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ESG round-up: Swiss association recommends arms company exclusions

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The Swiss responsible investment association, SVVK-ASIR, has identified 15 arms companies its members – major Swiss pension funds – should not invest in.

The 15 companies are from India, Israel, Romania, Russia, South Korea, and the USA. They are considered to make products that violate Swiss law and internationally recognised conventions, such as the Ottawa Convention – banning anti-personnel mines – and the Oslo Convention on cluster munitions.

The Swiss association announced the recommendation to its members last week. It has also published position statements on different types of munitions.

According to a statement from the association, its members will over the coming months decide on how to implement the recommendation in their portfolios. The assocation’s view is that engagement with companies producing banned weapons or munitions will not bring about change.  

It said the decision to eliminate a security from the portfolio remains with each member of the association.

SVVK-ASIR has seven members: first pillar fund buffer Compenswiss/AHV; the pension scheme for telecommunications company Swisscom (comPlan); accident insurance fund Suva; public pension fund Publica; and the pension funds for the postal service (Pensionskasse Post), federal railways (Pensionskasse SBB), and the canton of Zurich (BVK).

IPE understands that each member has holdings in at least one of the identified companies.

Jacqueline Oh, managing director of the Bern-based association, said the board of directors approved the exclusion recommendation at the end of February.

It is separately launching an engagement campaign with companies deemed to fall most foul of certain environmental, social, and governance (ESG) norms.

Oh said it had picked around 15 companies across a range of sectors to begin with.

“We’ll start small and gain expertise, but we want to increase the number of companies we engage with over time, ” she said.

The exclusion recommendation on controversial weapons is the first concrete measure taken by the association since it was founded in December 2015

Separately, Australian asset manager AMP Capital yesterday announced it would not invest in companies manufacturing tobacco, cluster munitions, landmines, or biological and chemical weapons.

It will divest around A$440m (€315m) worth of tobacco securities across equities and fixed income, which it said is the largest divestment in Australia to date. It will also divest around A$130m from cluster munitions and landmines. The asset manager’s portfolios do not have holdings in companies with known exposure to chemical or biological weapons, but such companies will be excluded from the investable universe.

The divestment will happen under a new “ethical framework” the company has introduced. This establishes minimum ethical standards to be applied across the portfolio. Previously, AMP Capital dealt with ethical issues as part of its ESG analysis on a case-by-case basis and by offering customers responsible investment options.

AMP Capital CEO Adam Tindall said: “The new framework complements our existing approach to addressing ESG investment risks by helping us to resolve complex   ethical issues as they arise. It reflects the changing attitudes of our investors, who increasingly do not want to be invested in harmful products.”

“We are not prepared to deliver investment returns to customers at any cost to society,” he added. “This position has been affirmed through consultation with major institutional clients and engagement with retail customers.”  

In addition, French public sector pension scheme Ircantec recently announced that it had sold holdings worth €46m across 18 companies as of the end of 2016 under a coal-based divestment policy.

In other ESG news, the UN’s Principles for Responsible Investment (PRI) has launched a proxy vote declaration system.

The system allows investors to publicly declare how they intend to vote on shareholder resolutions about ESG issues filed or co-filed by PRI signatories.

PRI said its decision to launch the system was influenced by other initiatives such as “Aiming for A”, an investor coalition that has had success with some shareholder resolutions filed at extractive companies.

The PRI said a range of signatories have been requesting greater transparency in proxy voting decisions by “the investment community”.

Finally, a group of institutional investors and non-profit groups have launched what they describe as the first public ranking of corporate human rights performance.

According to a statement, the Corporate Human Rights Benchmark (CHRB) is the product of two years of consulting with over 400 companies and organisations, and is supported by 85 investors accounting for $5.3trn (€5trn) in assets under management.

The investors leading the CHRB are APG Asset Management, Aviva Investors, and Nordea Wealth Management.

The benchmark examines companies’ policies, governance, processes, practices, and transparency, as well as how they respond to serious allegations of human rights abuse. Companies are scored on 100 indicators across six measurement themes.

The idea behind the benchmark is to incentivise companies to work towards a strong human rights record, which will give them “moral and commercial advantages”.

Mark Wilson, group CEO of Aviva said: “For the first time we have a public measure of companies’ human rights performance which will focus attention in the boardroom on their performance versus other companies and allow investors to ask the right questions.

“More transparency and a desire to improve in the rankings will spark a race to the top in corporate human rights.”

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