Daily ESG Briefing: UK Asset Managers call out Compass Group over schoolkids’ food scandal

The latest developments in sustainable finance

Legal & General Investment Management, BMO GAM, M&G and Rathbone Brothers are among those leading an investor push against Compass Group – the London-listed company at the centre of a scandal over the provision of food to schoolchildren during the current national lockdown. The UK Government paid Chartwells, a subsidiary of Compass, to provide food parcels to pupils in lieu of the free school meals they would have received if schools were open as usual; but the firm has been accused of making large profits from the public contract while providing food that falls considerably short of expectations. The £3trn coalition of investors and other finance industry players penned an open letter to the CEO of Compass Group asking him “to answer critical questions” and offer reassurance that future food parcels would be of a better standard. “At times it is necessary to seek answers, not only as investors in the company, but also as members of society,” said James Bevan, the CIO of CCLA, the UK asset manager that coordinated the letter. 

Aviva Investors has said its stewardship priorities for 2021 will include “stakeholder business models, diversity & inclusion, executive remuneration, climate change and effective dynamic leadership”. In his annual letter, CEO Mark Versey provided details of the five priorities, saying: “We acknowledge the magnitude of these challenges and will evaluate companies on the strength of their commitments and ability to demonstrate progress over time. However, we will hold boards and individual directors accountable where the pace of change does not reflect the urgency required.” Earlier this week, State Street Advisors’s CEO Cyrus Taraporevala said the firm’s focus areas for stewardship in 2021 would be climate change and racial diversity.  

Only 20% of people working in UK financial services are confident their firms are committed to ethical finance and ESG, according to a survey by the Chartered Institute for Securities & Investment. The non-profit surveyed 563 people between October and December, with 70% saying they were “not confident” about the ethical and ESG credentials of their firms and 10% being “neutral”. One respondent observed that “traction with senior management [is] proving challenging”, while another said: “American firm, overall not a good attitude to anything other than making money; mental health, charity, social, environment all not important.” One other said that the owner of the business “is sceptical over new funds being guided to a more ESG investment stance, he argues that even government bonds are not ethical as most governments invest in arms, Nuclear power and weapons.”

A study of more than 7,000 CFA Institute members has found that ESG experts are commanding pay premiums because of the scarcity of knowledge on the topic compared with demand. At the same time, social media and professional networking platform LinkedIn analysed around a million investment professionals, finding that less than 1% claim to have sustainability skills. On average, those with such skills listed received more official approaches from recruiters on LinkedIn than those with other talents. 

Germany’s Finance Agency has said it will issue two green bonds in 2021 – a 30-year deal in May, and a 10-year deal in September. “When the Green German Federal twin security is issued, the conventional bond will be increased by the same amount at the same time,” it explained in a statement. It went on to praise derivatives exchange Eurex for “integrating green bonds that are now deliverable into the existing German Fixed Income Futures” by reducing the threshold for eligible issuance from €5bn to €4bn. Tammo Diemer, a member of the German Finance Agency’s Executive Board, said: “For many of our investors, Futures deliverability is one of the most important criteria. The turnover rate in Bund futures is usually even higher than the strong trading in the underlying itself.” 

Vigeo Eiris has provided a Second Party Opinion for the debut sustainability bond from the West African Development Bank. The bank, whose members include Benin, Burkina Faso, Ivory Coast, Guinea Bissau, Mali, Niger, Senegal and Togo, will use the proceeds of the transaction – and any others under the new framework – to finance projects such as affordable electricity, water, sanitation, education, health and climate resilience, as well as the economic recovery from Covid-19.