ESG round-up: AXA IM ratchets up ESG expectations in new voting policy

The latest developments in sustainable finance: UN asks Sri Lanka to consider "debt-for-nature" swaps; Glasgow Financial Alliance for Net Zero under fire by NGOs; EU grants France €70bn for sustainable finance investments.

AXA Investment Managers has published a new voting policy which further expands environmental and social expectations for its investee companies. Highlights of the policy include plans to vote against the renewal of directors or the nomination committee chair if the board has not managed its environmental and social responsibilities properly. The French asset manager has also decided to vote against the re-election of the nomination committee chair at large-cap companies in the US and the UK whose boards have no ethnic representation. Additionally, AXA IM expects investee companies to specify clear ESG elements in the bonus or long-term incentive plan of senior management or face a vote against the remuneration policy.

The United Nations Development Programme has asked the government of Sri Lanka to negotiate “debt-for-nature” swaps tied to environmental conservation as part of measures to mitigate the country’s financial default, according to a report by the Financial Times. Sri Lanka’s lack of foreign exchange has left the country unable to repay its loans, triggering an economic crisis with mass protests over shortages of food, fuel and medicine. The Sri Lankan government has an estimated $8 billion of debt and interest due in 2022 but has suspended bond payments and begun negotiations for an IMF bailout. In November, Belize participated in a debt-for-nature swap as part of a sovereign debt restructuring.

A group of civil society organisations working on climate finance are marking the one-year anniversary of the Glasgow Financial Alliance for Net Zero GFANZ by calling it out for a “lack of meaningful progress”. In a letter sent to GFANZ co-chairs Mark Carney and Michael Bloomberg, Reclaim Finance, BankTrack, Re:Common, Urgewald and Climate Action Network-International have warned that only 60 out of 240 of the largest GFANZ members have a policy of excluding support for companies developing new coal projects. The letter states that, in addition to ceasing finance for companies with plans to expand the supply of fossil fuels, all GFANZ members should set interim milestones for emission reductions before 2030. It also calls for carbon intensity targets to be complemented by absolute emission targets and for fossil fuel and power companies to include scope 3 emissions and exclude the use of offsets in meeting the goal of a 50 percent reduction in carbon emissions by 2030.

A new report from the World Economic Forum explores how private equity markets can leverage their longer hold periods and full ownership models to drive sustainability. Creating Value through Sustainability in Private Markets claims that knowledge gaps, internal organisation misalignments and an over-focus on divestment are still blocking the private equity industry from fully realising its potential in driving sustainability shifts. The report urges private equity players to create value by decarbonising higher-emitting “grey” assets, rather than avoiding these risks completely.

The Institutional Investors Group on Climate Change has launched a Net Zero Stewardship Toolkit, which is aligned with both the Net Zero Asset Manager and Paris Aligned Asset Owners initiatives. The toolkit provides investors with six key steps to implement an engagement strategy that is consistent with an ambition for all assets under management to achieve net zero emissions by 2050 or sooner. It also outlines the range of voting tools available to investors, including director votes and shareholder resolutions, to hold companies to account on transition plans.

The European Commission has announced the approval of a €7 billion French scheme aimed at providing investment support towards a sustainable recovery. The plan was approved under the state aid temporary framework, which was set up in response to  the coronavirus outbreak, and is expected to benefit up to 1,000 French companies. The programme will be used to finance sustainable investments in tangible and intangible assets made by companies in the industrial sector, including the chemical industry, automotive industry and machinery and equipment manufacturing. The individual aid amount will not exceed €70 million per beneficiary, according to a statement.