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ESG round-up: Schroders to back climate resolutions at three energy majors

The latest developments in sustainable finance: Pay gaps between employees and CEOs widening at FTSE 350 companies; US lawmakers ask SEC to require disclosure of disability status.

Schroders has predeclared three votes in favour of climate resolutions at Shell, Chevron and Exxon. The manager said that voting in favour of resolutions at Chevron and Exxon asking them to set medium and long-term targets, and reduce emissions and hydrocarbon sales, respectively, reflected its aspiration for greater ambition and transparency towards net zero from the firms. It also said that its vote for Paris-aligned targets at Shell “is a signal of our desire for these companies to continue to demonstrate their focus on reaching net zero”.

Pay gaps between CEOs and employees have widened after narrowing during the pandemic, according to an analysis of FTSE 350 pay ratios by the High Pay Centre, a think-tank that campaigns for fairer pay. UK legislation requires all publicly listed companies with more than 250 employees to publish the ratio between the total remuneration of CEOs and the average remuneration of UK employees. Pay ratios were widest in the retail industry and lowest in media and financial services, the High Pay Centre found. Across the 69 companies that disclosed pay ratios in the first quarter of 2022, the median CEO/median employee ratio was 63:1, nearly double the ratio for the same group of companies in 2021, which stood at 34:1.

The US Securities and Exchange Commission has been asked to include the disclosure of disability status in all future rulemaking related to human capital management and diversity. In a letter sent to the chair of the SEC, Congresswoman Maxine Waters and Senator Sherrod Brown wrote that “collecting and publicly reporting data on disability status is key to closing the employment gap facing individuals with disabilities in the workforce”. Adding disability status in human capital reporting would align with the SEC’s core mission of protecting investors, ensuring fair markets and facilitating capital formation, the letter stated. All US private sector companies with 100 or more employees have to  report race/ethnicity, sex and job categories of their demographic workforce in EEO-1 mandatory filings.

The Australian Securities Exchange (ASX) is cracking down on “green” investment funds that cannot substantiate their claims, The Sydney Morning Herald has reported. A spokesperson is reported as saying that it will only admit funds for listing on its exchange that meet the naming requirements laid down by Aussie securities regulator ASIC, which requires funds to be true to their label, including those with an ethical or sustainability angle. The spokesperson also said that ASX can refer any breaches of its listing rules to ASIC.

There is a $200 billion investment gap in water infrastructure, which, when filled, could generate an additional $500 billion in additional economic value, a new report by WaterAid and the Blended Finance Institute has claimed. The report adds that blended finance structures could be key to unlocking this investment, and recommends a number of measures to help mobilise private capital, including for multilateral development banks to embed water and sanitation in their climate commitments, and for national governments to improve signalling to investors by introducing water strategies and “implementing cross-sectoral enabling policy and regulation”.

A new paper published by the European Central Bank suggests that the “climate sentiment” of firms, such as their anticipation of the impact of interventions such as carbon taxes, plays a “key role for smoothing the transition in the economy and finance”. The working paper, titled The double materiality of climate physical and transition risks in the euro area, uses climate scenarios developed by central banking body the Network for Greening the Financial System (NGFS). The paper’s authors said the results highlight the importance for financial supervisors of considering the role of firms and investors’ expectations in the low-carbon transition.