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Daily ESG Briefing: Australia to consider moves to stop investors axing coal

The latest developments in sustainable finance

Australia’s parliament is following the US’ lead, and exploring the potential for regulatory intervention to stop investors from divesting coal. The Parliament’s Joint Standing Committee on Trade and Investment Growth has launched an inquiry into the impact of the trend for excluding fossil fuels on export industries including coal mining. Australia is the world’s largest exporter of coal, which is its second most valuable export. Resources Minister Keith Pitt said: “It is of great concern to me that a legitimate industry like coal mining, which makes a significant contribution to the national economy… is being held back by what can only be described as corporate activism”. Earlier this year, US rulemakers postponed plans to create a ‘fair access’ rule, which would prevent the country’s banks from excluding controversial sectors such as fossil fuels and arms. 

RPMI Railpen, the asset manager for the UK’s railway pension schemes, has published its voting policy for the 2021/22 AGM season. The policy states that Railpen will sanction companies where it does not believe that there has been fair treatment of employees during the Covid-19 pandemic. It may also vote against the report and accounts or audit committee chair of companies where there is insufficient or inconsistent reporting on climate change-related financial risks. 

Refinitiv has launched its MarketPsych ESG Analytics scheme, which scores companies across more than 100 ESG “themes and controversies” using news articles and social media posts. The data covers over 30,000 companies in 252 countries and territories, and extends back to 1998.

The Board of Trustees at the University of Southern California has voted to pull its endowment out of fossil fuels. The board agreed to freeze all investment into the industry and divest its current investments over the next few years. Its current investments are primarily through long-dated private partnerships, it said, making them relatively illiquid. It has made no dedicated investments in the space for more than two years, “as the investment merits of the sector became increasingly unattractive”. The University will also establish an advisory committee on investment responsibility. 

The Climate Bonds Initiative has published certification criteria for green bonds that finance buildings in 22 cities, including Madrid, Vienna and Copenhagen. The requirements are based on the CO2 emissions of the best performing buildings in each city region. 

The Net-Zero Asset Owner Alliance, created by UN Environment’s Finance Initiative and the Principles for Responsible Investment, has said it is in favour of the Task Force on Climate-related Financial Disclosures including an implied temperature rise metric in its forward-looking disclosure recommendations. In a consultation response, the group expressed opposing views to other investor bodies, such as the Transition Pathway Initiative and the Institute of International Finance, which said the introduction of such forward-looking metrics should be delayed until the market is more mature. 

UK think tank the Pensions Policy Institute has released a report on how UK pension schemes are engaging with ESG factors, saying that greater support may be needed for schemes without the relevant ESG expertise and experience, as the rapid pace of regulatory change could leave them struggling to catch up. Among other issues identified by the report were a lack of consistency and clarity in data and reporting, and gaps in knowledge and understanding of climate issues in investing.

North American responsible investment body Ceres has called on the US Federal Reserve to modernise the Community Reinvestment Act by incorporating considerations of climate resilience and racial justice. The CRA was enacted in 1977 to combat redlining – the practice of systematically denying financial services to communities of colour. In its comments to the Board of Governors, Ceres highlighted the disproportionate effects of climate change and Covid-19 on communities of colour, and called on the Reserve to explicitly integrate climate change resilience and racial disparities in CRA regulations.