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PRI in Person: Stewardship, ESG policy, climate action

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Japan’s financial services regulator expects the country’s investors to start working together on engagement with companies, according to the deputy director of its corporate accounting and disclosure division.

Speaking at the PRI in Person conference in Berlin this week, Amame Fujimoto said the Financial Services Agency’s (FSA) original stewardship code did not explicitly mention collaborative engagement, meaning some Japanese investors might have misunderstood it to not be permitted.

The FSA’s first stewardship code was launched in 2014. It was revised this year to remedy certain perceived shortcomings, including that some investors were felt to be engaging with companies only on a superficial level.

The Government Pension Investment Fund – the biggest pension fund in the world at ¥149.2trn (€1.1trn) – was active in this regard, but many Japanese pension funds were not, according to Fujimoto.

The code was therefore modified to emphasise that asset owners needed engage more actively.

In the UK, the Financial Reporting Council (FRC) is reviewing its stewardship code. It intends to ask “broad initial questions” about its approach to the review as part of a formal consultation on its corporate governance code that is due soon.

Jen Sisson, senior investor engagement manager at the FRC, told the conference that the council was considering adding expectations relating to environmental, social and governance (ESG) issues to the corporate governance code. As the stewardship code is the counterpart to the latter, it was probable that it would also be amended to include provisions relating to ESG.  

PRI group targets better policy 

The PRI is launching an expert policy network and looking for policy and regulatory affairs professionals connected to its signatories to join a “global policy reference group”.

The group will be designed to allow the PRI and signatories to exchange information on policy and regulation and help “amplify” efforts to achieve clear policy frameworks that require responsible investment.

Last year the PRI published a report arguing that much pension fund regulation concerning ESG was poorly designed and gave “weak signals”.

Paris climate agreement commitments

The PRI and four regional investor climate networks have invited other investors to join an initiative to implement the commitment made in support of the climate change agreement reached at the UN conference in Paris in December 2015.

Back then, more than 400 investors representing over $24trn (€20.4trn) signed the Global Investor Statement on Climate Change, which committed them to work with investee companies to get them to minimise and disclose risks and maximise opportunities presented by climate change and changes in climate policy.

The Climate Action 100+ initiative is designed to implement this commitment through collaborative investor engagement with the world’s largest corporate greenhouse gas emitters.

It is due to be officially launched later this year, and was the result of an idea put forward by Anne Simpson, investment director for sustainability at the California Public Employees’ Retirement System, according to a spokesperson for one of the regional investor climate networks.

The spokesperson said the engagement focus was not new, but that “the scale … to coordinate and scale up is”.

“The 100 refers to the biggest corporate emitters,” she said. “The ‘plus’ is in the title because the focus list of companies is longer than that, to ensure we pick up companies that are important to investors for other reasons – such as their significance in a region or their exposure to physical climate risks.”

Investors can join via the PRI or any of the investor climate networks making up the Global Investor Coalition on Climate Change.

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