ESG round-up: Union starts legal action against Uber over Sharia-compliant pensions

The latest developments in sustainable finance: Uber's sharia pension dispute; FCA finalises targets on female and ethnic minority representation on boards.

The App Drivers and Couriers Union (ADCU) has commenced legal action against Uber following a lack of response regarding a request for pension provisions for Muslim drivers to be made Sharia compliant. The ADCU states that sharia investment screening is comparable to screening for “so called” ESG ethical funds. The union estimates that up to 75 percent of UK Uber drivers are Muslims, a majority of whom could lose out of participation in the pension scheme or be forced to compromise the tenets of their faith. The union also claims that Uber would be in breach of the 1998 Pension Act and the 2010 Equality Act.

The Financial Conduct Authority (FCA) has finalised rules requiring listed companies to report and disclose against targets on female and ethnic minority representation on boards and executive management. Responsible Investor reported on Tuesday 19 April that UK investors are ahead of the curve on race and ethnicity reporting, despite government reluctance to push forward legislative proposals. The new FCA rules will be based on a “comply or explain” approach and apply from this month’s accounting period. Under the new rules, at least 40% of the board should consist of female directors, one of the senior board positions should be held by a woman and at least one board member should be from an ethnic minority background. These targets are in line with the Hampton-Alexander and Parker government reviews, although the UK government recently said it does not intend to mandate ethnicity pay gap reporting as it did with gender pay gap reporting. Moreover, the FCA rules do not provide guidance on how best to collect data from employees, which is an outstanding issue, as reported by RI.

French asset owner Ircantec has announced that its asset managers have until the end of this month to exclude from their portfolios 12 fossil fuel companies that do not adhere to the climate goals of keeping global warming to 1.5C. The target entities are: Anglo American, BHP, BP, Energie Baden-Württemberg, ENI, Equinor, Fortum, Mitsubishi Corp, OMV AG, RWE, Repsol and TotalEnergies.

The Coalition of Finance Ministers for Climate Action, who met as part of the 2022 spring meetings of the World Bank Group and the International Monetary Fund, announced the addition of seven new member countries, bringing the total to 72. The latest additions to the group are Andorra, Bahamas, Bahrain, Cameroon, Egypt, Eswatini and Morocco. During its seventh ministerial meeting, the coalition discussed carbon pricing reforms in the context of various multilateral and regional carbon-pricing proposals. Launched in April 2019, the group collectively accounts for around 35% of global carbon emissions and 65% of global GDP.

A new report by MSCI ESG Research argues that there is limited evidence of shorting being similar to or a better tool than divestment for ESG purposes. MSCI research suggests that, on average, stocks with high short-selling demand have not had a higher cost of capital, and that therefore short selling has had limited influence on companies’ management to adopt ESG and climate-related best practices. The report also encourages investors to separate the ESG and climate disclosures for their long and short positions, and notes that ESG and climate transparency should be distinct from reporting for ESG and climate risk exposure.

In other news, MSCI has teamed up with Bloomberg in launching the first indices of their joint climate benchmark. The Bloomberg MSCI Global, Euro and US Corporate Paris-Aligned indices will serve as a benchmark for investors to assess the performance of corporate bond holdings that seek to meet or exceed the minimum standards of the EU Paris-Aligned Benchmark label. The indices use an exclusions-based approach with each index setting an initial 50 percent reduction of absolute greenhouse gas relative to the standard Bloomberg parent (Euro, US, or Global) corporate index, followed by an annual 7.5 percent decarbonisation relative to the baseline emissions.