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Daily ESG Briefing, Feb. 4: Ohio SERS, COP26, Hermes, LGIM and more

The latest responsible investment developments

The UK’s former lead on the COP26 climate negotiations has slammed the government for its lack of commitment to climate change, and warned that such summits are trivialised by a focus on agendas and red tape. Claire Perry, ex- Climate and Energy Minister, was sacked as the head of COP26 on Friday, and a subsequent letter to Prime Minister Boris Johnson has been leaked, in which Perry says the situation “was particularly awful at the last COP in Madrid”. “While half a million climate action protestors gathered in the streets, I sat in plenary sessions where global negotiators debated whether our meeting should be classified as “Informal” or “Informal-Informal”; others argued over the structure of tabs, tables and colours in reports (rather than the commitments countries would make) and some of the world’s wealthiest oil-rich countries made their annual demand for global funding to offset the damage all this low carbon planning would do to their economy,” she wrote.

Meanwhile, the UK’s “landmark” Environment Bill has been re-introduced to Parliament, having been pushed back last year due to December’s general election and EU withdrawal negotiations. The latest version of the bill, which sets out how the UK’s green standards and environmental protection laws will look after Brexit, includes a proposal for a two-yearly review of international environmental legislation and powers to stop exports of plastic waste to developing countries and “ensure that producers take responsibility for the waste they create”.

Despite the uncertainty around this year’s COP, the UK Government and the UK Green Finance Institute today announced the inaugural Green Finance Education Summit as part of its Pathway to COP26 programme.

The School Employees Retirement System of Ohio (SERS) has denounced proposals to tighten US rules on proxy voting and filing shareholder resolutions as setting a “dangerous precedent” and “stifling the voices of investors”. In a letter to Securities and Exchange Commission (SEC) Chairman Jay Clayton, SERS Executive Director Richard Stensrud wrote: “Proposed rules regarding proxy advisory firms…intrude upon the relationship between investors and their advisors and inject expensive and unnecessary inefficiencies to the process of voting proxies. Making it more difficult for small investors to submit shareholder proposals is antithetical to promoting fairness in the market. For these reasons we request that the SEC not move forward with the proposed rules.” The 60-day comment period for the proposed amendments to the SEC’s proxy review process closed yesterday.

US fund management giant Federated Investors and the UK’s Hermes Investment Management have merged to become Federated Hermes, Inc., a $576bn (€521bn) asset manager “focused on a commitment to responsible investing to achieve financial outperformance”. Federated also changed its New York Stock Exchange (NYSE) ticker symbol from FII to FHI. The news follows Federated’s 2018 acquisition of a 60% stake in Hermes Fund Managers from its previous majority owner, BT Pension Scheme (BTPS). Since then, Federated has launched a responsible investing office and become a client of EOS, Hermes’ engagement and stewardship arm.

Legal & General Investment Management (LGIM) is to vote against all directors serving as chair while also serving as CEO. The move is expected to impact corporate giants including BlackRock, JPMorgan and Facebook and have a particular impact in the US, France and Spain: combined chair/CEOs are found on 47% of S&P 500 boards, 48% of Spain’s largest companies and more than half of France’s CAC 40 firms, according to LGIM. Iancu Daramus, Sustainability Analyst at LGIM, commented on LinkedIn: “CEOs should not be able to mark their own homework by also serving as board chairs.”

Mexico’s federal government is readying to issue a sovereign green bond this year, according to media reports. Arturo Herrera, Secretary of Finance and Public Credit, said there was investor appetite for bonds that would channel proceeds towards financing environmental and social objectives. Chile’s finance ministry became Latin America’s first sovereign green issuer last year, closing two back-to-back issuances – a debut $1.4bn (€1.2bn) offering followed by a €861m ($978m) bond – over a matter of weeks.

BMO Global Asset Management will ramp up engagement with financial institutions over climate risk to their loan and underwriting portfolios this year, encouraging TCFD reporting and stronger mitigation strategies, it has said. The announcement came as part of a wider pledge to set climate change as an engagement priority and push investee firms to align with Paris in areas including coal phase out and sustainable marine and food systems. BMO was a founding member of Climate Action 100+, the investor coalition for collaboratively engaging with the most significant carbon emitters, and will continue leading on a number of engagements as part of the initiative. The asset manager’s engagement priorities for the year also include public health and labour standards.