ESG round-up: New Hampshire Republicans propose prison for ESG investment

The latest developments in sustainable finance: Church Commissioners votes against 91 companies on human rights grounds; MEPs adopt anti-greenwashing law.

Lawmakers in the US state of New Hampshire have introduced a bill that would make investing state funds in line with ESG criteria a felony punishable by up to 20 years in prison. House Bill 1267-FN, introduced by three Republican lawmakers, would make “investing state or taxpayer funds knowingly in a manner violating fiduciary duty concerning environmental, social, and governance (ESG) criteria” punishable by between one and 20 years imprisonment. A note accompanying the bill from the state’s treasury department warned that it could raise management costs if certain financial institutions were excluded, while the New Hampshire Retirement System warned that it might reduce investment returns.

The Church Commissioners for England voted against 91 companies in 2023 for not meeting expectations on human rights. The votes were cast as part of the asset owner’s first year piloting a new approach on human rights, which includes an engagement initiative with data providers to get more detailed information on corporate performance. The Church Commissioners said it voted against the board chair at identified firms unless there was a committee chair with responsibility for sustainability or human rights. The report also noted that, because of the difficulty associated with identifying a responsible director for human rights, it “will consider prioritising voting at chair and reports and accounts over specific ‘lead directors’ for 2024″.

GPIF met with six foreign asset owners last week at the sixth meeting of the Global Asset Owners Forum, a group organised by the Japanese pensions giant to exchange views with global peers. Meeting notes show that the attendees – NBIM, APG, CalPERS, CalSTRS, HESTA and Temasek – called for more concise disclosures from Japanese companies, coming in at under 50 pages, on governance issues such as tax and ESG KPIs. They also raised hopes that “the “implementation of ISSB… will stay as faithful as possible to the global baseline”, and that “jurisdiction-specific concerns should be addressed via temporary reliefs rather than permanent deviations”.

MEPs have adopted a new law banning greenwashing and misleading product information in the EU. The bill has outlawed generic environmental claims, such as “natural”, “biodegradable” and “climate neutral” without proof, and any misleading statements. It has ruled that only sustainability labels based on approved certification schemes or established by public authorities will be permitted. The legislation will also ban claims that a product has a neutral, reduced or positive impact on the environment because of emissions offsetting schemes. The directive was adopted with 593 votes in favour, 21 against and 14 abstentions.

French supervisory authority ACPR has said it will continue its push on the development of transition plans and their integration into prudential regulations, as part of its commitment to climate change. The regulator added that it will participate in European Banking Authority working groups on transition plans. ACPR will also release the results of its second climate stress test exercise this year.

The Principles for Responsible Investment (PRI) is set to release the target company list for its nature engagement initiative Spring in the coming weeks, RI can reveal. Officially launched at PRI in Person in Tokyo, Spring will initially focus on responsible corporate political engagement and will likely expand to engagement with policymakers.

Pension schemes and professional trustee firms have stepped up on DE&I but are facing barriers due to deficient data, according to research commissioned by Cardano in partnership with pensions social media firm Mallowstreet. The annual research, which surveyed 120 UK pension funds and professional trustee service firms, found that nearly half of schemes and PT firms have implemented DE&I strategies, a substantial rise from 26 percent in 2022. A further 28 percent of firms have established specific DE&I targets.

Meanwhile, 43 percent of defined contribution schemes reported that they would refrain from giving a mandate to a provider that fails to meet their DE&I standards, in contrast to nearly half (46 percent) of defined benefit schemes, which said they would take no action. Fifty percent of pension trustee firms said they would consider requesting a change to the composition of a provider’s team if it failed to meet their DE&I standards.

Hungary’s central bank has scored higher than all G20 supervisors on sustainability practices, according to an internal assessment. The exercise was based on a Green Central Banking scorecard developed by Positive Money and industry title Green Central Banking, and has been validated by the former. The central bank has introduced a 20 percent discount on green securities pledged as collateral, committed to doubling the size of green investments made via its foreign reserves to €500 million, and reduced bank capital requirements for green financing.

ISS ESG has launched a biodiversity impact assessment tool (BIAT) portfolio report, which allows investors to compare a portfolio’s biodiversity risk and impact against a benchmark. It also enables investors to view the biodiversity impact of the top and bottom five holdings in their portfolios, observe economic activities with the largest impact, assess for dependencies on ecosystem services (including materiality classification), and evaluate the portfolio’s impact based on a set of additional TNFD-related disclosures. The broader BIAT solution – first launched in 2022 – has expanded its universe to include more than 17,000 companies, with a dataset of around 650 individual factors.

Derivatives exchange Eurex has expanded its ESG indices offering to include socially responsible investing (SRI) indices. The new derivatives contracts will use the STOXX Europe 600 SRI Index as well as MSCI’s SRI index suite, covering Europe, US, and emerging markets. The new indices provide broad exclusions combined with a best-in-class selection approach.

Barclays has announced a sustainable banking group within its capital markets division, following the launch of its energy transition group last week. The two teams will work together closely covering M&A, equity, debt and risk management to provide a “tailored” service. The sustainable banking group will be led by Susan Barron, global head of sustainable capital markets, and Cindy Quan, head of Americas ESG advisory.