Around the world in ESG
New rules clarify trustee ESG duty
Sep 2018: New regulations adopt recommendations by the Law Commission, an independent statutory body, requiring occupational pension scheme trustees to state policy on financially material considerations stemming from ESG matters. Climate change is specifically mentioned in the regulations. Requirement to produce separate statement on how members’ views are taken into account is dropped after consultation.
Asset managers back scaled-up labour reporting campaign
July 2018: Launched in July 2017, the Workforce Disclosure Initiative gains more investor signatories this year, including Aviva, BMO Global Asset Management and PGGM. After successful pilot year, initiative stepped up its ambitions, sending survey to 500 companies.
Pension body challenges EC on IORP ESG plan
Aug 2018: aba, the German association for occupational pensions, strongly criticises European Commission’s plan for rules about integration of ESG criteria in pension funds’ investment decision-making. Rejects proposal to amend IORP II Directive to allow for delegated acts and suggests it was based on incorrect understanding of ESG requirements in the directive.
Senator introduces climate risk disclosure bill
Sep 2018: Climate Risk Disclosure Act directs the Securities and Exchange Commission, the main securities regulator, to issue rules requiring companies to disclose information about their exposure to climate change-related risks
CalPERS awards $1bn quant-driven sustainable mandate
July 2018: Biggest US state pension fund hires AXA Investment Managers to run $1bn (€854m) quant-driven global sustainable equity mandate. The strategy focuses on low volatility and high earnings indicators.
Regulator adopts new ESG requirements for pension funds
May 2018: Brazilian national monetary council adopts resolution revising norm governing occupational pension funds’ investments. Pension fund asset managers must consider ESG risks as part of regular risk management processes, wherever possible. Brazilian occupational pension fund supervisor led process of proposing changes to the regulation.
Think tank questions evidence base for positive green bonds verdict
May 2018: Paris and New York-based 2° Investing Initiative argues evidence is lacking to conclude that green bonds contribute to scaling up investments in green projects. Compares green bond market to a hot air balloon festival: “Great to raise awareness and turn people’s heads towards the sky, but if the objective is to reach the moon, we will need more than hot air.”
Some Pensionskassen reject ESG, blaming costs, lack of detail
Sep 2018: ESG products are too expensive and their targets too vague, according to a poll of Swiss pension funds. In a survey by consultancy Complementa 60% of respondents said costs of specialised products had put them off investments; 57% pointed to need for specialist expertise as a deterrent.
Corporate governance council proposes ‘social licence to operate’ principle
May-Aug 2018: Updates to principles and guidelines proposed by ASX (Australian Securities Exchange) Corporate Governance Council trigger heated debate. Council chair rejects criticism of consultation draft as “work of ‘left-wing activists’ or ‘social engineers’” but says council will listen carefully to concerns raised by use of term ‘social licence to operate’. Final updated guidelines due late 2018/early 2019.
Government Pension Investment Fund (GPIF), World Bank report on fixed income ESG ‘constraints’
April 2018: Report produced for world’s largest pension fund and World Bank Group argues there are significant constraints limiting wider application of ESG considerations in fixed income investing. GPIF CIO says pension fund committed to working with external fixed income managers to integrate ESG.
Asset management association drafts green investment guidelines
July 2018: Consultation launched on draft guidelines articulating how investors should implement government guidelines for establishing a green financial system. Draft Guidelines on Green Investment welcomed by PRI and UN Environment Finance Initiative, who say they are consistent with global trend on sustainable investment regulations.
European Commission unveils sustainable finance legislative proposals
May 2018: Proposals intended to “allow the financial sector to throw its full weight behind the fight against climate change”. Package of measure includes three legislative proposals, on a green ‘taxonomy’, investor ESG integration and disclosure duties, and low carbon benchmarks. Disclosures proposal seeks to amend IORP II to allow delegated acts.
AP2 creates ESG-led multi-factor equity indices for €10bn portfolio
Feb 2018: Second Swedish national pensions buffer fund reveals it created a pair of multi-factor indices, with ESG the most important factor for weighting. Indices are for AP2’s internally-managed global equities, representing around €10bn. Benefits, according to AP2, include better than expected returns, lower costs and higher integration of ESG considerations in investment process.
Disagreement over SWF oil and gas divestment
Aug 2018: PRI co-founder Carlos Joly wades into debate, arguing the country’s sovereign wealth fund should be allowed to divest its holdings in international oil and gas companies. NBIM, the oil fund’s manager, had recommended this as insurance against an energy price fall, government-appointed commission argued against it. Government consultation on commission findings ends late November.
European pension fund trio backs ‘cutting edge’ climate change project
Sep 2018: Dutch pension funds PME and Philips, plus Sweden’s AP1, launch project on climate change risks they say could help inform future portfolio decisions. Pilot to run until end of 2018 and be rolled out more widely if successful. Project also involves Dutch insurer ASR, Canadian pensions manager OPTrust and fintech firm Ortec Finance.