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ESG Briefing, May 14: GPIF, Big Society Capital, Australian Ethical and more

The round-up of the latest ESG developments

Environmental

The Church of Ireland – the country’s Anglican arm – has reportedly voted to exclude companies that generate more than 10% of their turnover from fuel production, by 2022. The vote was taken at its General Synod in Armagh, Synod member Stephen Trew is quoted as saying: “Ethical investors around the world, and now the Church of Ireland, have looked at the ethics and the risks and concluded that divestment from all fossil fuels is the right thing to do”.
The UK Government has launched a consultation on a new environmental body to protect England’s environmental laws post-Brexit. IEMA’s Chief Policy Advisor Martin Baxter said: “We are also pleased to see a commitment to retain in some form the key principles that underpin environmental law, such as the Polluter Pays Principle. […] Nevertheless, the proposals do not fill all of the gaps that will be left once the UK withdraws from the EU institutions that currently oversee environmental protection.” Read the consultation document here.
UK Parliament’s Environmental Audit Committee will this week publish its latest report on green finance, looking at how the country can mobilise investment in clean energy and sustainable development.
Key financial institutions have provided $5.5bn in equity and debt financing to 16 businesses that produce or purchase palm oil from recently-deforested plantations and cleared peatlands. According to research by Chain Reaction Research, these institutions hold $4bn of $17bn in shareholder value in the firms, and control $1.5bn in outstanding debt out of a total of $5.6bn. Commonwealth Bank of Australia, BNP Paribas, Vanguard, BlackRock, Dimensional Fund Advisors, the Norwegian Government Pension Fund, APG and Royal Bank of Canada are among the equity investors.
Mining giant Anglo American has announced it will review its membership to lobby groups that support fossil fuels and potentially hold contrary climate views before its 2019 annual meeting, the FT reports. It follows a historic vote earlier this month at Rio Tinto, which saw 18% of shareholders back a resolution calling on the Anglo-Australian firm to disclose its climate lobbying activities, despite opposition from the company and advice of proxy advisors.h6. Social

Big Society Capital has released the results of its work with Skroll Academy to identify investment models that help tackle domestic violence in the UK. The pair’s research project was launched in October, and identifies three potential funding models: a Corporate Social Responsibility model; a Social Impact Bond model; and a Social Enterprise model.
The Initiative for Responsible Investment has released a new report examining the work of National Advisory Boards on impact investing. The report, entitled “National Advisory Boards and Impact Investing: The Power of Cross-Sector Collaboration”, came out of work with the Global Steering Group for Impact Investing. Read the full report here.

Governance

Australian Ethical will divest from asset manager AMP for failing to meet its ethical investment standards, it has said. The announcement came the same week analysts at Macquarie Group estimated there could be up to A$35bn of investor outflows at AMP after it was found to have a number of severe governance problems. Australian Ethical’s Head of Ethics Researhc, Stuart Palmer, said in a blog that it had made the exit decision because of “serious breaches of AMP’s duty to clients, including ‘fees for no service’, failure to reprimand dishonest advisers and remediate clients, and keeping clients in expensive, inappropriate, legacy products and platforms”, among other things. “Furthermore, senior AMP leaders consciously chose to prioritise AMP’s short term profit at the expense of clients’ best interests and compliance with the law,” he claimed.
Japan’s Government Pensions Investment Fund (GPIF), the world’s largest pension fund, has revealed that 15 of its 16 external domestic equity managers plan to disclose their proxy votes following the fund’s engagement on the issue. The $1.3trn asset owner, which deems such disclosure “essential for institutional investors to fulfil their own stewardship responsibilities”, published the update in its latest Stewardship Activities Report (2017), adding that Invesco Asset Management is preparing to follow suit. The report also sets out GPIF’s plans to expand its stewardship role, including improving the evaluation of responsible investing and performance fee structures for passive investments, and examining compensation for external managers.