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ESG Briefing, May 18: Ceres, Aviva, BNP Paribas, Lloyds, LGIM, State Street and more

The round-up of the latest ESG developments

Environmental

More than 100 investors with over $2.5trn of assets, including Aviva, BNP Paribas AM and the New York State Common Retirement Fund, have penned a letter to oil and gas companies and their financiers to “strongly urge [them] to honour their fiduciary duty to investors and refuse to engage in drilling in the Arctic Refuge”. More than 100 firms and banks received the letter, which cited climate, reputational and financial risks as reasons not to take leases in the Arctic National Wildlife Refuge – the sale of which has been approved by the Trump Administration.
Investing $1trn per year in clean energy is now “eminently feasible”, according to a report by US sustainability non-profit Ceres. In Sight of the Clean Trillion: Update on an Expanding Landscape of Investor Opportunities – which is a follow up to its 2014 report Investing in the Clean Trillion: Closing the Clean Energy Investment Gap – highlights the “expanding landscape of clean energy investment opportunities” – particularly in the transportation sector – and argues that sustaining that level of financing to 2050 is now a possibility.
CEOs of some of the world’s biggest companies have signed a new climate declaration that seeks to rally the private sector to acceleate climate action and adopt science-based targets to help reduce emissions. The Oslo Climate Leadership Declaration has so far garnered signatures from the heads of more than 20 firms, who commit to “contribute towards peak CO2-emissions by 2020 and net zero emissions by 2050”. 11 of the companies have pledged to join the Science Based Targets Initiative. Companies include Ikea, Unilever, HP, Australian Ethical, DNV GL and Storebrand. The declaration was launched by the Business for Peace Foundation and the We Mean Business Coalition. 
Repsol will stop seeking growth in oil and gas and will shift its business towards a lower-carbon model, according to reports. The Spanish energy giant, which issued a controversial green bond last year, told Bloomberg it was planning to maintain its current production. Chairman Antonio Brufau is recorded telling shareholders at its AGM last week that the firm was “fully committed to the fight against climate change”, and reiterated that electric vehicles would become part of its business going forward.  
Costa Rica’s newly-elected President, Carlos Alvarado has reportedly announced a nationwide ban on fossil fuels, as part of his ambitious plans to create a decarbonised society. He is quoted as saying: “Decarbonization is the great task of our generation and Costa Rica must be one of the first countries in the world to accomplish it, if not the first”.
Lloyds Banking Group has will provide £2bn (€2.2bn) in green financing for UK businesses, according to media. The Clean Growth Finance scheme aims to help drive a more sustainable and productive future and takes Lloyd’s total green commitments to £3bn. In 2016, the commercial bank committed to £1bn for real estate green lending to support its clients’ sustainability investments, aimed at reducing CO2 emissions from their real estate assets.h6. Social

Legal & General Investment Management (LGIM) has launched a fund to empower women and encourage gender diversity in UK companies. The Future World Gender in Leadership UK Index Fund is LGIM’s first fund based on an in-house index, and is dubbed ‘GIRL fund’ because “it is about investing effectively in the women of the future”. The index comprises the largest 350 UK companies, scoring them on their gender diversity in four areas: board, executive committee, management and workforce levels. Firms are expected to have a minimum of 30% representation of women in these four measures. “These scores are fully aligned with our voting and engagement policy,” LGIM stated. Alignment with the UN Global Compact is also considered, which has so far led to the exclusion of security firm G4S. Top scorers are The Renewables Infrastructure Group, Merlin Entertainments, Next and Marks & Spencer; while laggards are Melrose Industries, Hochschild Mining and Acacia Mining. 
Share prices in the gambling sector have taken a hit this week after the UK Government announced plans to slash the maximum stake on fixed-odds betting terminals from £100 to £2. The move was made after public campaigns and concerns over the social and economic costs of gambling addiction. High street name William Hill saw its share price plummet more than 6.5% on the news, and said the decision could mean 900 of its betting shops could stop turning a profit, leading to multiple closures. GVC’s shares fell more than 4%, and the firm reportedly said the decision could have a £120m impact on its earnings this financial year, rising further when the rule is implemented next year.
 
Governance

Ceres has launched a primer to help corporate directors “get out in front” on climate change issues. It gives a series of recommendations on how directors can build climate competency into their boards. “Investors are increasingly calling on boards to step up their oversight of climate change,” it says. The report was funded by the We Mean Business Coalition.
In another new report from Ceres, the group says companies with the right sustainability features in their board governance, such as formal mandates, expertise and executive compensation linked to sustainability are more likely to have established strong commitments on the topic and are better positioned to deliver sustainability performance.
State Street Corporation has said it engaged 610 companies – almost half of its total assets – on ESG issues in 2017. 271 of those were environmental and social topics, with 168 on climate alone. The figures were published its latest CSR report, which outlined its activities in 2017. The report also says State Street joined the TCFD, and signed the CEO Action for Diversity and Inclusion pledge.