ESG round-up: USS joins growing shareholder revolt against Shell’s chair on climate

The latest developments in sustainable finance: Danish pension funds engage with Amazon; ICMA and LuxSE launch sustainable bond database.

Universities Superannuation Scheme (USS), the UK’s largest private pension fund by assets, has said that it will vote against the chair of Shell’s board and the chair of the oil giant’s safety, environment and sustainability committee after losing confidence the firm’s decarbonisation efforts. The announcement follows a warning in March from the £91 billion ($113 billion; €105 billion) fund about such action, as reported in the Financial Times. USS also said that it would support the shareholder proposal put forward by climate activist Follow This. “While Shell’s 2035 target aligns with a less-than 2C pathway, the company’s operating plans don’t show how it will achieve this,” a USS spokesperson said. “We’re also concerned with the company’s continued investment in new oil and gas production.”

A group of Danish pension funds has called on Amazon to ensure employees’ rights and improve transparency around worker conditions. Sampension, PenSam and PKA have asked Amazon to write a report outlining concrete actions it is taking to ensure its employees’ rights to unionise, as well as to negotiate wages and working conditions.

Germany’s KfW has issued a €3 billion seven-year green bond, its second euro green benchmark this year. ESG investors made up around 90 percent of the allocated order book, which was mainly allocated to Nordic, German and French investors. The bond pays a coupon of 2.75 percent. In February, KfW also issued a €3 billion 10-year green bond. The bank has now raised €6.8 billion of its announced €10 billion for this year.

Staying with Germany, the German state of Baden-Württemberg has launched a tender for sustainability data. The state recently passed a sustainable investing law that includes wide-ranging exclusions and emissions rules, and is looking for data in a number of areas including taxonomy alignment and the ratification of global treaties. Arnim Emrich, the head of the state’s treasury and asset management unit, said that it was looking to ensure a “homogenous interpretation of sustainability standards” across managers and portfolios, rather than relying on various individual institutions to provide it. The 10-year contract closes on 6 June. Applicants will need a German speaking member of staff.

The International Capital Market Association (ICMA) and the Luxembourg Stock Exchange (LuxSE) have partnered to launch a sustainable bond database. The platform, established by ICMA and powered by the Luxembourg Green Exchange, provides users with access to information about bonds from more than 2,100 issuers and more than 8,700 listed green, social, sustainability and sustainability-linked (GSSS) bonds aligned with ICMA’s principles.

Climate Action 100+ (CA100+) has published a consultation draft of its net-zero standard for diversified mining. The final version is scheduled for publication in Q3. The standard aims to provide a tool for signatories to have access to metrics for the sector. It also complements the initiative’s sector-neutral CA100+ company benchmark.

The European Parliament and UK’s Advertising Standards Authority (ASA) have both clamped down on the use of the term ‘carbon neutrality’ in advertising. Last week the European Parliament voted in favour of new rules for general and unsubstantiated environmental claims to be banned. An overwhelming majority (544) voted for the new laws, with 18 voting against and 17 abstentions. The parliament’s mandate would see the banning of general environmental claims such as “environmentally friendly”, “natural”, “biodegradable”, “climate neutral” or “eco” if these do not come with detailed evidence. It also aims to ban environmental claims that are based solely on carbon offsetting schemes.

Separately, this week the ASA said that absolute claims in advertising such as “eco-friendly” or “green” should be fully substantiated, adding that it would begin stricter enforcement around the use of terms including “carbon neutral”, “net zero”, and “nature-positive” this year.

Almost two-thirds of investors currently allocate to or are interested in investing in social bonds, according to research from Goldman Sachs Asset Management. Survey respondents included heads of ESG investing and portfolio manager from insurers, pension funds and banks. In 2019, a total of 50 social bonds were issued, and a year later the number had grown to 227 issued bonds. The survey showed that the biggest drivers for investing were social impact and a commitment to sustainability. The most popular themes to advance through social bond investing included clean water, food security and sustainable food systems.

Australian super fund HESTA has pledged its support for the recognition of Aboriginal and Torres Strait Islander peoples through a constitutional Aboriginal and Torres Strait Islander voice. HESTA CEO Debby Blakey said the upcoming referendum to establish the Voice to Parliament was a chance to move towards reconciliation. The fund launched a 2023-25 innovate reconciliation action plan and is also part of the Australian Institute of Superannuation Trustees (AIST) indigenous superannuation working group.

MSCI has launched a tool for assessing a portfolio’s change in portfolio carbon footprint. The framework shows to what extent changes in a portfolio’s carbon footprint are due to companies’ real-world decarbonisation efforts, a portfolio manager’s investment decisions or changes in companies’ financing.