RI ESG Briefing, July 10: PRI launches report on credit ratings agencies and ESG

Environmental

The PRI has launched a report on how investors and credit ratings agencies are dealing with ESG risks in their analysis. The research, funded by the Rockefeller Foundation, is laid out in a report titled Shifting perceptions: ESG credit risk and ratings – part 1: the state of play. Both investors and ratings agencies are allocating more resources to issues around ESG, particularly climate, it says, but highlights a current disconnect on time frames for assessing these risks. It also raises questions about the role of regulators and products in the field, and how to incentive credit analysts to consider ESG risks more systematically in their research. The document follows the PRI’s ESG in Credit Ratings Statement, launched last year.
France’s new president, Emmanuel Macron, has said the country will host a climate conference to celebrate the 2nd anniversary of the adoption of the Paris Agreement. On Twitter, the leader said an event will be held on December 12 to discuss “climate mobilization”. The announcement came on the same weekend that 19 of the G20 countries confirmed that the Paris Agreement was “irreversible” in the face of Donald Trump’s move to pull the US out of the deal. The 19 signed off on document called the Hamburg Climate and Energy Action Plan for Growth, outlining how their countries could meet their goals. The Institutional Investor Group on Climate Change described it as “the most ambitious G20 climate statement ever produced”, and said it would reassure investors.
A report from the CDP claims that 100 active fossil fuel producers are linked to 71% of industrial greenhouse gas emissions since 1988. The research underpins a new Carbon Majors Database, and says firms including ExxonMobil, BHP Billiton and Gazprom have been responsible for more than half of all global GHG emissions since the start of the industrial revolution. Almost a third of these ‘legacy’ emissions were traceable to publicly-listed companies. The highest emitters within investor owned companies are ExxonMobil, Shell, BP, Chevron, Peabody, Total and BHP Billiton, according to the findings. State-owned companies also play a big part, the report says. CDP’s Technical Director Pedro Faria said the 100 producers “may hold the key to systemic change on carbon emissions”.
Climate think-tank the 2° Investing Initiative has launched a Transition Risk Scenario Tool to support recent recommendations from the Financial Stability Board’s Taskforce on Climate-related Financial Disclosure. The taskforce suggests that organisations should undertake scenario analysis to assess their resilience to different future scenarios related to policy changes, physical damage and other climate-related risks. To help users find appropriate scenarios, and to improve transparency around how different models work and how ambitious they are, the tool aims to become a ‘warehouse’ where users can upload scenarios onto a single platform.h6. Social

Charity Bank, the UK ethical bank has announced that its loan book has nearly doubled in size to £100m in the last two-and-a-half years. The bank, which uses savings to make loans to charities and social enterprises working to enrich and improve society, has provided over £185m in loan finance to support more than 850 organisations since 2002.
The Canadian province of Manitoba is reportedly seeking a consultant to help establish its first social funding programme – filing a ‘request for proposals’ last week. The successful consultant will help set the criteria for the province’s social impact bonds and find a programme to serve as the pilot project and future model of the bonds. It is hoped that the programme will be up and running within 180 days.
The Impact Investment Exchange Asia (IIX), the Singapore based group which facilitates capital for social enterprises, has launched a US$8m Women’s Livelihood Bond (WLB). The bond is designed to unlock capital for impact enterprises and microfinance institutions that are part of “the sustainable livelihoods spectrum for women” in South-East Asia. The WLB is projected to empower over 385,000 women with access to credit, new markets, and goods and services.

Governance

It’s emerged that Bob Eccles resigned as chair of Arabesque, the ESG quant house, to avoid any perceived or potential conflict of interest. The Harvard professor said: “As an advocate of good corporate governance, it is essential to practice it. I am on the board of TruValue Labs, a big data sustainability company. I was also on the board and Founding Chairman of Arabesque Partners, an asset management company. With the recent launch of its S-Ray product, Arabesque has also moved into the data vendor market.” In a message to his contacts, Eccles – who has been replaced by Georg Kell – continued: “Thus, I decided that the right thing for me to do is resign from the board of Arabesque to avoid any perceived or potential conflict of interest.”

Royal London Asset Management has flagged says it will vote against the remuneration committee at clothing giant Burberry, in addition to voting against its pay report and the reelection of its chairman. RLAM’s Corporate Governance Manager, Ashley Hamilton Claxton, said that the company’s decision to reduce the CEO’s bonus was “slim” and “lackluster” against what she described as “a backdrop of reduced targets and poor financial performance” at Burberry. She blamed confusion over pay on “poor oversight” within the firm, and said issues around the role of CEO and reporting procedures had created “further uncertainty and governance risks for investors”. RLAM holds 0.47% of Burberry, with more than two million shares valued at £33m.
The Securities Investors Association in Singapore (SIAS) is reportedly launching two new ESG awards at its upcoming 18th Investor Choice Awards – 19 September 2017. The Sustainability award and the Shareholder Communications Excellence award will honour companies that adopt ESG principles and that employ the best corporate governance and shareholder practices respectively.