ESG Core Investments BV, the first European sustainability-focused special purchase acquisition company (SPAC), launched in Amsterdam raising €250m. The overall market is projected to be worth $300bn, according to Accelerate forecasts. Last year, 248 blank check SPACs went public in the US – a figure that could triple in 2021 and reach the 1,000 mark. Already since January, 170 SPACs have listed in the US, raising $52.8bn. Up to now, Europe and the UK have lagged behind this ‘SPACtacular’ trend, as The Economist called it, but Amsterdam is rapidly emerging as Europe’s center for blank-cheque companies. In response, the UK government has just announced it will relax listing rules to enhance London’s clout as a financial center post-Brexit, which includes attracting SPAC IPOs. Despite governance concerns amongst some investors, SPACs and ESG might just be getting started – last month, former NFL quarterback Colin Kaepernick launched a social purpose SPAC.
After a heated AGM season in 2020 that saw record investor support for environmental shareholder proposals, ESG activism is expected to intensify this year as a variety of stakeholders examine company ESG credentials. The launch of new, dedicated ESG activist funds like Inclusive Capital and Engine No.1 often have the support of traditional asset owners like the $282.5 billion California State Teachers' Retirement System. This season will also see a new global campaign - Say on Climate - launched by British billionaire and activist investor Sir Chris Hohn, who has filed numerous climate resolutions asking companies to disclose to shareholders their plans to reduce emissions. Other investor groups and NGOs such as Greenpeace, ShareAction or Follow This have also filed resolutions at European companies. One of the most prolific ESG activists is the Interfaith Center on Corporate Responsibility, a coalition led by faith-based and SRI-affiliated investors. They filed 244 shareholder proposals at 152 American companies for the 2021 AGM season, asking boards to address racial justice and diversity, climate and human and workers’ rights.
Signalling a U-turn in ESG reporting in the US, President Joe Biden’s nominee to chair the SEC, Gary Gensler, said the agency would consider forcing more reporting on climate risks, adding that it would benefit issuers: “There are tens of trillions of investor dollars that are going to be looking for more information about climate risk." Just a year ago the SEC planned to modernise corporate reporting without considering climate risk, criticised at the time by Commissioner Allison Herren Lee as “ignoring the elephant in the room”.
The UK Chancellor Rishi Sunak announced plans “to finance the green industrial revolution” as part of the response to fix public finances after the pandemic, heralding a potential blueprint for other governments. Sunak announced the creation of a UK Infrastructure Bank that will contribute at least £40 billion of investments in public and private projects – with a focus on the offshore wind industry. Sunak intends “to position the City as the global leader for voluntary, high quality carbon offset markets.” This comes as companies and governments that have committed to Net Zero pledges face increasing scrutiny. In the run-up to COP 26, expect to see significant improvements and growth in the markets for carbon pricing and offsetting as a means of achieving Net Zero pledges.