Deutsche Börse is to acquire a majority share of 80% in Institutional Shareholder Services (ISS), the proxy voting agency and ESG insights provider, from private equity firm Genstar Capital.
In doing so, the German market infrastructure group said it was committing to “one of the key megatrends in the industry that will fundamentally change the investment space over the coming years”.
Theodor Weimer, CEO of Deutsche Börse AG, said: “[ISS’] ESG expertise and data capabilities perfectly link to Deutsche Börse’s business model along our entire value chain.
“Together, ISS and Deutsche Börse have complementary ingredients to become one of the globally leading ESG players of the future.”
The transaction is the latest example of consolidation in the ESG data and analytics market, after the announcement last month of FactSet buying Truvalue Labs.
The deal is based on a valuation of ISS of $2.28bn for 100% of the debt, cash and debt free. In 2017, Genstar bought ISS for $720m from Vestar Capital Partners. Genstar and its current management will continue to hold a stake of around 20% in the company.
For ISS, it marks a change from being the one to acquire businesses. Over the years it has expanded both geographically and business areas, having for example bought the investment climate data division of South Pole Group in 2017, and a year later oekom research, a provider of ESG ratings and data and sustainable investment research. MSCI owned ISS until selling to to Vestar in 2014.
For Deutsche Börse, the ISS acquisition comes after the group last year bought analytics firm Axioma and combined it with its existing STOXX and DAX index businesses to form Qontigo, a “buy-side intelligence leader”.
The transaction is expected to close in the first half of next year subject to customary closing conditions and regulatory approvals.
Saudi Aramco among adds to Climate Action 100+ focus list
Saudi Aramco is among nine new companies that Climate Action 100+, the buy-side initiative backed by more than 500 investors, will be engaging with as part of the group’s efforts to help resolve the climate crisis.
Saudi Aramco is the world’s largest oil and gas producer, and was added to the engagement group’s focus list for that reason. Other companies now on the list include Colombian industrial conglomerate Grupo Argos, Australian chemical sector firms Incitec Pivot and Orica, and German utility Uniper.
Southern Copper and Wesfarmers were removed from the list.
Climate Action 100+ said the changes followed a periodic review to ensure the companies engaged remained relevant to confronting the global climate change crisis.
“These additions present a strategic opportunity to further curb emissions and enable the transition to a net-zero future by 2050,” said Laetitia Tankwe, adviser to the president of French pension scheme Ircantec and chair of Climate Action 100+.
“We welcome the opportunity to support signatories in these new engagements. Our teams are working with focus companies to identify a pathway to, and design a just transition for, a sustainable future.”
Saudi Aramco yesterday tapped the debt capital market with a five-part deal reportedly set to be sized at $8bn (€6.6bn) on the back of $48bn in orders. The maturities of the bonds ranged from three years to 50 years.
Reacting to the news of a new debt sale by Saudi Aramco, Ulf Erlandsson, a former portfolio manager at AP4 and now the founder of The Anthropocene Fixed Income Institute, yesterday said the company’s ESG credentials were “not advantageous” but that “there will be discussions across more than a few teams if the risk-return potential in buying Aramco bonds should outweigh potential reputational downsides and negative ESG impact”.
He called for investors to get their portfolio or asset managers to consider alternatives to investing in the Aramco bonds, suggesting the Markit CDX Emerging Markets Index could be a good replacement.
BlackRock to up ESG exposure in DC default strategy
BlackRock is making changes to LifePath, its UK defined contribution (DC) default strategy, that will materially increase its investment in ESG strategies.
By mid-2021 more than half of the total LifePath UK assets – some £3bn (€3.3bn) – will become invested in ESG strategies, it said.
The increase in “ESG exposures” will come from developed market equities. Exposure will significantly increase to the BlackRock ACS World ESG Equity Tracker Fund and a new exposure to the MSCI World ESG screened developed market index will be added.
In parallel to the ESG-related changes, BlackRock will also be looking to reduce LifePath’s UK equity exposures and increase that to developed markets. There will also be a small increase to emerging market equities in the strategy.
Sarah Melvin, head of UK at BlackRock, said: “As pension scheme trustees increasingly look for ways to further incorporate ESG investments into their schemes, this strategy enables them to balance the risk and return of their portfolios, while fulfilling their regulatory obligations.”
LifePath is the principal default of the Aegon Master Trust. Tim Orton, managing director for investment solutions at Aegon UK, said the ESG changes addressed a “growing customer need”.
Last month Legal & General Investment Management announced it would be applying its “engagement with consequences” programme across all its DC default funds.
Amundi develops fossil-fuel-free fund for Oxbridge colleges
Amundi and Cambridge and Oxford colleges have partnered to develop a low-carbon ESG index fund.
Cambridge’s Clare College will transition all of the endowment fund’s equity allocation to the new strategy as part of its plans to achieve zero carbon and reduce the long-term risk of stranded assets.
The strategy seeks to replicate the performance of the MSCI ACWI index while aiming to improve green revenues by 50% and reduce carbon emissions intensity by 30%.
It excludes fossil fuel reserves, energy sector stocks and thermal coal exposure, and companies involved in breaches of the UN Global Compact and involved in controversial weapon manufacturing or sales.
The fund also monitors value factor exposure to ensure it does not deviate significantly from the benchmark and to reduce the risk of any unintended bias.
It will be open to other charities and endowment funds.
Investors tighten SASB reporting expectations statement
The Investor Advisory Group (IAG) of the Sustainability Accounting Standards Board (SASB) has issued an updated statement calling on companies to use SASB standards in their reporting to investors.
Among the changes made to the statement, which was first issued in 2016, is an affirmation that although other standards and frameworks may complement the SASB Standards, they “are not replacements for them”.
“The IAG seeks to send a clear market signal that leading international investors are calling for SASB-based disclosure as a foundation for corporate sustainability disclosure to investors”
The move to update the statement was led by the IAG’s “messaging working group”.
“By strengthening the statement in several key areas, the IAG seeks to send a clear market signal that leading international investors are calling for SASB-based disclosure as a foundation for corporate sustainability disclosure to investors,” the investor group said in an announcement today.
Since being founded in 2016, before SASB Standard were codified for use, the IAG has grown to encompass 55 asset owners and asset managers across 12 countries and $41trn in assets under management.
“This updated statement—from a group that has more than doubled in size in just four years—reflects the growing momentum, strength, and internationalisation of investor support for SASB-based disclosures,” said Christopher Ailman, IAG Chair Emeritus and chief investment officer at the California State Teachers’ Retirement System (CalSTRS).
“I’m proud to see what the IAG has accomplished and I challenge the IAG to achieve and accomplish even more in the years ahead.”
The SASB IAG initiative comes amid a flurry of efforts related to fragmentation in expectations of ESG-related corporate reporting, and growing recognition of the importance of data to solving global sustainability challenges such as climate change.
Invesco launches global proprietary ESG ratings and insights tool
Invesco has created a proprietary tool providing comprehensive coverage of ESG insights, metrics, data points and direction of change on over 8,000 companies.
The investment manager said Invesco ESGintel, as the platform is called, will provide wider coverage than most external providers due to multiple data sources and an ability to include models for companies where no public data or scoring currently exists.
It leverages data sets from Bloomberg ESG, Sustainalytics’ Controversies and, so far, includes the following climate tools: Transition Pathway Initiative management scores, ISS Carbon Data, Science-Based Targets, and a carbon disclosure score from CDP.
Invesco said it believed the tool was “a critical pillar in our aspiration towards systematic ESG integration across all investment strategies across the firm”. The tool will intially be used for Luxembourg, Irish and UK domiciled products with corporate exposure, as well as several additional strategies from other regions.
Global standard for reporting, measuring financed emissions
As part of London Climate Action Week the Partnership for Carbon Accounting Financials (PCAF) today officially launched a standard for asset managers, asset owners and banks to measure and report GHG emissions tied to their lending and investment portfolios.
The standard provides methods to measure financed emissions of six asset classes: listed equity and corporate bonds, business loans and unlisted equity, project finance, commercial real estate, mortgages and motor vehicle loans.
Carola van Lamoen, head of the sustainable investing Center of Expertise at Robeco, one of the initiators of PCAF back in 2015, said: ”Harmonised carbon accounting is essential, as steering portfolios starts by having a standard framework, and being able to measure it”.
“We hope for an accelerated uptake, so that the investment industry can move on, and shift its focus from not only measurement, but also to creating impact.”