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ESG roundup: UK schemes challenged on climate risk action

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UK pension savers have written to schemes such as The Pensions Trust and the Universities Superannuation Scheme urging them to engage with asset managers about voting against the remuneration policies of Royal Dutch Shell and BP.

The letters were addressed to trustees and other relevant decision-makers and outline potential liability if they don’t take action.

The letter writing campaign was supported by responsible investment campaign organisation ShareAction and environmental law charity ClientEarth.

ClientEarth CEO James Thornton said: “ClientEarth is supporting these members to make full use of the law to protect their rights. We’ll be watching how pension funds vote on these remuneration policies, and will be ready to take action where necessary.”

A spokesman for ShareAction said at least 24 schemes had been contacted through the campaign, including public and corporate schemes, and both defined benefit and defined contribution funds.

The oil and gas companies will this year hold three-year binding votes on pay policy.

The letters argued that the pay policies Shell and BP were proposing did not incentivise business activity compatible with keeping global warming to less than 2°C, which could put shareholder value at risk in the long term.

LGPS funds urged to up the ante on investment climate risk 

Separately, ClientEarth and ShareAction have analysed newly published ‘investment strategy statements’ (ISS) from local government pension scheme (LGPS) funds, and found that more than 80% did not mention climate risk.

The analysis came after the organisations contacted The Pensions Regulator in February highlighting varying standards across the LGPS funds in terms of how they were assessing and managing climate risk in their decision-making. 

The two organisations argued that funds must address climate risk specifically in their investment strategies as climate change posed systemic risks likely to affect a fund’s whole portfolio. They said they would continue to monitor “laggard funds” and might take further regulatory action. 

Catherine Howarth, CEO of ShareAction, said many LGPS funds were “operating under a number of misconceptions, including legal ones”.

“This is not fair on pension holders,” she said. “Members’ savings should be protected across the board from the very real and emergent risks of climate change.”

Don’t relax on climate change action, investors urge leaders

More than 200 global institutional investors have called on the heads of state of major world economies to drive investment in low carbon assets and implement climate-related financial reporting frameworks.

Overarching these demands was a call for the G7 and G20 leaders to stick with and swiftly implement their commitments to the Paris Agreement on climate change.

G20 leaders failed to reference climate change, climate finance, and climate adaptation in an official statement following a meeting of these countries’ finance ministers in March this year. Pressure from the US was reportedly behind the omission of a stated commitment to climate action.

In this week’s letter to G7 and G20 government leaders, investors urged global leaders to commit to supporting a doubling of global investment in low carbon assets in developed and developing countries by 2020 and to include carbon pricing in climate-energy action plans.

On climate-related financial reporting frameworks, the investors called on political leaders to “clarify the purview of national financial regulators to explicitly mandate, enforce, and evaluate” the quality of climate-related financial disclosures in alignment with the recommendations from the Financial Stability Board (FSB) Task Force on Climate-related Financial Disclosures (TCFD).

More specifically, national financial regulators should develop mechanisms to monitor whether company and investor disclosures, and national reporting rules, are aligned with the task force’s recommendations. National regulators should provide annual progress reports to the FSB, according to the investors.

The letter was coordinated by several investor organisations, including the Institutional Investor Group on Climate Change (IIGCC) and the Principles for Responsible Investment (PRI).

Actiam cuts back on coal investments

Elsewhere, the €55bn Dutch asset manager Actiam has said it would divest from companies with a turnover of more than 15% derived from coal production.

As a consequence, the manager – a subsidiary of Vivat/Anbang – said it would sell its holdings in 10 emerging market firms, adding that it would publish the companies’ names at a later stage.

It said that its entire investment portfolio, including its index products, were subject to the exclusion decision.

Actiam’s pension fund clients include the €20bn Vervoer, the sector scheme for private road transport in the Netherlands.

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