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ESG round-up: EFRAG appoints members for technical expert group on sustainability

The latest developments in sustainable finance: Morningstar going after lazy portfolio managers in ESG quality control; a 'right to boycott' campaign has been called for by civil society organisations.

The EU’s corporate reporting body EFRAG has this week appointed members of its Sustainability Reporting Technical Expert Group, completing the integration of the “Sustainability Reporting Pillar in the EFRAG structure”. The expert group, which will provide technical advice on the draft EU sustainability reporting standards, is made up of 18 members from 11 countries, including representatives of Danske Bank and BNP Paribas.

A “right to boycott” campaign has been called by a number of civil society organisations in response to proposed legislation that would oblige UK public bodies to follow the government’s foreign policy in their purchasing, procurement and investment decisions. In February, the House of Commons approved an amendment that would allow policymakers to overrule politically motivated boycotts and divestment policies by public sector pension schemes, particularly relating to Israel and Palestine. The group’s statement said: “We are concerned that this would prevent public bodies from deciding not to invest in or procure from companies complicit in the violation of the rights of the Palestinian people.”

Morningstar is upping its quality control of ESG funds, according to a report by Bloomberg citing Hortense Bioy, global head of sustainability research at the market data provider. She said fund managers interviewed by Morningstar in connection with ESG controls can expect to be challenged further. The drive to tackle greenwashing and guarantee that investment firms actually live up to their marketing hype around ESG was initiated earlier this year after Bioy cited “ambiguous” ESG definitions as grounds to strip the label from funds representing more than $1 trillion.

UK dividends had a strong start to 2022 after taking lower one-off special dividends and the departure of mining giant BHP from the UK stock market into account, according to a UK dividend monitor report from Link Group. The report claims the ongoing recovery from the pandemic is increasing at a faster pace, with the oil sector showing the biggest Q1 increase in dividends due to the “astonishing rebound” in oil prices delivering a “dramatic turnaround in fortunes”. There is a lot of headroom for growth now that oil majors are enjoying a big increase in their cashflow, according to the report. All other sectors analysed also increased underlying payouts in the first quarter of this year, including AstraZeneca’s first increase in almost a decade, the return of BT’s dividend after a two-year hiatus and a post-covid-19 rebound from the property sector. The report also points to retailers showing signs of revival, with large special dividends from Next and B&M European Value, while Royal Mail’s special dividend was driven by high internet purchases through the pandemic. However, the report also highlights that dividends remain scarce in hard-hit sectors such as travel and leisure.