ESG Round-up: GPIF reveals asset manager ESG priorities

The latest developments in sustainable finance: 94 FTSE100 companies have at least one ethnically diverse director, Japanese investors complain of engagement difficulties.

Japan’s Government Pension Investment Fund – the world’s largest pension scheme – has revealed the most common ESG issues its external managers consider, following an annual review of what asset managers believe to be “material ESG issues”. Climate change featured as a top issue for all managers apart from active managers in domestic equities, where governance issues such as board composition and minority shareholder protection topped the list. According to the figures (Japanese only), an increasing number of passive managers across both domestic and foreign equities consider biodiversity to be a material issue, with human rights increasing in importance for both active and passive domestic equity managers.  

Elsewhere in Japan, investors voted against management on 11 percent of votes at Japanese companies last year, according to a survey of 75 members of the Japanese Investment Trusts Association, who include some of the largest asset managers in the country as well as foreign investors. Proposals with the highest pushback included those relating to retirement bonuses and the introduction of takeover defence measures, the Association said. Some investors complained about difficulties engaging with Japanese firms, with one saying that investor relations teams “are merely explanation staff”, and another that “there are few opportunities for direct engagement with top management”. Almost half said that they could adopt some form of collective engagement, although many felt that individual engagement was more effective. 

Ninety-four FTSE 100 companies have appointed a director from an ethnic minority group – up from just half five years ago – according to an update from the UK government’s Parker Review of ethnic diversity. The review set a deadline of December 2021 for all FTSE 100 boards to have at least one director from an ethnic minority group, while FTSE 250 firms must follow suit by 2024, but 55 percent of them already meet the target. The review says that of the remaining six companies in the FTSE 100, a further three are in advanced stages of recruitment, leaving Russian metals group Evraz, defence company Meggitt and Dechra Pharmaceuticals yet to appoint an ethnically diverse board member. While progress has been made in the last five years, only six FTSE 100 chief executives and three chairs are from an ethnic minority background, a figure rising to 16 and five in the FTSE 250, respectively.  

Meanwhile, EU member states have agreed on a directive to improve gender equality on corporate boards, meaning legislation can now move forward after a decade of negotiations. The EU Commission and Parliament had both adopted negotiation positions by 2013, but member states were unable to agree a position until Monday, when employment and social affairs ministers agreed a general approach. Companies will be given until 2027 to have at least 40 percent of non-executive director positions held by “members of the under-represented sex”, or 33 percent of their boards. When choosing between equally qualified candidates, companies will be required to give priority to those of the under-represented sex. In October 2021, 30.6 percent of board members were women, and just 8.5 percent of board chairs. 

More than 100 members of European Parliament have written to the European Commission calling on it to withdraw controversial plans to include gas in the taxonomy, arguing that the bloc’s recent commitment to energy independence from Russia has made the proposal obsolete. The letter says that withdrawing the delegated act “will increase the focus of investments on truly sustainable energy sources and thereby increase our energy independency”, while retaining the act “will only further increase our dependency on gas and our reliance on Russian imports”. The number of signatories falls short of the 353 votes needed to reject the proposal in a plenary vote. 

NGO ShareAction has called on asset managers to set “public and ambitious” ESG expectations for companies with explicit voting consequences in its new voting expectations standard. The standard asks managers to pre-disclose ESG-related voting intentions, vote in favour of ESG-related shareholder proposals as a default position, and vote against standing item resolutions such as director elections where ESG performance is unsatisfactory, as well as reinforcing votes against Say on Climate resolutions with votes against standing item resolutions. 

Swiss Re will axe new oil and gas companies from its cover as it beefs up its oil and gas policy. The world’s second largest reinsurer said it would no longer provide individual insurance to oil and gas firms in the highest 10 percent of carbon intensity, an increase from its previously policy of 5 percent, and would not insure new oil and gas projects from companies without an independently verified net zero plan, with all its insurance premiums due to come from oil and gas firms with a net zero plan by 2030. It will also phase out insurance for companies with more than 10 percent of their production in the Arctic, unless they are based in Norway. In its sustainability report, released today, Swiss Re said that it had reduced the carbon intensity of its investment portfolio by 34 percent against 2018, and has invested just under $4 billion in labelled bonds.