ESG Briefing: ‘Don’t let EU make all the rules on sustainable finance’, warns Asia trade body

The latest developments in sustainable finance

Asian trade body ASIFMA, which represents 125 banks, asset managers, law firms and other financial players in the region, has warned against letting the EU dominate sustainable finance policymaking, urging Asia Pacific policymakers to step up activity and “represent this region’s perspective prominently in global fora”. In a report dedicated to the topic, the group says “it is not prudent for the industry and policymakers to leave standard-setting to any one jurisdiction alone,” – referring to the EU’s current efforts. Regulators could “consider forming a specific regional task force with subgroups targeting specific issues such as regulatory disclosure, ESG scoring, risk management, etc., or working through other existing industry structures and in order to achieve the level of coordination needed for an effective regional approach to sustainability, and engagement globally,” the report suggests.

Hedge fund activism is bad for socially responsible performance over the medium term, according to a new study from HEC Paris Business School. The research is based on data from more than 2,600 listed US firms, and shows that there is an average initial uptick of 7.7% in company value in the first 12 months of being targeted by activist hedge funds, but the success isn’t long lived. “Within five years of coming under pressure from activist investors, the average firm loses 7% of its employee base while operating expenses and investment in R&D falls by 6.6% and 9% respectively,” the study claims. “Social responsibility efforts are hit too and put on hold compared to similar firms not having been targeted with a performance difference of 25% within five years of being targeted.”

Nearly two-thirds of investor relations professionals in the UK, Europe and Asia Pacific have seen a “significant to medium” change in their roles over the past three years because of the boom in ESG investing,  according to a new study. 103 individuals were surveyed – one third in each jurisdiction – by Orient Capita, the investor relations arm of Link Group, and 57% didn’t understand the difference between SRI and ESG. The research also pointed to the need for companies to invest more in building out expertise and capacity on sustainability, if they want “to incorporate this seriously into their corporate strategies”. “At present, the research showed that budgets allocated to ESG remain limited with only 10% investing in excess of £50,000 per annum,” the authors wrote. “This could be increased by the recruitment of a dedicated in-house ESG resource, a trend seen across several large cap companies in the past 12 months.”

Insurance supervisors should encourage strengthened climate-related financial disclosures, the International Association of Insurance Supervisors and the Sustainable Insurance Forum have urged, after finding low implementation of the TCFD recommendations across the sector. In a new paper, the pair find that progress on TCFD take-up is largely limited to select large globally-active insurers, and identify where supervisors can push for improved disclosure through the use of existing supervisory tools. The two organisations said they would continue to focus on climate risk in insurance over 2020, and are next developing an application paper which will include guidelines on disclosure. 

Columbia Threadneedle and RBC Global Asset Management have pledged to vote against board directors of businesses that are lagging on putting women in top jobs, the Financial Times has reported. RBC GAM said it will vote against all members of nominating or governance committees at firms where women account for less than a quarter of the board in the US, Canada, the UK, Ireland, Australia and New Zealand – a policy that will see it using its votes against JPMorgan, Berkshire Hathaway, and PepsiCo. Columbia Threadneedle, meanwhile, said it would vote against the nomination committee chair at FTSE 350 companies that it views as laggards in diversity.