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Daily ESG Briefing: Don’t borrow shares just to vote, warns new securities lending guidance

The latest developments in sustainable finance

The Global Alliance of Securities Lending Associations has warned that “it is not considered acceptable practice to borrow securities for the sole purpose of exercising a vote” in new voting guidance. The group, whose members include the International Securities Lending Association as well as those of Canada, South Africa and Asia, also said that “intermediaries holding securities as collateral should not be expected to exercise any associated voting rights”. The document outlines best practice for investors seeking to establish or revise their voting policies or discuss the topic with agent lenders and asset managers.

Schroders has teamed up with Singapore's sovereign wealth fund, GIC, to produce a framework to assess avoided emissions – those emissions that are saved indirectly by using low-carbon products and services. Schroders said the framework could help investors identify “an extended set of winners from the green transition by considering how companies are contributing to solutions that mitigate emissions and not only whether they look ‘low carbon’ now based on conventional methodologies”. 

The US Securities and Exchange Commission has released guidance around “spring-loaded awards” – compensation arrangements through which companies give stock options or other awards to executive staff ahead of market-moving information such as strong financial results or major deals. The guidelines address how firms should acknowledge and disclose such arrangements, and say that non-routine spring-loaded grants “merit particular scrutiny by those responsible for compensation and financial reporting governance at public companies”. 

Nest Insight, a collaboration between the UK’s pension specialist Nest Corporation and asset managers BlackRock, Legal & General Investment Management and Invesco, has released a paper challenging “the commonly held view that talking to disengaged pension savers about responsible investment and ESG issues could be a widely effective way to prompt people to engage for the first time”. The research analysed the click rates and other user behaviour of 35,000 unregistered Nest members to judge whether “responsible investment communications” could engage pension savers that had never logged into their pension account more effectively than traditional communications. “Our research findings suggest that there could be quite a wide gap between the pension industry’s interest in talking about ESG and the current appetite of some scheme members for hearing about it,” said Jo Phillips, Director of Research and Innovation at Nest Insight. “However, it’s important to remember that the emails tested in this trial were designed to prompt the very first engagement among an unengaged group of pension savers. It’s quite possible that we’d see different results among savers who are further along their retirement saving engagement journey.”

Russian bank VTB Capital has estimated the cost of decarbonising the country’s economy at $1.1trn over the next 40 years. The estimate is based on a 60% reduction in net greenhouse gas emissions compared with 2019. “Complete decarbonisation will require an investment of 5x annual EBITDA for the transport sector, 2-3x for the cement and chemical industry, 1-1.5x for the waste and utilities sector, and for the oil and gas and metals and mining industries, capex will be less than 1x annual EBITDA, which will keep dividends in these sectors at a high level for an economy undergoing an environmental transformation process,” the report states.