In the Loop: Reworded ESG statements, EU regulation and stewardship resources

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Mark my ESG words

Backspace delete computer keyboardIt recently came to our attention that BlackRock in March amended its ESG integration statement for the first time in nearly two years. A comparison of the current statement with an archived version of the previous statement reveals some interesting changes in language.

Gone from the introduction is the belief that “sustainability has become a critical factor in determining companies’ long-term value”, while the section detailing the management giant’s approach to ESG integration no longer asserts that “sustainability-related data provides an increasingly important set of tools to identify unpriced risks and opportunities within portfolios”.

References to an “investment conviction” that sustainability and climate-integrated portfolios can provide better long-term risk-adjusted returns have been watered down to an “investment view” that incorporating financially material ESG data and information can do the same.

The oversight and governance section has seen significant changes. The new version emphasises the role of the internal audit function, and responsibility for reporting to the Investment Subcommittee of the Global Executive Committee is now formally in the hands of the Risk and Quantitative Analysis Group.

However, despite the rewording, RI understands that no material changes have been made to oversight and governance, albeit with limited reshuffling as a result of the launch of the firm’s sustainable and transition function in October last year.

This is not the first time an investment giant appears to have changed its ESG-related statements. In April, Majority Action said State Street Global Advisors had “modified its proxy voting policies and related documents”, effectively watering down its stance on climate change.

SSGA told RI that climate-related risk remains one of its top priorities and that its voting actions reflect this. However – somewhat surprisingly – it did not highlight a new document RI later discovered while trawling through the asset manager’s website, which includes some of the omissions from the proxy document.

The week in RI

June got off to a flying start for supporters of sustainability regulation.

On the first day of the month, the European Parliament not only voted in favour of the Corporate Sustainability Due Diligence Directive (CSDDD), but also resisted attempts to remove financial institutions from its remit.

Also on Thursday, in its latest advice to the European Commission, ESMA recommended that the definition of a “sustainable investment” should be clarified in order to address greenwashing.

In other news, Nordea AM broke new ground by blacklisting US chemicals giant DuPont over biodiversity concerns, and AP7 teamed up with LGIM on an “engagement-led” transition strategy.

Meanwhile in APAC, the Hong Kong Monetary Authority pledged to focus on interoperability with other jurisdictions, particularly the EU, as it released the final draft of its green taxonomy.

Quote of the week

“There appears to be a new trend of professionals relying on specific introductory-level ESG certificates to display their expertise which could be deemed neither fit nor proper”

Back to school? EU regulator ESMA said in a greenwashing report to the EC this week that it is unimpressed with some ESG certificates seen in the industry.

Martin Špolc join RI Europe line-up

With less than two weeks to go until RI Europe, we’re delighted to announce a big-name addition to the programme.

Martin Špolc, head of sustainable finance at the European Commission’s Directorate General for Financial Services, will be joining us from Brussels on Wednesday 14 June for a live video interview with our deputy editor (and EU regulation expert) Elza Holmstedt Pell.

A raft of sustainable finance updates from the Commission are due out on 13 June, covering the EU taxonomy, ESG ratings, usability and transition finance. For the inside take on these developments, and the chance to put your questions to Martin, sign up now for RI Europe.

Out and about

Copenhagen here we come! Next week our reporter Gina Gambetta will be heading to Denmark for the NordicSIF annual conference on 8-9 June. If you will be in town and would like to meet up with Gina, drop her a line here.

Stewardship resources deep dive

What proportion of your total stewardship resources is allocated to collaborative stewardship activities? How does the average level of seniority of your staff with stewardship-related responsibilities compare to the average seniority level of your organisation’s general investment team?

These are the types of questions the Thinking Ahead Institute (TAI) are seeking answers to in its Global Stewardship Resourcing Survey.

It is also asking asset managers for their overall approximate external asset manager fees (including performance-related fees) as a percentage of AUM.

In December, the TAI was commissioned by the PRI to research and assess the appropriate level of resources that institutional investors should be prepared to dedicate to stewardship.

The survey, which closes at the end of the month, is part of this effort and seeks to gain a deeper understanding of current stewardship practices, resourcing and key stewardship costs.

Survey data will serve as the foundation for establishing voluntary guidance on the desired level of resources that the industry should consider allocating to stewardship activities.

The findings of this project will be published later this year.

Today’s letter was prepared by the RI editorial team.