Daily ESG Briefing: East Sussex fund taps Storeband for fossil free mandate

The latest developments in sustainable finance

The £3.9bn (€4.3bn) East Sussex Pension Fund (ESPF) in southern England has awarded a £400m (€441m) “green tilted” fossil-free mandate to Storebrand, marking the Norwegian firm’s first major UK pension fund mandate. The East Sussex fund, part of the UK Local Government Pension Scheme, has opted for Storebrand's Global ESG Plus, which aims for long-term alignment with the Paris Agreement. Gerard Fox, Chair of the East Sussex Pension Fund, said: “The Energy Transition presents challenges that touch every country, sector and company. For an LGPS Fund it defies simple investment versus divestment decisions, requiring company engagement and a whole portfolio approach.” He added that investing in “generic” passive indices “tends to weight exposure to older and often more carbon intensive incumbents over which no investor due diligence has taken place”.

Investors are seeking to set up an independent institute to oversee the Global Industry Standard on Tailings Management, set up in the wake of the deadly 2019 Brumadinho tailings dam disaster. The institute was one of the recommendations of Dr Bruno Oberle, the  Independent Chair of the Global Tailings Review. The UN Environment Programme (UNEP) and the Principles for Responsible Investment (PRI), Co-Convenors of the Global Tailings Review, the Church of England Pensions Board and the Council on Ethics of the Swedish National Pension Funds, announced a partnership to create the institute today. A senior consultant is being recruited to lead the process of establishing the Institute.

Climate risks remain mispriced, according to Isabel Schnabel, who is a Member of the European Central Bank (ECB) Executive Board. In an exchange of views with German economists, organised by the German Ministry of Finance, Schnabel also argued that a lack of common environmental standards is slowing the growth of the green bond universe. In a subsequent Twitter discussion, she fielded questions about climate change.

The European Council, the heads of state/government body of the European Union, has transmitted its submission on the Nationally Determined Contribution (NDC) of the EU and its member states to the United Nations, a requirement of the Paris climate agreement. The submission contains an updated and enhanced target of at least a 55% reduction in greenhouse gas emissions by 2030 compared to 1990, following the guidance of the European Council given on 11 December 2020.

A large majority of central banks surveyed by the Network for Greening the Financial System (NGFS) have taken initial steps to adopting SRI practices in one or more of their portfolios, or are planning to do so. And yet, across the board, the coalition of central banks and financial supervisors found the 40 respondents had varying SRI objectives, still determining what combination of investment strategies would best align with their portfolios’ characteristics. In general, however, the survey indicated that green bond investing, negative screening, and ESG integration are currently popular investment strategies. Moving forward, the NGFS recommends central banks: help improve the consistency, comparability and granularity of ESG data, formalise SRI policies, and  embed SRI in governance principles and reporting practices.

As asset owners in Asia-Pacific markets push forward on implementing ESG factors into their investment processes, their expectations of asset managers regarding their ESG implementation practices are also growing, according to Cerulli Associates. The findings come in the research and consultancy firm’s Responsible Investing in Asia 2020: On the Cusp of Change, which examined the initiatives and approaches taken by managers, distributors, and asset owners in embracing responsible investing in Asia-Pacific markets.

Nordea has joined the Partnership for Carbon Accounting Financials (PCAF). With their addition, PCAF, which aims to standardise carbon accounting for the financial sector, now boasts 90 financial institutions, with almost $19trn in assets, including Morgan Stanley, Bank of America and CitiGroup.

Thirty-six companies in the FTSE 350 pay at least a quarter of their employees less than £20,000 (€22,070) a year; of that 34 companies pay all lower quartile employees below the annualised equivalent of the London Living Wage (£19,565), while 11 pay below the annualised equivalent of the Real Living Wage (£16,926), according to research by the High Pay Centre. The work, funded by Standard Life Foundation, was based on new pay ratio disclosures, following rules requiring listed companies with over 250 UK employees to disclose their CEO’s pay relative to the upper quartile, median, and lower quartile pay of their UK workforce. 

Investors, coordinated by the Interfaith Center on Corporate Responsibility, have filed proposals for 2021 proxies with CVS, Dollar General, Kohl’s, Kroger, McDonald’s, Walmart, and Yum! Brands to learn how the companies might adopt paid sick leave policies as a standard health and safety protection for their workers in light of Covid-19. The investors say significant exposure to the public puts employees of these companies at heightened risk; they argue that by adopting permanent paid leave policies, the companies will help mitigate the risk of outbreaks and closures by allowing employees to safely quarantine and recover at home.