ESG round-up: ASIC sues Mercer Super for alleged greenwashing

The latest developments in sustainable finance: BNP Paribas targeted with deforestation complaint; FTSE 350 hits 40% women on boards early.

The Australian Securities and Investments Commission has sued Mercer Superannuation for allegedly misleading statements regarding the sustainable characteristics of some of its superannuation options. This is the first time ASIC has taken an Australian entity to court over greenwashing concerns. The commission has alleged that Mercer made inaccurate statements on its website regarding seven “sustainable plus” investment options, including describing the options as suitable for members “deeply committed to sustainability” and claiming that they excluded companies involved in carbon intensive fossil fuels, alcohol production and gambling. ASIC alleges that several of the companies were involved in these cited exclusions.

A spokesperson for superannuation fund said: “Mercer has co-operated with ASIC throughout its investigation and will continue to carefully consider its concerns with respect to this matter.” They declined to comment further as the matter is being dealt with by the courts.

BNP Paribas has been targeted with a complaint regarding deforestation and human rights. The complaint was filed by Brazilian NGO Comissão Pastoral da Terra and France’s Notre Affaire à Tous – one of three NGOs which launched a climate lawsuit against the bank last week. The complaint, which has been filed to the Paris Judicial Court, alleges deforestation, and human rights and indigenous rights violations in Brazil by BNP Paribas. As with the climate lawsuit, the NGOs have accused the bank of violating France’s duty of vigilance law.

A spokesperson for BNP Paribas said: “We have significant exposure to potential litigation actions from NGOs even though our sector policies are among the most stringent and the transition of our credit portfolios among the most advanced. On biodiversity, BNP Paribas has demonstrated its awareness of this issue before the rest of the sector and its actions in this regard are already particularly significant.” They added that the bank requires its clients to have a “zero deforestation” strategy in their product and supply chains by 2025, as well as full traceability of beef and soy supply chains – direct and indirect – in the Amazon and Cerrado.

The FTSE 350 has hit the 40 percent women on boards target three years ahead of deadline, according to data from the FTSE Women Leaders Review. The research – formerly known as the Hampton-Alexander review – found that 40.2 percent of directors at FTSE 350 companies were women as of January this year, up from 9.5 percent 11 years ago. The UK is now in second place behind European leader France, which has 44 percent women on boards across CAC 40 companies. Norway, Australia and Belgium are on the cusp of hitting the 40 percent target for comparable indices.

China is looking at introducing mandatory ESG disclosures for domestic public firms, according to Bloomberg. Chinese regulators are reportedly collaborating with advisory bodies and ratings agencies to create a framework for compulsory ESG-related disclosures for locally listed companies. Firms may be expected to comply with this as early as the end of the year.

Almost four in five companies are adopting carbon targets in executive pay, according to research by PwC UK and the London Business School. The analysis, which looked at 50 top European companies, found that 78 percent have adopted some form of carbon target in executive pay. Payouts for carbon targets disclosed in 2022 averaged 86 percent, with more than half paying out at 100 percent. The study also broke the companies down into Climate Action 100+ (14 companies) and non-CA100+ (36 companies), revealing that 80 percent of CA100+ companies with an explicit carbon measure in pay have a broad statement linking this carbon measure to their long-term company plan. That compares with 72 percent of non-CA100+ companies.

California state senator Lena Gonzalez has announced plans to introduce a bill on divesting the state’s retirement systems – CalPERS and CalSTRS – from oil and gas companies. If passed, the boards would have six years to liquidate their fossil fuel assets, and an additional five years where they could make fossil fuel investments in the name of fiduciary health if reported on a regular basis. Last year, the chair of California’s Assembly Public Employment and Retirement Committee rejected the measure, citing the politically divisive nature of oil and gas as the reason. The CalPERS board also opposed Gonzalez’s last bill on the matter. The state’s largest labour organisations – the California Labor Federation, the Service Employees International Union and the California Teachers Association – have yet to comment publicly on the bill.

The US government has announced a series of measures to clamp down on child labour, according to Reuters. During a conference on Monday, officials said an interagency task force on child labour had been set up “to target industries where violations are most likely to occur for investigations”. The announcement comes after the Labor Department reported a nearly 70 percent increase in child labour violations since 2018, including in hazardous occupations. In the last fiscal year, 835 companies were found to have violated child labour laws.

Nomura Asset Management has incorporated avoided emissions and removals into its quantitative assessment of climate-related opportunities for Japanese corporations. To do this, NAM will calculate the economic value of a company’s avoided emissions and removals using the internal carbon price, and apply this value to assess the impact as a ratio of the company’s operating income. It is the first Japanese asset manager to incorporate this into its ESG assessment process.

WWF, FAIRR, UNEP FI’s Sustainable Blue Economy Finance Initiative, the World Benchmarking Alliance (WBA) and Planet Tracker have launched an initiative to help investors engage seafood companies on critical nature and biodiversity-related impacts and risks. In its first phase, the investor action group will focus on engaging companies on best practice sustainability efforts, such as developing full-chain traceability systems, reducing bycatch and discards, reducing food loss and waste, and working towards meeting globally recognised standards.

The Asia Investor Group on Climate Change (AIGCC) has launched two working groups on deforestation and the energy transition, bringing its total number of working groups to six. The AIGCC forest and land working group will build investors’ understanding on managing the emissions of soft commodity-driven deforestation. The energy transition group will support investors’ internal policy development on energy transition, establish investor expectations on early phase-out of coal and explore the role of renewables.

The Task Force on Climate-related Financial Disclosures (TCFD) is conducting a survey for asset managers and asset owners on their climate financial reporting practices. The TCFD will publish the results in its 2023 status report alongside a summary of TCFD-aligned reporting practices and challenges across the industry. The deadline for completing the survey is 3 April.

Non-profit think-tank the Financial Inclusion Centre has called on UK regulators to put the environment at the core of their targets. In its latest report, the FIC argued that the UK’s transition to net zero cannot take place without major reform to regulation to force UK financial institutions to take climate responsibilities seriously. The report said that large regulators such as the Bank of England, the Prudential Regulatory Authority, the Financial Conduct Authority and the Financial Reporting Council need to prioritise the environment in their objectives.