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RI ESG Briefing, Sep 21. The news you need to know: bite-sized.

Round-up of the latest ESG developments.

Environmental

Moody’s Investors Service has become the first credit rating agency to join the Institutional Investor Group on Climate Change (IIGCC), the main European investor body focused on climate change. It joins the IIGCC under the newly created designation ‘Associate Member’, created for financial service providers that are neither asset owners nor asset managers – the prerequisite for full-membership. Stephanie Pfeifer, CEO of IIGCC said: “[t]his is a really positive step that sends a powerful message to a segment of the financial sector that has valuable research and insight to contribute to our work and activities going forward”. The role of credit rating agencies has been a topic of consideration by the European Commission’s High-level Expert Group on Sustainable Finance (HLEG).

Aviva, the London-based global insurer, is one of ten companies – across seven sectors – to commit to implementing the recommendations of the global Financial Stability Board’s Taskforce on Climate-related Financial Disclosures (TCFD) within the next three years. Announced at Climate Week in New York, the first signatories include: Aviva plc, Royal DSM, Enagás, Ferrovial, Iberdrola, Marks & Spencer, Philips Lighting, Sopra Steria Group, Wipro Ltd, and WPP.
CEO of Aviva, Mark Wilson, spoke to RI in advance of his speech to the UN at Climate Week link here.

US financial giant Morgan Stanley has unveiled a new climate change mitigation index tool in collaboration with The Economist Intelligence Unit, the business arm of the namesake news title. The Climate Change Mitigation Opportunities Index is a “report analytical tool” offering investors the opportunity to explore technologies that mitigate climate change, evaluating them in terms of both their climate impact and their potential for market-rate returns. The tool analyses five sectors across 20 countries, responsible for 90% of all greenhouse gas emissions.

Incorporating ESG and reducing carbon in global equity dividend strategies does not harm yields according to research by AXA IM Rosenberg Equities, the quantitative investment arm of the French insurer. Its results, based on 4,200 stocks across emerging and developed markets, also revealed little correlation between carbon and dividend pay-out rates and a strong correlation between good governance and dividend income. AXA IM Rosenberg Equities recently announced plans to integrate ESG across all of its funds and strategies by the end of 2017.

Social

US SIF, the country’s Forum for Sustainable and Responsible Investment, has released a sustainable and impact investing guide for retail investors to meet the group’s growing interest. ‘Getting Started in Sustainable and Impact Investing’ provides retail and non-accredited investors advice on mutual funds, ETFs, and direct ownership of stocks. A 2017 study by Morgan Stanley reportedly found that 75% of individual investors expressed an interest in sustainable investing.The Corporate Human Rights Benchmark, which ranks the world’s largest publicly traded companies on its human rights practices, has announced it is consulting with “external stakeholders”, including investors, regarding its methodology and processes before it finalises the next iteration of its benchmark. The Benchmark, which released its inaugural results in April 2017, is backed by 87 investors with over $5.3tn assets under management, including Aviva, Hermes, and APG. It said it was “taking some time to reflect and gather feedback” – with a deadline of 30 October 2017 – after “a number of points regarding the Pilot Methodology were raised by external stakeholders” The consultation will focus on the benchmark’s: methodology, process, presentation of results, and addition of new sectors.

Governance

Universities Superannuation Scheme (USS), the UK’s fund for academics, is facing questions from its members over “curious” assumptions used in calculations of its recently announced deficit – which stands at a staggering £12.6bn, the FT reports. In a letter signed by more than 50 academics – including leading statistical experts – and published in the FT they have urged the USS to publish in full the workings behind its most recent financial assessment of the £60bn retirement fund.

METI, the Japanese Ministry of Trade, Economy and Industry, has published the English version of its company and investors guidance to establish a framework for long-term Stewardship and Corporate Governance responsibilities. The aim of the “Guidance for Integrated Corporate Disclosure and Company-Investor Dialogue for Collaborative Value Creation” is to establish a “common language” between investors and corporates and promote mid- to long-term corporate value as well as sustainable growth. This, a previous report by a Study Group found, was needed as there still exist blockages in company-investor dialogues that are caused by lack of disclosure of ESG information and its wrong evaluation. RI reported on the guidance previously when the Japanese version was published.

PIRC, the UK’s influential shareholder advisory group, has been awarded the Fair Tax Mark, the accreditation scheme of UK non-profit Fair Tax. The Fair Tax Mark aims to reward businesses with good tax practices and bridge “the gap between corporate responsibility and the wider tax justice movement”. Alan MacDougall, Managing Director of PIRC, said: “[r]esponsible and transparent tax planning is now a key indicator of good corporate citizenship”.