ESG round-up: Kentucky attorney general files motion to dismiss KBA lawsuit

The latest developments in sustainable finance: Goldman Sachs fined $4m for ESG funds; Swiss Federal Council enforces climate disclosures.

Kentucky’s attorney general, Daniel Cameron, has filed a motion in federal court to dismiss a lawsuit by the Kentucky Bankers Association (KBA). Earlier this month, the non-profit trade association announced a suit against Cameron for issuing six subpoenas and civil investigative demands (CID) to Bank of America, Citigroup, Goldman Sachs, JPMorgan Chase, Morgan Stanley and Wells Fargo. As well as arguing that the attorney general was acting in excess of his legal authority, the lawsuit accused him of violating first amendment rights and Senate Bill 205, an anti-ESG law passed in 2021 by the Kentucky general assembly. A spokesperson for Cameron told Responsible Investor: “Recently, we asked six large banks that provide financial services in Kentucky to share with us information concerning their investment practices. We have asked for that information to ensure that those financial institutions are not withholding services from Kentucky businesses that don’t agree with the Biden administration’s climate agenda or the ESG movement.”

The Securities and Exchange Commission has charged Goldman Sachs Asset Management (GSAM) for failing to follow its policies and procedures on ESG investments between April 2017 and February 2020. Goldman Sachs has agreed to settle the charges with a $4 million penalty. The asset manager was charged for policy and procedure failures involving two mutual funds and one separately managed account marketed as “ESG Investments”. A spokesperson for Goldman Sachs said: “GSAM is pleased to have resolved this matter, which addressed historical and procedures related to three of GSAM’s fundamental equity group’s investment portfolio. GSAM is committed to its pursuit of best practices across its portfolios for sustainable, long-term value creation that helps its clients meet their investing needs.”

The Swiss Federal Council has adopted the ordinance on mandatory climate disclosures for large companies, which will come into force as of 1 January 2024. Public companies, banks and insurance companies with 500 or more employees and at least SFr20 million ($21 million; €20 million) in total assets or more than SFr40 million in turnover will be obliged to report publicly on climate issues. The draft ordinance was widely supported by stakeholders during a consultation, which ran from March to July 2022.

The Inland Revenue Authority of Singapore (IRAS) has announced that goods and services tax will be waived on the issuance, transfer or sale of any carbon credit from 23 November. The news comes ahead of the launch of a global exchange for high-quality carbon credits developed by SGX in collaboration with DBS Bank, Standard Chartered and Temasek. Announced in May last year, Climate Impact X is expected to launch in early 2023. CEO Mikkel Larsen said: “The Singapore government’s decision to waive GST on carbon credit transactions is testament to their support for carbon markets and commitment to establishing the country as a carbon services hub.”

A group of investors with £3.2 trillion ($3.8 trillion; €3.7 trillion) in assets have backed CCLA Investment Management’s call for large UK companies to provide cost of living support to low-paid workers. In a statement from CCLA, companies have been asked to consider meeting the new UK Living Wage rates and to work alongside unions to reach agreements on pay. Earlier this year, CCLA and the Church Investors’ Group wrote to 100 of the UK’s largest listed companies to ask what they are doing to support their employees. More than half of the responses – 58 – were assessed as showing “insufficient support”. CCLA will write again to the list of 100 companies in March 2023 to ask for an update and to monitor progress. Investors supporting the initiative include Aviva Investors, Brunel Pension Partnership, Joseph Rowntree Foundation, Legal & General Investment Management, and Trust for London.

Costco has committed to setting climate emissions reduction targets across its full value chain, following a Green Century shareholder proposal where 70 percent of investors voted for the move. The Scope 3 emissions targets are set to take effect in 2023. Costco has previously been considered a laggard on climate action, standing out as one of only three of the largest 50 S&P companies without a major climate commitment as of December 2021.

The Financial Reporting Council (FRC) has published its 2022 report on stewardship reporting, which found that the quality of activity and outcome reporting for engagement, collaboration and escalation has improved this year. There were also developments in reporting on contributions made to address market-wide and systemic risks, as well as reporting on how signatories monitor and hold service providers to account. The research notes that greater emphasis should be placed on activities and outcomes during the reporting period, using both quantitative and qualitative evidence. In 2023, the FRC will focus on reporting on the outcomes of engagement and providing case studies to illustrate both activity in the year and progress towards those outcomes.

Tumelo, a shareholder voting fintech, has collaborated with proxy advisers Glass Lewis, Pensions & Investment Research Consultants and As You Sow to launch a stewardship partnership programme. The programme will allow retail and institutional investors to vote at scale across their holdings through voting policies, as well as accessing fund manager voting intentions ahead of AGMs. The initiative aims to provide greater transparency and ease for voting decisions.