RI ESG Briefing, Feb 20.: EFAMA, Aquila Capital, Hermes Investment Management, FMO, cobalt, RepRisk

Environmental

European fund management trade body EFAMA (European Fund and Asset Management Association, says it welcomes the “high-level-principles-based approach” taken by European authorities to integrating sustainability risks and factors in the UCITS Directive, AIFMD and MiFID II — as long as measures are consistent. Its full response is here.

Almost half of institutional investors expect to increase their exposure to assets supporting the renewable energy transition by 2021, new research commissioned by Aquila Capital has found. According to the study, 63% of investors see energy storage (batteries) as offering the greatest investment potential, while electricity transmission and the interconnectors between energy grids came in second and third.

Dutch public-private development bank FMO has issued its first green bond, a $500m five-year offering. The transaction had a “very high quality and diverse orderbook”, with 51% of allocations taken by bank treasuries, 31% by central banks and official institutions, 15% by asset managers, 2% by insurance and pension funds and 1% by private banks. The proceeds will be allocated within FMO’s Treasury to a sub-portfolio linked to FMO’s green finance lending operations.

Social

The European Commission has adopted a new list of 23 “third countries” – countries that are not members of the Union – that it deems to have deficiencies in their frameworks for preventing money laundering and terrorist financing. As a result of the listing, banks and other entities covered by EU anti-money laundering rules will be required to apply increased due diligence on financial operations involving customers and financial institutions from these high-risk third countries to better identify any suspicious money flows. The full list of countries can be seen here.

INSIKT, a tech-focused Community Development Financial Institution that aims to “disrupt the predatory lending industry”, has closed a $45m social bond issuance, led by WebBank. The issuance brings INSIKT’s total capital raised to $298m since 2017, which allowed the firm to make 242,752 loans to families.

Amnesty and Global Witness are among 14 NGOs who have reportedly opposed plans made by the London Metal Exchange (LME) to ban cobalt linked to human rights abuses. The LME’s plans would mean suspending cobalt brands trading at a significant discount to its contract, as they may be seen as tainted by human rights violations. The NGOs said in a letter that the LME should not immediately ban brands selling cobalt – a key material in EV batteries – and instead work with companies to ensure responsible sourcing. The letter said: “It is short-sighted and irresponsible of the LME to single out cobalt and tin as higher risk metals above others, or to single out (artisanal) material as implicitly higher risk”, adding that all companies in the exchange should implement OECD responsible sourcing practices.h6. Governance

Investors across Europe are at risk of ignoring their role as responsible stewards, with only 3% believing their organisation meets the Shareholder Directive Rights requirement, new research from Hermes Investment Management has found. The directive, which is due to be implemented by member states this year, will require investors to report on their engagement and voting decisions on a comply or explain basis. 42% of the 174 European investors asked had not even heard of the directive, while not one investor in Spain or Italy reported being fully compliant with the requirements.

190 investors including Storebrand, NNIP, AustralianSuper, Aviva, BMO and Triodos, have signed a letter to the Government of Bangladesh urging it to stick with the Accord for Fire and Building Safety in Bangladesh, which was established in 2013 following the Rana Plaza tragedy. The Accord was a collaboration between the private and public sectors to inspect garment factories in Bangladesh. There are now plans for the Government to assume responsibility for the task instead, but there are concerns about its capacity to do so currently. The investors, which represent $3trn. “We are concerned that ending the work of the Accord would increase the risk for Accord signatory companies to continue to source from unsafe factories lacking a credible and effective regulatory system,” explained Faryda Lindeman of NN Investment Partners.

RepRisk has released its Most Controversial Projects of 2018 Report. With three of ten projects selected being in the food and beverage sector, RepRisk said the report shows the sector’s significant exposure to ESG risks. Also included in the report are projects such as factories, dams, and ships that posed serious reputational, compliance, and financial risks in 2018 for the companies involved.

A court in Houston has dismissed a class-action lawsuit from Exxon Mobil employees that claimed the company’s climate change impact disclosure had harmed its stock value, media reports say. The plaintiffs were current and former employees invested in the company through the Exxon Mobil Savings Plan. They alleged corporate officers and plan fiduciaries “knew or should have known” that conflicting statements on the risk of climate change, and a federal investigation of Exxon’s reserve accounting, would damage the investment value. The district judge wrote that Exxon’s eventual disclosure of a dip in stock value related to climate change disclosure “was probably foreseeable, but the court cannot say it was inevitable.”

US pipeline firm Energy Transfer Partners’ $900m racketeering lawsuit against environmental non-profit Greenpeace has been dismissed by a US District Court Judge. The dismissed complaint was an amended version of a previous one filed in 2017, which US Federal Judge Billy Roy Wilson rejected as failing to make “simple, concise and direct” allegations. Last July, the same judge dismissed Dutch finance campaign group, BankTrack from the case stating similarly that ETP “failed to state a plausible RICO claim”.