ESG Briefing, May 24: GPIF, Bank of England, AfDB, Church of Scotland, Aon

The round-up of the latest ESG developments


The Bank of England has found itself in the limelight over climate risk for the second time in as many weeks, as hedge fund veteran Christopher Hohn called for strict rules and greater disclosure for banks. Hohn, Founder of the Children’s Investment Fund, warned that if the BoE didn’t step up its requirements from the sector, it risked undermining the long-term stability of the UK’s banking system. He pointed to the Taskforce on Climate-related Financial Disclosures as a useful tool. The comments were made in the FT.
Risk consultant Aon has launched a ‘Centre of Excellence’ to look at weather and climate risk to governments and businesses. The network – comprising experts from different departments of Aon – will help its clients assess risks, and create mitigation and transfer plans to tackle them. It will partner with “innovative firms” on the project, which will focus on lowering the cost of capital for climate mitigation solutions, as well as quantifying risk.
China is reportedly planning to introduce ESG reporting rules for listed firms, in the latest development in the country. According to local reports, the China Securities Regulatory Commission announced it would push for transparency by introducing disclosure on environmental, social and governance issues. The securities market watchdog is also considering developing a commodity futures market for carbon trading.  
The Church of Scotland has rejected a fossil fuel divestment motion at a meeting of its assembly (23 May), voting in favour for open-ended engagement with oil and gas companies. The original motion – which received less than 25% of the vote – urged trustees to divest oil and gas companies “not aligned with the Paris climate agreement within two years”. But the assembly opted for a counter-motion urging a more pragmatic approach based on continued engagement. The Very Rev Albert O’Boyle – filer of the successful counter motion – warned against divestment, and pleaded for “more robust engagement” and to “be the thorn in the flesh of the oil companies”. The Church of Scotland, which has assets of £443m invested through its Scotland Investors Trust, employs both Newton Investment Management and Legal & General Investment Managers to run its money.h6. Social

Oregon’s state Treasury has sold its debut sustainability bonds in a $40m transaction to finance the construction of new affordable housing in the state. The deal was three-times subscribed and came in tranches offering tenors of between one and 20 years, without coupons from 2.29% to 3.98%. The issuer may return to market with sustainability bonds for other ESG projects such as environmental protection and resilience.  
UK charity Belong has launched sold notes via Retail Charity Bonds Plc. The deal was for an undisclosed amount and is aimed at retail investors, offering a coupon of 4.5% and a tenor of eight years. Belong creates village communities for older people suffering from dementia or needing nursing care. Retail Charity Bonds Plc has sold more than £150m in notes for different organisations since 2014, in eight deals.
The African Development Bank will launch a Korea-Africa Energy Investment Facility with the Government of Korea, to help support goals of universal access to energy. The bank will develop eligible projects while Korea will provide up to $600m over five years in finance. The facility is slated to begin being operational by the end of the year. The move comes as AfDB launched its second sustainability bond under its Light up and Power Africa initiative, to finance access to clean energy in the region.


CalSTRS is among four US pension funds reportedly preparing to sue Commonwealth Bank Australia over alleged misleading or deceptive conduct, along with breaches of continuous disclosure rules. The investors are said to be joining a class action suit which will be open to anyone who acquired CBA shares between June 14 2014 and August 3 2017. The suit will centre on claims made by the anti-money-laundering and counter-terrorism-financing watchdog, the Australian Transaction Reports and Analysis Centre (AUSTRAC).
Japan’s $1.4trn Government Pension Investment Fund (GPIF), the world’s largest pension fund, has confirmed it has appointed Arabesque to provide data to help it measure ESG performance. The London-based sustainable quant manager has a product called S-Ray, which combines more than 500 metrics from 50,000 sources, it says.