ESG roundup: Arms trade treaty, GES engagement, Sustainalytics
GLOBAL - Institutional investors with $3trn (€2.4trn) of assets have called on UN member states to support a strong, legally binding and comprehensive arms trade treaty (ATT) when they convene in New York from 2-27 July for the UN Diplomatic Conference on the ATT.
The 39 asset owners and investment managers - all signatories to the UN-backed Principles for Responsible Investment (PRI) - which have signed the 'Global Investor Statement on the Arms Trade', believe that the absence of a global conventional arms control system preventing irresponsible supplies affects investments by negatively impacting both the global economy and companies in their portfolios.
According to the coalition of investors, the economy is negatively affected by irresponsible transfers of conventional arms that contribute to insecurity, human rights violations, corruption and the diversion of public resources to destructive activities.
Without a stronger system to control international trade in conventional arms, investors believe companies operating in the defence industry face regulatory and reputational risks, as they might be perceived to be complicit in human rights violations committed by irresponsible end-users.
The investors argue that any ATT should prevent all types of international transfers of conventional arms and ammunitions where there is a substantial risk that these would undermine peace and security, be used in violation of human rights and international humanitarian law, or seriously impair sustainable development.
They say an ATT should also include a comprehensive and detailed list of conventional arms, including small arms, light weapons, ammunitions and components and equipment specially designed for arms.
François Meloche, extra-financial risk manager at Bâtirente, a Canadian labour-sponsored multi-employer retirement system, said: "The chairman's draft paper should be considered as a basis for negotiations at the July Diplomatic Conference, as it represents a clear path for moving forward."
Bennett Freeman, senior vice-president for sustainability research and policy at Calvert Investments, a US-based investment adviser to a family of sustainable and responsible mutual funds, added: "The negotiation process should be open and transparent. Interested stakeholders should have as much access as deemed appropriate to the negotiations, as their perspectives can inform and clarify debates, as well as help to identify solutions."
The investor engagement with policymakers and UN member states has been carried out through the PRI Clearinghouse, a global platform for collaborative shareholder engagement.
One example of successful engagement is Russia's largest power-generating company, RusHydro.
The hydroelectric company has proven responsive to international investors' concerns over a 2009 Siberian power plant accident that killed 75 people.
After nearly three years of constructive engagement, an onsite visit by Global Engagement Services (GES) showed that RusHydro had acted responsibly by taking full responsibility for remediating and compensating the effects of the accident.
What is more, on its own initiative and following the recommendations of the Federal Service on Ecological, Technological and Nuclear Supervision Rostekhnadzor - it has also improved health and safety management so that it is now systematically managing the risks related to its operations in order to ensure its safety.
RusHydro's deputy chief executive George Rizhinashvili said: "Socially responsible investors are very important to us. Their presence in our shareholder base highlights the sustainability of the company's core business - hydro generation.
"We appreciate the positive outcome of the dialogue with GES, as its report, which is based on solid methodology, is an important third-party acknowledgement of our progress with regard to environmental, social and governance issues."
GES concluded that RusHydro has fulfilled the revision criteria and that the case is resolved.
In other news, responsible investment research firm Sustainalytics has
announced the acquisition of Asian and emerging markets environmental, social and governance (ESG) research and analysis provider Responsible Research.
Beginning in July, all Sustainalytics clients will have access to ESG Insight Asia, a monthly newsletter produced by the team in Singapore that focuses on industry-specific issues facing Asian companies.
They will also have access to Responsible Research's back catalogue of in-depth industry-specific reports.
Lastly, employee-controlled investment manager Neuberger Berman has become a signatory to the UN PRI effective.
Joseph Amato, Neuberger Berman president and chief investment officer, said: "The signing of the PRI is another example of our commitment to responsible investing.
"This is a statement of our support for PRI and its work with asset managers in formulating a global presence for the Principles."