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ESG Briefing, June 28: WEF updates ESG guidelines, MetLife releases impact investment figures

A round-up of the latest ESG developments

Environmental

The lobbying activities of US corporates present a “heightened” reputational risk due to the country’s increasingly polarised political climate, according to a new report by Washington-based advocacy group, the Center for Political Accountability. The report – ‘Collision Course’ – argues that “in today’s highly volatile environment, corporations are vulnerable to serious risk if political contributions or their outcomes, or both, are perceived to be at odds with their core values.
Hermes Investment Management has launched a tool aimed at allowing fund managers to assess the carbon performance of their portfolio in a bid to better inform engagement activities and client reporting. The tool will be able to measure carbon risk of funds and listed companies – including Scope 1-3 emissions, profit at risk in different carbon pricing and policy scenarios, identification of companies which require increased carbon-focused engagement and level of current engagement on carbon risk across portfolios – and progress achieved.
Société Générale has acquired Lumo, a fintech firm that helps individuals and companies finance a selection of renewable energy projects in France. Launched in 2012, its crowdfunding platform has collected funds from thousands of individual investors to be put towards financing approximately 40 wind, solar and hydroelectric projects with a total green electricity output of over 260m kWh, or enough to cover the annual energy needs of almost 100,000 households. Société Générale says the acquisition will allow it to better support its major energy clients in developing their projects as requested by the French government’s Renewable Energy Liberation Plan.
The Japanese arm of NGO 350.org has named Mitsubishi UFJ Financial Group (MUFG) the country’s “Most Irresponsible Bank” for 2018, claiming it is the biggest financer of firms involved in coal power and other “extreme” fossil fuels among Japan’s financial groups. The campaign group submitted a petition with 9,000 signatures calling on MUFG, along with Sumitomo Mitsui Financial Group and Mizuho Financial Group, to stop lending to coal-fired generation and extraction and align their activities with the Paris Agreement. The petition requests all three to provide a “substantive response” in time for PRI in Person in September. “We also want to send the message to shareholders that continued investment in coal and other extreme fossil fuels is out of line with the rest of the world, which is rapidly heading towards a renewable energy future,” the NGO said.
LGT Capital Partners, the funds house owned by the Princely House of the Liechtenstein, has found that ESG integration has been prioritised by private equity firms over the last few years, with European firms making the greatest progress. In its sixth annual ESG Report, which assesses the ESG credentials of 294 managers globally, it found that 58% of private equity firms are now rated as either ‘Excellent’ or ‘Good’ in terms of ESG integration, compared to just 27% in 2014.h6. Social

The IFC, in collaboration with a group of over 50 fintech investors and digital financial innovators, has launched a set of Guidelines for Investing in Responsible Digital Financial Inclusion. Launched on June 20 at the Connecting the Dots conference in Amsterdam, the guidelines are aimed at allowing investors and investees to evaluate opportunities, mitigate risks and support a responsible and inclusive digital finance ecosystem and “fintech revolution”. The 10 guidelines include promoting fair and transparent pricing and better disclosure of terms and conditions for customers, preventing people taking on more debt than they can comfortably manage, increasing their financial literacy, and fostering a proportionate legal and regulatory framework.
The European Investment Bank is reviewing a €300m funding proposal for an investment platform aimed at financing social and affordable housing in Spain. The platform, developed with the Instituto de Crédito Oficial (ICO) – the Spanish National Promotional Bank – will support new and reotrofitted property, energy efficiency improvements and accessibility measures. The project is estimated to cost €600m in total.
CalSTRS and CalPERS could reportedly be banned from buying debt from the Turkish government because of its refusal to acknowledge the Armenian Genocide, after a divestment bill passed in the California Senate last week. Passed by a vote of 4-0 with one abstention, the Divestment from Turkish Bonds Act (“AB 1597”) would prohibit the two pension giants from making additional or new investments, or renewing existing investments issued, owned, controlled, or managed by the government of Turkey. CalPERS has $185m and CalSTRS has several hundred million dollars in bonds issued by the Republic of Turkey, which would need to be liquidated within six months of the passage of a federal law imposing sanctions on Turkey.
MetLife, the global insurer, has announced that its impact investment portfolio grew 12% to $50bn in 2017 and that MetLife Foundation, its charitable arm – which focuses on financial inclusion – has reached more than six million low-income individuals in the penultimate year of a five year, $200m programme.

Governance

The World Federation of Exchanges has revised its ESG Guidance and Metrics, in a bid to recognise new developments in sustainability – like the creation of the SDGs and the TCFD – incorporate investor feedback and streamline metrics. The document was first launched in 2015 to provide a reference point for stock exchanges looking to address ESG reporting in their markets, and has been used by more than 35 exchanges so far. The revisions also include clarification that “investors are the target audience for listed company ESG disclosures”, so exchanges should “focus on ensuring the availability of investor-relevant, decision-useful information”.