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Daily ESG Briefing: SEC approves Nasdaq’s corporate board diversity push

The latest developments in sustainable finance

The Securities and Exchange Commission has approved Nasdaq’s push to require companies listed on the stock exchange to meet certain minimum diversity targets on their boards. The proposal will require companies, subject to certain exceptions, to have at least “two diverse board members, including one who self-identifies as female and one who self-identifies as either an underrepresented minority or LGBTQ+”, or explain why they do not. Simiso Nzima, Investment Director and Head of Corporate Governance for Global Equity at CalPERS, told RI: "As an investor, we have a vested economic interest in improving board and management diversity at our portfolio companies. A growing body of empirical evidence shows that diverse teams are more likely to perform better than non-diverse teams." 

However, some have claimed it is a failure that people with disabilities have not been included in the requirements.  “We repeatedly engaged Nasdaq and the SEC to make the case that people with disabilities are a marginalised minority group akin to women, racial and ethnic minorities, and LGBTQ+,” said Ted Kennedy, Co-Chair of the Disability Equality Index. “While these populations were rightfully included, people with disabilities were wrongly left out.” 

It is now critical that institutional investors consider physical climate risk side by side with transition risk, Inevitable Policy Response has warned in response to today's IPCC report on climate change. Julian Poulter, the initiative’s Head of Investor Relations, said that it was wrong for investors to continue considering physical climate risks behind more immediate industry transition risks, and that while portfolio risks from physical risk were longer term, they are potentially far greater and more pervasive in effect. The Australasian Centre for Corporate Responsibility said that investors should demand an end to all fossil fuel expansion, as well as voting against obstructive directors.

Sovereign wealth funds have invested three times more into oil and gas than renewables since 2015, with funds showing a wide divergence in ESG performance, according to analysis from Reuters. While the range of investment strategies, sizes and geographies across the $8tn industry makes comparisons of ESG progress difficult, Australia, New Zealand and Norway performed best on ESG ratings in their top 25 holdings. Sovereign wealth fund investment in renewables accounted for less than a quarter of their infrastructure investments over the past decade, lagging behind public pension funds at 29%.

India’s capital markets regulator has updated its rules relating to independent company directors in an attempt to improve their effectiveness and independence. Under the new rules issued by SEBI, which come into effect from the start of 2022, the appointment, re-appointment and removal of independent directors must be approved by a 3:1 ratio of votes at a special shareholder resolution. If an independent director resigns, their entire resignation letter must be disclosed, and two thirds of nomination and remuneration committee members must now be independent directors, up from 50%. 

Investor group the 300 Club has proposed a new ‘green’ security to help raise capital to fight climate change. The security would involve private sector green bonds issued with a guarantee from the UK government. The 25-year bonds would make annual payments with no final return of principal, with the 300 Club claiming that the security would fit “very well” within the liability profile of defined benefit pension funds, and that the security could be sold in the wholesale market or through the government-owned savings bank National Savings and Investments for defined benefit schemes.