiatives in the Netherlands, including carbon levies for the industry and power sectors, energy and car tax reforms, and air passenger taxes, and recommends some modifications to these initiatives. The paper also provides assessments of hazards and macroeconomic risks from weather shocks and climate change and assesses the adaption plan against key principles on mainstream climate change into macro-fiscal planning.
Keywords:
Carbon levy; carbon pricing; climate change adaptation; climate change mitigation; emissions trading system; energy taxes; floods; green PFM; Netherlands climate strategy; price floor; sea-level rise; policy initiative; adaption initiatives in the Netherlands; Policy recommendation; C. assessing climate risk; Climate change; Natural disasters; Climate policy; Greenhouse gas emissions; Natural gas sector; Northern Europe; Global
Cover IMF Working Papers
Deconstructing ESG Scores: How to Invest with your own Criteria?
Torsten Ehlers, Ulrike Elsenhuber, Kumar Jegarasasingam, and Eric Jondeau
Environmental, Social, and Governance (ESG) scores are a key tool for asset managers in designing and implementing ESG investment strategies. They, however, amalgamate a broad range of fundamentally different factors, creating ambiguity for investors as to the underlying drivers of higher or lower ESG scores. We explore the feasibility and performance of more targeted investment strategies based on specific ESG categories, by deconstructing ESG scores into their granular components. First, we investigate the characteristics of the various categories underlying ESG scores. Not all types of ESG categories lend themselves to more focused strategies, which is related to both limits to ESG data disclosure and the fundamental challenge of translating qualitative characteristics into quantitative measures. Second, we consider an investment scheme based on the exclusion of firms with the lowest scores in a given category of interest. In most cases, this strategy allows investors to substantially improve the ESG category score, with a marginal impact on financial performance relative to a broad stock market benchmark. The exclusion results in regional and sectoral biases relative to the benchmark, which may be undesirable for some investors.We then implement a “best-in-class” strategy by excluding firms with the lowest category scores and reinvesting the proceeds in firms with the highest scores, maintaining the same regional and sectoral composition. This approach reduces the tracking error of the portfolio and slightly improves its risk-adjusted performance, while still yielding a large gain in the targeted ESG category score.
Keywords:
Sustainable investment; ESG ratings; ESG investing; Negative screening; Best-in-class screening; ESG score; ESG category; headline ESG; ESG data disclosure; Corporate social responsibility; Greenhouse gas emissions; Labor force; North America; Global; Europe