Daily ESG Briefing: GPIF, AP2, BlackRock and Vanguard

Japan’s Government Pension Investment Fund (GPIF) has said it expects external managers to engage with index providers and a broad range of stakeholders to contribute to “sustainable growth of the entire market”, in a newly-added section to its Stewardship Activity Principles, currently available only in Japanese on its website.

According to the principles, which GPIF expects to be applied on a comply-or-explain basis, asset managers should engage actively with the interests of beneficiaries, including by participating in consultations conducted by index providers. It says passive managers in particular should formulate engagement strategies and implement effective measures from the viewpoint of sustainable growth of the entire market. The revisions come on the heels of the news that GPIF is ramping up its due diligence on index providers and ESG ratings companies, covered by RI here last week.

Swedish buffer pension fund AP2 has seen the carbon footprint of its listed equity portfolio shrink by half over a two-year period, according to its latest sustainability report. The report also said that, in 2019 AP2 increased the strategic weighting of green bonds from 1% to 3% of its total portfolio, divested from around 60 tobacco and nuclear weapons companies, and included climate risk into its overarching return assumptions, serving as the basis for strategic portfolio decisions. The English version of the report will be available at www.ap2.se from the beginning of March.

BlackRock’s newly-published agribusiness engagement guidelines “identify many of the key risk factors of the industry but do not include any actual commitments”, environmental groups have claimed. According to analysis by Friends of the Earth and Amazon Watch, BlackRock’s recent statement on agribusiness fails to indicate how it will hold companies accountable for ongoing climate emissions, deforestation, and human rights violations. The work suggests BlackRock should disclose its standards for gauging companies' operations and guidelines for transparent time-bound engagement with companies that fall short.

Solactive has become the latest index provider to create Climate Transition and Paris-Aligned Benchmark indices designed to meet the criteria of the EU Technical Expert Group on Sustainable Finance’s (TEG) Final Report on Climate Benchmarks and Benchmarks’ ESG Disclosures.

The Solactive ISS ESG Provisional Paris-Aligned Benchmark Indices (PAB) provide exposure to a portfolio that is “in line with a 2°C scenario through 2050”, while the less ambitious Solactive ISS ESG Provisional Climate Transition Benchmark Indices (CTB) represent a “baseline climate-aware allocation”. The indices cover Europe and Developed Markets. MSCI was first off the blocks with provisional EU-compliant climate benchmarks back in November last year.

The US city of Pittsburgh reportedly took the first step towards divesting its pensions from fossil fuels, firearms manufacturers and for-profit prisons last week, a move requested by Mayor Bill Peduto back in June. At its first-quarter meeting, the comprehensive municipal pension trust fund board unanimously voted to form a three-member study subcommittee for the work, comprised of new board vice president Mark DePasquale, of the city’s Department of Public Works; City Controller Michael Lamb; and Board Treasurer and Fraternal Order of Police Lodge #1 member Rich Ruffolo, who will lead the group. Less than 2% of the city’s $813.9m in combined funds are invested in the industries targeted for divestment, according to estimates.

BlackRock, Vanguard and State Street routinely vote against environmental and social proposals, ignoring proxy advisor recommendations, new analysis from responsible investment NGO ShareAction has found. The study, conducted on behalf of the Charities Responsible Investment Network, found that the three asset management giants vote in contradiction to proxy advisor recommendations on environmental, social and political lobbying proposals up to 74% of the time. The analysis examined the votes cast by 23 big name and charity asset managers on 127 environmental, social and political lobbying proposals. Contrary to concerns that proxy advisors have too much influence, ShareAction’s research finds that the majority (65%) of investors – including many commonly used by charities – are in fact less progressive than their voting advisors.