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ESG Briefing, May 22: Human rights, voting advice, pay disclosure and more

The round-up of the latest ESG developments

Environmental

In a survey of nearly 100 investors, Royal London Asset Management has found that 65% expect to allocate more capital to explicit ESG strategies over the next three years, while 70% said the topic was now “somewhat or very important” to them when selecting an investment strategy or fund manager. The annual review looked at other topics relevant to UK investors, such as inflation and Brexit, but highlighted ESG as giving the most striking results.
Morningstar has released a report reviewing trends in passive sustainable investing, looking at asset growth, asset flows and the development of index-tracking sustainable funds. The report reveals that the global market share of passive sustainable funds has increased to 12%, more than double the figure five years ago. However, growth rates have not been uniform across geographies, with European funds accounting for 85% of the global total supported by institutional investors with sustainable mandates.
Public power and G&T coops in the US must consider raising their rates to maintain their credit profiles in the face on carbon transition risks, according to Moody’s. In a new report on public power and electric generation and transmission cooperative utilities (G&T coops), Moody’s said that, although the firms only account for 28% of US electricity sales, their fleets tend to be more carbon intensive than peers and they will be under pressure to shut down assets to reduce emissions. “The ability to recover those capital costs while obtaining replacement power from another source could create affordability concerns if rate increases required are significant or politically sensitive,” the report says, adding: “Self-regulation remains the key differentiating factor for public power and G&T coops, and to mitigate carbon transition risk, public power and G&T coops can raise rates to maintain their credit profiles.”
Three Cambridge University students have gone on hunger strike to demand a commitment that the university fully divests from fossil fuels by 2020. The students, part of the Cambridge Zero Carbon Society, said that although “the coming days will be difficult”, it is “insignificant in comparison to the sufferings of the millions of people in the global south who are already affected by climate change”. Earlier this week, the Movement for the Survival of the Ogoni People (MOSOP) representing inhabitants of Ogoniland in Nigeria, called on the university to cut ties with Shell, saying that environmental damage oil spills had poisoned their drinking water. Discussing the divestment movement, the CEO of fellow oil major BP was recently reported in the Guardian to have pointed out how much money it donates to Cambridge University.
An NBC News investigation, in conjunction with the International Consortium of Investigative Journalists, into the the leaked Panama Papers has found that more than 200 prominent NGOs – including WWF, the Academy of Sciences and the Packard Foundation – have been invested in the oil and gas industry, despite many broadcasting their support of environmental causes. Some claim to have divested recently and reinvested in renewables, but The Packard Foundation is one of the organisations with no plans for divestment, saying its asset managers are given discretion, with no screens, to “maximise the growth of the endowment”.
Health and safety organisation NSF International has become an emissions verifier under CDP. The US-based firm will provide third-party verification of emissions data submitted by companies to the environmental NGO. NSF writes standards and assesses products for the food, water, health sciences and consumer goods industries.h6. Social

According to the Corporate Human Rights Benchmark (CHRB), corporate performance on human rights is showing signs of improvement, helped by benchmarks and pressure from civil society and investors. The claims are based on the findings of CHRB’s annual report which also highlighted that companies fell heavily into the lower scoring bands, reflecting the early stages of most firms with regards to implementing the UN Guiding Principles and other industry standards. A group of 28 prominent companies, including Macy’s, Hermes and Prada, were singled out for refusing to meaningfully engaging with the CHRB.
86% of companies don’t disclose information on internal pay inequalities, according to a new report from data provider Equileap, which says transparency is the biggest stumbling block on the issue. Bridging the Gap: What Governments, Companies and Investors can do for Gender Pay Parity, analyses nearly 750 large companies from 22 developed markets, and claims that only 4.5% report having no gender pay gap. Out of the 130 UK companies included, only seven published gender-specific information, and just one had a gap of less than 3%.
BHP Billiton is reportedly facing legal action from shareholders who allege that they were misled on the safety measures at a Brazilian dam, which killed 19 people in the country’s worst ever environmental disaster. In the 2015 incident, the breach at the Fundão dam exposed the local area to waste from an iron ore mine operated by Samarco – a joint venture between BHP and its partner Vale. The mining giant is being sued by Australian law firm Phi Finney McDonald on behalf of investors over failure by the mining giant to ensure the appropriate safety measures including a warning system to warn people living downstream in the event of a dam failure.

Governance

Stewardship advisors Hermes EOS has called for more effective leadership and management stability at Deutsche Bank AGM ahead of the bank’s AGM on Thursday. Dr. Hans-Christoph Hirt, Head of Hermes EOS, raised concerns about the “unusually high” management turnover at Deutsche, urging a review and improvement of the selection and nomination processes. The bank has had four CEOs under Chair Paul Achleitner’s six year tenure, and has seen frequent departures of management board members, with some members leaving the supervisory board after a single term, Hermes EOS pointed out.
ESG data analytics firm TruValue Labs has announced the close of a $13.6m funding round, which will enable it to continue to further develop its artificial intelligence and data analytics technology offerings. The new funds will be used to expand the company’s “client base and accelerate the development of predictive capabilities that uncover additional sources of alpha”, it said. Funding was led by San Francisco-based venture capital firm, Katalyst Ventures.
Hawaii’s largest state pension fund has joined the Principles for Responsible Investment. The $17bn Hawaii Employees Retirement System is the latest asset owner to sign up to the UN-backed organisation and is reported to be planning to allocate more capital to ESG-aligned projects. It is currently seeking a new Chief Investment Officer, which is wants to help “achieve its goal of sustainability for its stakeholders and beneficiaries”.