Daily ESG Briefing: NNIP hires Truvalue Labs for ESG assessments

NN Investment Partners has hired Truvalue Labs to contribute to its in-house ESG assessment process. “We have a systematic process, where we combine datasets that contain price-moving information, like P/E, growth or balance sheet factors,” said NNIP’s Jeff Meys. “Until we started using Truvalue Labs’ data, it was challenging for the team to include any ESG indicators in our quantitative investment processes, because we couldn’t find any alpha source in any of the data from traditional data suppliers. Alpha alone isn’t enough—the data needs to be uncorrelated with other factors.” NNIP chose two unnamed indicators to include in assessments, “and they are a significant percentage of our overall company score,” said Meys. “We’ve been positively surprised by the impact.”

The European Parliament’s Environment Committee has voted for a 60% emissions reduction target for 2030. A final vote will take place today (Friday 11th), with a full plenary vote scheduled for October. Member States will decide on their position by the end of the year. The European Commission is proposing a target of 50-50% and will publish an impact assessment on the plans next week, while scientists say a 65% target is required to avoid catastrophic climate change. 

The Investor Alliance for Human Rights has published a risk briefing on Palantir Technologies, alleging significant social and governance risks. The risks, it said, are revealed in the software company’s recent S-1 filing with the Securities and Exchange Commission relating to its proposed listing of class A common stock on the NYSE. The concerns raised by the investors include human rights risks through its relationship with the US Department of Defense, Immigration and Customs Control, and the Department of Homeland Security; compliance issues with data privacy and anti-corruption laws; a lack of board independence; founders’ control of voting shares, virtually eliminating any shareholder influence; and its exemption from certain reporting structures, limiting its financial disclosures to shareholders.

Canadian investors this week presented ESG proposals to Ontario’s Capital Markets Modernization Task Force, including requests for Toronto Stock Exchange-listed issuers be required to adopt and report on diversity targets and ESG indicators aligned with SASB and the TCFD, and to be required to hold an annual advisory shareholder vote on the board’s approach to executive compensation. Convened by SHARE, the investors are: Addenda Capital, BMO Global Asset Management, British Columbia Teachers Federation Salary Indemnity Fund, Canada Post Corporation Pension Plan, Groupe Investissement Responsible, Jarislowsky Fraser Limited, NEI Investments and RBC Global Asset Management. 

Fitch Ratings says that “climate-change stress tests will eventually feed into prudential capital requirements for European banks”, pointing to current efforts in the EU, UK and Japan. “The ECB is the only regulator to make clear that climate scenario analysis and stress testing should explicitly feed into banks' capital adequacy,” Fitch said, adding that “French and UK banks will run exploratory 30-year climate-change scenarios set out by the Banque de France and the Bank of England respectively” which won’t officially test banks' capital adequacy, but “we expect that climate-change risks will eventually feed into prudential capital requirements across Europe”. The report highlights the lack of activity in the US on the topic.