Environmental
The UK government is to publish a consultation in June with the aim of legislating on the reporting of long-term investment risks by pension fund trustees, according to the Department for Work and Pensions. The government announced in December that trustees could be required to produce a policy on evaluating longer-term risks as well as the consideration of members’ ethical concerns in its Statement of Investment Principles (SIP). The UK Pensions Regulator has also raised concerns about pension fund reporting of climate change risks. David Farrar, DWP senior policy manager, reportedly told a conference in Paris: “We are looking at ways so that it [the investment statement] is not just a box ticking exercise but so it can drive real investment change.”
Blended-finance body Convergence has awarded a design funding grant to the Coalition for Green Capital and the Development Bank of Southern Africa (DBSA) to support their work on creating a green bank. The move, reported by RI last October, will see the establishment of the ‘Climate Finance Facility’ within the DBSA. The Climate Finance Facility will aim to co-finance climate-friendly infrastructure projects with local banks in the Southern African region.
The California Public Employees Retirement System (CalPERS) will prioritise board diversity and climate risk reporting in its engagement strategy in efforts to improve financial returns in 2018. According to its recently published corporate engagement plans, the giant Californian pension fund will continue its work to obtain climate risk reporting from companies by launching the Climate Action 100+ initiative, a consortium of 256 investors advocating stronger climate-related financial disclosures. Following on from its engagement with over 500 companies regarding their lack of female board members in 2017, this year the fund will continue engagement with companies yet to make improvements. Ted Eliopoulos, CalPERS chief investment officer, said: “Voting our proxies and keeping an open dialogue with businesses are part of our duties as a responsible shareowner.” Link
The University of Bristol has announced plans to fully divest from all fossil fuel companies within two years. Hitting the target would make Bristol the first Russell Group university to achieve full divestment. The university, which pledged in 2016 to become carbon neutral by 2030, currently has £2m invested in companies which support the fossil fuel industry. The university has already decreased embedded carbon in fossil fuel reserves associated with its endowment fund investments by 78%, and ended investment in companies that derive more than 5% of their income from the most carbon intensive sectors of the fossil fuel industry.
Cardiff University has also announced plans to become fossil free by 2021 after a meeting of its council discussed the university’s draft ethical investment policy. The move is in line with the university’s strategy ‘The Way Forward 2018-23, a core value of which is environmental sustainability. Professor Colin Riordan, Vice-Chancellor of Cardiff University, said: “Along with our pledge to phase out the use of single-use plastic by 2023 – as outlined in our strategy – the move to divestment sends a clear and positive message that we are committed to environmental sustainability and tackling climate change. Link
Pan-European stock exchange Euronext, Belgium’s Financial Services and Markets Authority (FSMA), the National Bank of Belgium (NBB) and the Belgian Minister of Finance have signed a statement in support of the TCFD recommendations at a bell ringing ceremony at Euronext Brussels. The backing from Belgium brings support for the TCFD to over 250 companies, with a combined market capitalisation of more than $6.6tn, and 37 other organizations, including four governments and 23 financial regulators.h6. Social
Australia’s Qantas Super has announced it is divesting from tobacco manufacturers. Its Chief Investment Officer Andrew Spence said: “Given the negative social costs and health problems associated with smoking, tobacco is at risk of becoming obsolete with growing acknowledgement globally that there is no safe level of usage of the product….. We now join more than 35 other super funds who have also withdrawn from tobacco.”
KBI Global Investors has turned its attention to the SDGs, becoming the latest manager to measure the impact of its natural resource portfolios. The Dublin-based firm calculated the percentage of each investment portfolio’s revenue that is aligned with the SDGs before deciding whether they have positive, neutral or negative impact in terms of delivering the goals.
The European Commission has proposed two new measures to ensure that tax on digital businesses in the EU is “fair and growth-friendly”. The Commission’s website says current tax rules pose a risk to public revenues of EU member states as they were not designed to cater for virtual companies. The first initiative – the Commission’s preferred long-term solution – would see profits registered and taxed where businesses have substantial digital interaction with users. The second proposes an interim tax covering the digital activities currently escaping tax altogether. Valdis Dombrovskis, Vice-President for the Euro and Social Dialogue said: “The amount of profits currently going untaxed is unacceptable. We need to urgently bring our tax rules into the 21st century by putting in place a new comprehensive and future-proof solution.”
A new investment tool allowing users to make investments starting from just £1 based on their personal beliefs has been announced by automated money management chatbot Plum. The tool, which will launch officially in April, is intended to give users the power to invest in areas they care about.
Chicago officials are proposing legislation that would allow for ESG changes to be incorporated in the city’s investment policy, applying ESG investing across its entire portfolio. The city currently invests its operating budget primarily in fixed income, in highly rated government and corporate bonds. If approved, the proposal would allow investment in other types of fixed income, such as green bonds financing environmentally friendly infrastructure, energy and real-estate projects, and bonds issued by foreign governments aimed at reducing poverty. Treasurer Kurt Summers, who put forward the proposal, said: “I see this as enhancing our ability to fulfill our fiduciary responsibility.”
Hermes Investment Management has signed a participation agreement with Oxford-based financial technology company Util. The agreement will see £33.0 billion investment manager Hermes assess and audit Util’s company valuation methodology over the next 12 months by applying it to selected Hermes’ listed equity funds. The methodology is intended to provide a standardised analysis of companies, taking into account social and governance factors alongside financial performance.
The Global Impact Investing Network (GIIN) has launched a framework for accelerating impact investment titled ‘Roadmap for the Future of Impact Investing: Reshaping Financial Markets’. The report lays out six categories of action needed to drive progress, including strengthening the identity of impact investing, changing investment behaviour and expectations regarding responsible finance, and developing products, tools and services. The framework was put together based on extensive research including contributions from over 350 individuals involved in the global impact investing ecosystem.
Governance
The UK’s Financial Conduct Authority has announced new rules in a bid to improve the competition in the country’s asset management industry. They include a requirement for fund managers to make an annual assessment of value and appoint a minimum of two directors to their boards. The FCA plans to further consult on proposals to ensure funds provide better information about what they are offering.
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