ESG round-up: Louisiana divests $800m from BlackRock in ESG pushback

The latest developments in sustainable finance: US anti-ESG movement risks ‘balkanisation of finance’, Munich Re pledges to stop supporting upstream oil and gas projects.

Louisiana treasurer John Schroder has announced that the state will divest around $800 million from BlackRock in response to the asset manager’s alleged enthusiasm for sustainable investing. The move is the latest in a series of anti-ESG actions by right-wing politicians and officials across the US. In a letter to BlackRock CEO Larry Fink, Schroder argued that ESG investing breaches the state’s law on fiduciary duties, which demands “a sole focus on financial returns for the beneficiaries of state funds”. He added that ESG investing would deny Louisiana “one of its most robust assets” and “cripple” its economy. Other states which have divested from BlackRock include Arkansas ($125 million), Utah ($100 million), and West Virginia ($20 million).

A report on climate policy published by Inevitable Policy Response has argued that the anti-ESG drive in the US risks creating a “balkanisation” of finance. The report, which was commissioned by the PRI, noted that global asset managers and banks are being forced to choose between ESG or fossil fuel energy strategies, at the risk losing of money from CalPERS or the Texas Municipal Retirement System, respectively. Banks and pension funds that control assets in a state where investment laws are changing could also face legal liability risks.

Reinsurance giant Munich Re has announced that it will no longer finance or insure projects “exclusively covering the planning, financing, construction or operation of new oil and gas fields”. The new policy, which comes into effect in April 2023, will apply to projects where no production had taken place after 31 December. The German-based insurer will also cease to make new direct investments in “pure-play” oil and gas firms from April. “We welcome that Munich Re is catching up with the leading insurers on climate by ruling out support for new oil and gas fields, new oil infrastructure and new oil plants,” said Regine Richter, insurance campaigner at non-profit urgewald.

The FCA has written to the UK’s Department for Work and Pensions to update new pensions minister Alex Burghart on the recommendations for the regulator from the Taskforce in Pension Scheme Voting Implementation (TPSVI). The letter calls for a “comprehensive and standardised vote disclosure regime”. The FCA is also creating a vote reporting group to bring together stakeholders and develop a more comprehensive and standardised vote disclosure regime. The taskforce was set up in December 2020 by then pensions minister Guy Opperman to tackle issues in the voting of equity shares by pension schemes.

Universal Owner Initiatives has published a report questioning whether the Net Zero Asset Managers Initiative (NZAMI) is “broken”. The think tank said asset manager pledges to the NZAMI are “inadequate”, adding that the initiative is failing to commit signatories to real net-zero action. It also critiqued the Paris Aligned Investment Initiative and Science Based Target initiative, recommending suggestions for improved net-zero alignment, corporate transition and better stewardship.

A study by ESG Book has found that one in seven “sustainable” funds has a carbon emissions intensity higher than the global average. Of the 515 ESG and climate funds analysed, 73 indicated a greater emissions intensity ratio than the average recorded across the 36,000 funds tracked by ESG Book and none of the climate-labelled funds had a portfolio fully aligned with the Paris Agreement. Fifteen funds also surpassed 400 tons of carbon dioxide equivalent per million dollars of revenue – more than twice as high as the industry average. Several climate funds were also found to invest in fossil fuel and mining companies, including Shell, Exxon Mobil and BHP Group.

UK pensions pool Border to Coast has published a net-zero roadmap addressing how it will deal with the systemic risk of climate change, drive carbon emissions reductions and achieve its 2050 net-zero commitment. The PAB-aligned plan calls for urgent global collaboration in order to deliver on these commitments. The report shows that 78 percent of B2C’s emissions come from net-zero-aligned companies, with the pension pool actively engaging with 73 percent of these firms. B2C will offer more opportunities for its partner funds to invest in climate solutions, and work to improve data and reporting across the investment industry. The pension pool has also imposed a climate change policy and improved its voting approach towards companies failing to make progress on net-zero.

Dutch pension fund PFZW has published updates to its investment lists, removing 16 companies from the equity and bond lists in the first half of this year. Of the 16 firms, one was exposed to controversial weapons, one was invested in coal, three were not meeting PFZW’s “responsible business conduct” expectations (tested against the international OECD standards) and 11 were sold due to Russia exposure.

Lombard Odier and The Enterprise for Society Centre have formed a partnership to drive the transition towards a circular economy. The companies are looking to develop research focused on understanding the transition towards a circular economy, and identifying the corresponding societal challenges and the alignment of companies and investments.

The International Forum of Sovereign Wealth Funds (IFSWF), a body which promotes sovereign fund governance standards, has admitted four new members. The Indonesia Investment Authority has joined as a full member and agreed to uphold the Santiago Principles, which are the generally accepted principles and practices for governance, investment and risk management of sovereign wealth funds. The Armenian National Interests Fund, Malta Government Investments and the Mauritius Investment Corporation have committed to work towards fulfilling the Santiago Principles as they implement their investment and risk management processes.