Daily ESG Briefing: UK regulator slams companies’ use of governance code

The latest developments in sustainable finance

The UK’s Financial Reporting Council (FRC) has expressed its disappointment at the response to the Governance Code of 2018 in its latest review. The regulator found evidence of widespread ‘box ticking’ practices, that suggest the code is seen “purely as a compliance exercise”. It also found instances of poor application of the ‘comply or explain’ principle that guides the code. The review stated that “with a plethora of ESG issues rising in prominence and attracting greater government and public attention, ignoring best practice guidance generates greater risk”.

The CEOs of eight of Canada’s biggest pension investors have issued their first ever joint statement, calling on companies to adopt the standards of the Sustainability Accounting Standards Board – better known as SASB – and the TCFD recommendations. The heads of AIMCo, BCI, Caisse de dépôt et placement du Québec, CPP Investments, HOOPP, OMERS, Ontario Teachers' Pension Plan and PSP Investments have all signed the statement, on the same day that SASB announced a merger with the International Integrated Reporting Council.

Meanwhile, Canada has seen its ‘responsible investments’ grow from C$2.1trn at the end of 2017 to C$3.2trn at the end of 2019, according to a report launched today by the country’s Responsible Investment Association. 

Just one central bank in the world has explicitly linked its response to the Covid-19 crisis with its climate strategy, according to research from the London School of Economics. Fuji is the only nation to make the connection between the two agendas, says Lessons from Practice, which assesses central banks in 180 countries to establish the level of sustainability each has integrated into its emergency response package.   

The UK government will set up a National Infrastructure Bank as part of its new National Infrastructure Strategy to help the UK meet its net zero emissions target by 2050, on the back of the economic recovery to overcome the effects of the pandemic. See Spending Review 2020 here.  

Norges Bank Investment Management (NBIM), the manager of Norway’s sovereign wealth fund, has said that the adoption of a new purpose statement by the Principles for Responsible Investment (PRI) should have been subject to a signatory vote as it represented a significant strategic departure for the network. The comments from NBIM, a PRI founding signatory, echoes its earlier criticism regarding the PRI’s decision to include “real-world impact aligned with the SDGs” as part of it’s 10-year Blueprint.