ESG round-up: NBIM releases expectation document on human capital management

The latest developments in sustainable finance: Church Commissioners for England becomes ally of TIFD; Swiss government publishes green financing framework.

Norges Bank Investment Management has released a new expectation document for investee companies on human capital management. In the document, the manager of Norway’s trillion-dollar sovereign wealth fund calls on companies to integrate human capital management into their policies, strategy and risk management; report publicly on material information; engage with workers and their representatives, including trade unions; and have robust grievance and whistleblowing mechanisms. The fund has also placed glove manufacturer Supermax Corp under observation due to the risk of human rights violations, revoked the exclusion of Malaysian conglomerate IJM Corp after it ended the activities on which its exclusion was based, and announced the successful conclusion of a targeted engagement with miner AngloGold Ashanti after a nine-year process centred around two gold mines in Ghana.

NBIM also said that renewable assets have contributed to the double-digit negative performance of the sovereign wealth fund this year. It revealed yesterday that the giant fund returned -14.4 percent in the first half of 2022, corresponding to a loss of NKr1.68 billion (€170 billion; $173 billion). Unlisted renewable energy infrastructure investments returned -13.3 percent. The energy sector, by contrast, was the only one to generate positive returns – 13 percent – driven by a sharp rise in oil and gas prices.

On social issues, the Church Commissioners for England has become an ally of the Taskforce on Inequality-related Financial Disclosures, under the Respect for People responsible investment pillar. Mirroring the work of the Task Force on Climate-Related Financial Disclosures, TIFD’s end goal is to provide guidance, thresholds, targets and metrics for companies and investors to measure and manage their impacts on inequality, as well as inequality’s impacts on company and investor performance. 

In other news, the Swiss government has published its green financing framework ahead of an inaugural green bond issue, scheduled for autumn this year. The framework, which covers six areas of expenditure – including research innovation, renewables and clean transportation – carries a second party opinion from ISS ESG. The government has identified roughly SFr4.5 billion (€4.7 billion; $4.7 billion) of relevant spending from 2021, and said it would look to raise several hundred million francs each year. The size and tenor of the debut bond will depend on the country’s funding requirements and market conditions at the time of issuance, it said.

The International Monetary Fund has published a working paper looking at the design and implementation of debt-for-climate swaps, a form of debt restructuring where the debtor commits to make climate-related investments as part of the relief. The paper concludes that the swaps can be useful when “lack of fiscal space” is the main obstacle to climate-related investments, but on a purely fiscal basis they are generally a less efficient form of support than conditional grants or broad debt restructuring. It also proposes linking debt swaps to KPIs measuring climate outcomes, instead of expenditures or projects, which could also have the advantage of cutting costs of capital.