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ESG Briefing: Net-Zero Asset Owner Alliance adds France’s ERAFP and Germany’s KENFO

The latest developments in sustainable finance

The French civil servant pension fund, ERAFP and Germany’s sovereign wealth fund, KENFO have become the latest asset owners to join the United Nations’ Net-Zero Asset Owner Alliance – taking the initiative’s assets under management to more than $4.5trn (€4trn). Signatories to the Alliance commit to achieving a carbon-neutral investment portfolio by 2050. 

The Bank of England is “examining the case” for increasing capital requirements for dirtier assets – the so called ‘brown-penalising factor’ – the central bank’s out-going Governor Mark Carney revealed in a letter to the Chair of the Parliamentary Treasury Committee. Responding to questions on how the financial sector is managing climate risks, Carney reiterated the growing need for climate related financial disclosures using the TCFD framework to become mandatory.

Carney’s replacement, Andrew Bailey, also responded to the committee in his current role as head of the UK’s financial watchdog, the FCA. Bailey, who takes over from Carney this month, said that UK consumers “do not yet have clarity on the climate-related exposures of their investments” and added that the regulator has “powers available” to introduce disclosure rules on carbon footprints. 

The Chief Investment Officer of the Government Pension Investment Fund (GPIF), Hiro Mizuno, has announced on Twitter that the UK’s railway pension fund manager Railpen, France’s state pension fund Fonds de Réserve pour les Retraites (FRR) and Canada’s British Columbia Investment Management Corp. (BCIMC) have signed up to the new asset owner partnership that aims to push back against short termism in financial markets. 

Japan’s $1.6tn state pension fund revealed last week that it had joined forces with the California State Teachers’ Retirement System and UK-based USS Investment Management to address short termism, an issue the trio state could pose potentially “catastrophic systemic risks to our portfolios”.

The European Investment Bank (EIB), which announced last year that it would phase out fossil fuel financing by 2021, is looking to hire expertise to help it “identify a larger portfolio of adaptation opportunities” to support its climate strategy and make its projects “more resilient to climate change”. The tender, which is worth €1.1m, runs for three years. 

The Church Investors Group (CIG), representing 70 members with £21bn in assets, has announced a tougher voting stance on ESG issues this year, including voting against the chairs of mining companies that have not responded to engagement by the Investor Mining and Tailings Safety Initiative, the body co-Chaired by the Church of England Pensions Board. The CIG made its warning in a letter to the leaders of FTSE 350 companies this week.

South Africa’s $101bn state public pension fund, the Government Employees’ Pension Fund (GEPF), has put out a tender for “master custody services” that includes a reference to ESG capabilities in both listed and unlisted investments.  

California’s $17bn Orange County Employees Retirement System has also put out a tender with an ESG component. The west coast public pension fund is searching for a provider of a “comprehensive, multi-asset class, investment risk analysis system” and asks prospective bidders to outline their ESG expertise, including “data systems, ratings, and analytical tools”.