ESG Briefing: Axa, Allianz and Generali among insurers shunning Aussie super mine

Environmental

AXA, Allianz and Generali are among 10 of the world’s leading insurers who have announced they will not provide insurance to develop the controversial Carmichael coal mine in Australia. The move follows many of the world’s largest banks refusing to support the project, which if operational would produce 4.6 billion tonnes of CO2 – more than eight times Australia’s annual emissions. Twenty other major insurers have not ruled out insuring the project.
61 investors – including the Office of the New York City Comptroller and CalSTRS – have written to 30 of the largest oil and gas companies urging them to publicly declare their support for the continued regulation of methane emissions by the US’ Environmental Protection Agency (EPA). It comes as the EPA’s New Source Performance Standards (NSPS), which set water and air standards in the country, face rollbacks.
The BMJ, the UK medical journal, has published an editorial calling for medical organisations to divest from fossil fuels, warning of the “serious threat to public and planetary health” and risk of stranded assets posed by the industry. The UK’s largest medical royal college, the Royal College of General Practitioners, recently committed to fossil fuel divestment, joining several other healthcare organisations that are divesting. The BMJ article says health professionals “should urge their professional institutions to divest through direct lobbying or by joining finance committees”.
Santander has committed to ending its direct financing of coal mining and power projects in a recent update to its coal finance policies. NGO BankTrack said, while the decision was “welcome and overdue”, Santander’s failure to exclude its coal clients from future support meant it was “nowhere near moving beyond coal”. The new commitment will not see Santander stop financing coal power companies.
A report from the UK’s Solar Trade Association (STA) suggests that solar could soon be the country’s cheapest source of energy after assessments of solar’s levelized cost of electricity (LCOE) revealed that it is likely to fall between £50 – 60 in 2019, 30% below an earlier estimate. At this price, solar is competitive with gas and onshore wind. STA estimates that solar could fall as low as £40 by 2030.
EU ambassadors yesterday endorsed the European Council’s position on two of the legislative proposals put forward by the Commission earlier this year, meaning both can move to the next stage of negotiations after Christmas. The proposal relating to ESG disclosure and investor duties, and the proposal centred on the creation of new ‘green’ benchmarking categories have both gone through. Notably, the Council is supporting the Commission’s proposal for the new benchmarks to be labelled ‘low-carbon’ and ‘positive carbon impact’, while the European Parliament is fighting for tougher definitions – ‘transition’ and ‘Paris aligned’. Trilogue is expected to begin in the coming weeks.
95 global investors – representing $14.6trn AUM – have written to major European power companies with the largest emissions footprints, demanding them to “set out transition plans” aligned to the Paris Agreement. The companies are: Centrica, CEZ, E.ON, EDF, Enel, ENGIE, Fortum Oyj, Naturgy, Iberdrola, National Grid, RWE and SSE. Copies have also been sent to Eurelectric, the European electricity sector trade body, and Germany’s coal exit commission. The investor group is coordinated by the Institutional Investors Group on Climate Change (IIGCC) and aims to deliver on the goals of Climate Action 100+.

Social

MSCI and the OECD have published research on the role of institutional investors in implementing the SDGs into their strategies. The paper forms part of a partnership between the two organisations, which is aimed at creating a framework for discussion around the topic, and developing a proof-of-concept illustration of a hypothetical index targeting SDGs for use by institutional investors in public equity markets.
Large Australian businesses will have to report on their efforts to combat modern slavery next year, when the Australian Modern Slavery Act comes into force. The law will see firms with a turnover of AUD100m or more required to publish a public Modern Slavery Statement on their actions to address modern slavery risks in their operations and supply chains. After passing through both houses of the Australian Parliament, the bill received royal assent this month and will be introduced in early 2019. Sedex, an organisation dedicated to driving responsible business practices in supply chains, has compiled a guide on what the law means for businesses, which can be accessed here.Nutrien, the Canadian fertiliser giant created following the merger of Agrium and PotashCorp, is to abandon mining operations in the disputed Western Sahara territory by 2019. The announcement comes after years of controversy around human rights implications associated with the firm’s activity in the area, and campaign groups like Western Sahara Resource Watch and Sister of Mercy leading shareholder revolts and urging investors to “blacklist” Nutrien. In early 2018 the CEO of the newly merged Nutrien announced plans to stop sourcing phosphate rock from the Western Sahara, partly due to “shareholder preference”. In June, Norwegian asset manager KLP excluded major phosphate player Innophos Holdings over its association with Nutrien. Innophos subsequently announced it would no longer source the raw material from the Western Sahara.
Californian pension giant CalPERS would be forced to divest its private prison holdings, if proposed legislation is introduced, CIO reports. A bill on the controversial sector, put forward by Democrat Assemblyman Rob Bonta, will be considered by fellow Californian lawmakers early next year. Concerns over private prisons have heightened this year since it was reported that CoreCivic and GEO Group were found to be involved in the detention of children and their families on behalf of the US Government.

Governance

Vigeo Eiris has announced that it has joined the Pensions and Lifetime Savings Association (PLSA), a network of 1,200 UK pension schemes representing £1trn in assets. According to a release, the ESG intelligence provider hopes to contribute through its expertise in “climate risk & energy transition, gender diversity, human rights and modern slavery, business ethics and tax transparency, as well as portfolio level analysis of product and behavioural contribution towards the UN SDGs”.
Malaysia has shown the biggest regional improvement in corporate governance according to a biennial survey by the Asian Corporate Governance Association (ACGA). The report attributed this to improvement in Enforcement and optimism in relation to recent political changes. Australia occupied the top rung, unchanged from two years prior, while Hong Kong and Singapore were second and third respectively.
Stanford University has announced the adoption of an Ethical Investment Framework and an updated Statement of Investment responsibility. This follows a year-long review which canvassed the views of the campus community. As part of its updated investment approach, the university has listed the “abhorrent and ethically unjustifiable” conditions under which an investment should be excluded and has put into place procedures for responsible investment requests from the campus community to be heard.
La Financière Responsable (LFR) and Mandarine Gestion have been awarded top scores for their approach to company analysis, in a study of small to mid-sized French asset managers by ESG consultancy EthiFinance. EthiFinance used 23 different factors within three pillars and scored the managers out of 100.
New York City Comptroller Scott Stringer and the City’s five public pension funds have filed shareholder proposals at CBS and Alphabet to end practices which “force employees to relinquish their ability to challenge unlawful discrimination and harassment”. The proposals specifically target “a suite of contractual arrangements” such as “no-poaching” pacts, non-compete restrictions, mandatory arbitration which precludes employees from suing in court and NDAs which keep misconduct secret, particularly in relation to sexual harassment.