RI Briefing March 20: Facebook, Statoil, guns and divestment

Round-up of the latest ESG news in a bite-sized format.

New York City Comptroller, Scott Stringer, who oversees $193bn in city pension fund assets, has dubbed reports on Facebook’s improper use of user data “very alarming”, adding that as an investor in the company, he is following the situation “closely”, Reuters reports. It is alleged that Facebook user data was accessed by UK based consultancy Cambridge Analytica to help President Donald Trump win the 2016 election. ESG research house, Sustainalytics also said that it is reviewing its Facebook rating following the allegations.

Climate change poses significant risks for the property and casualty (P&C) insurance and reinsurance sectors and has a net negative credit impact on the industry, a report published by Moody’s Investors Service has found. According to the report, P&C insurers – already at significant risk from catastrophic events – will see heightened volatility and increased challenges linked to the assessment, measurement and mitigation of catastrophic risks as the frequency of weather-related catastrophic events increases. James Eck, a Moody’s Vice President said: “The effects of climate change on the frequency and severity of catastrophic events are difficult to predict, and the correlation of climate-exposed risks that span P&C (re)insurers’ balance sheets increases the magnitude of potential losses arising from the physical and transition risks associated with climate change.” The report is available to Moody’s subscribers and the key findings from the research are presented in a podcast discussion.

Norway’s biggest petroleum company Statoil ASA is set to change its name to Equinor to reflect its efforts to move beyond oil and gas into renewable energy, according to media reports. The news comes after Statoil’s 2017 strategy outlined plans for 15-20% of its investments to be in “new energy solutions” by 2030. The company has upped investments in offshore wind and entered solar energy since Eldar Saetre took up his role as CEO in 2014. Chairman Jon Erik Reinhardsen said: “The world is changing, and so is Statoil. The biggest transition our modern-day energy systems have ever seen is underway, and we aim to be at the forefront of this development.”

California State Treasurer John Chiang has called on institutional investors in the US to take a stand against gun violence by divesting from holdings in sellers of military-style assault weapons, ammunition and other devices. The call to action was made at the headquarters of the California Public Employees Retirement System (CalPERS), the US’s largest pension fund at £350bn. It comes just over a month after law enforcement confirmed the gunman who killed 17 and wounded 17 more in a Florida high school used a semi-automatic AR-15-style rifle.

UC Berkeley Haas School of Business is seeking applications for its second annual Investment for Impact Research Prize, which awards outstanding research on the social impact of capital. The prize is intended to foster and share innovative academic research in the academic and practitioner community. A blog about last year’s winner can be found here..

The UK’s Financial Reporting Council (FRC) is inviting pension funds to share their views regarding the FRC’s work and the UK Stewardship Code, which is set to be reviewed later this year.

Smart beta specialist Aperio Group has launched two new SRIESG strategies, Jewish Values and Green REIT. The Jewish Values profile, developed in partnership with the Reform Pension Board (RPB), features positive tilts such as human rights, environment and climate change, and support for Israel, alongside exclusions such as coal and consumable fuels, landmines and cluster munitions, and involvement with the Sudanese government. The Green REIT strategy is intended to deliver environmentally friendly US real estate exposure via publicly traded US REITs.The Northern Ireland Local Government Officers’ Superannuation Committee (NILGOSC), the £7.7bn pension fund for public sector workers, will not divest from oil and gas companies, it has said in a note to members. NILGOSC, which oversees the fund, said divestment from fossil fuels would mean “[losing] its power to engage with the relevant companies” and have “no effect” on carbon dioxide levels. NILGOSC pointed out that it is invested in many forms of renewable energy and that the fund has signed up to international measures such as the Carbon Disclosure Project and the 2014 Global Investor Statement on Climate Change.

A mining company whose investors include Legal & General Investment Management, Schroder Investment Management, Standard Life Investments and South Africa’s Public Investment Corp is under scrutiny for human rights issues. Activists gathered outside Lonmin (London Mining) Corporation’s AGM on March 15 to call for the firm to be held accountable for the killing of 34 South African miners before its forthcoming acquisition. 34 miners were shot and killed at a Lonmin platinum mine in 2012 after the firm allegedly urged the South African police to use force to end a strike. Lonmin denies the allegations. With the firm about to be bought by South African mining company Sibanye-Stillwater, the activists say the disappearance of Lonmin as an entity could mean no one is held accountable for the crime. Legal and General, Schroder, Standard Life and Public Investment Corp are all PRI signatories.

Durham University has announced its commitment to withdraw its £1.5m investments in fossil fuels and to become a “major international partner in the development of green energy”. Durham joins the likes of Sussex and SOAS in a growing band of UK universities to shift towards environmentally-driven disinvestment. The university said its divestment policy should “where possible inform and guide research links through constructive engagement with companies involved in fossil fuel extraction”.

The International Transport Workers’ Federation (ITF) has released an advisory note for shareholders to vote against the re-election of International Container Terminal Services Inc. (ICTSI) directors Stephen A. Paradies and Jon Aboitiz. ICTSI is a Philippines-based port management company. The ITF believes that these directors are responsible for major governance and operational issues at the company such as having only two independent directors and 60% of voting rights controlled by the Razon family, founders of ICTSI.

FCLTGlobal (Focusing Capital on the Long Term), a non-profit founded by the Canada Pension Plan Investment Board, McKinsey & Company, The Dow Chemical Company, Tata Sons and BlackRock, has released a summary report of its 2018 Summit held in February. FCLTGlobal develops tools and approaches to support long term behaviour in capital markets. Among the topics discussed in the closed-door event was responding to activist pressure, the role of investment mandates and dialogue between shareholders and corporations.

ShareAction, the responsible investment NGO, has blamed uninspiring messaging by the pensions industry for millennials’ unwillingness to save for retirement. A ShareAction report advocates for more emotionally-engaged communication by emphasising responsible investment activities, as younger savers tend to care about making a positive difference in the world. Although minimum workplace pensions contributions will rise to 5% in April, this is still short of the 12% advised by industry experts.  

Climate change was the most successful area for its shareholder engagement last year, according to BMO Global Asset Management’s Responsible Investment Report 2017. The report lists a total of 199 instances of change by companies. The focus on climate issues was driven by intensive investor pressure and the publication of guidelines by the Financial Stability Board’s Task Force on Climate-related Financial Disclosures (TCFD). Other areas of shareholder engagement included corporate governance, executive remuneration and social issues.