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RI ESG Briefing, July 25: BlackRock looks at Investment Stewardship Ecosystem

The latest ESG developments, in brief

Environmental

La Société du Grand Paris, the Saint Denis, Paris-based, public organisation overseeing the largest current urban infrastructure project in Europe of more than 200km in automatic train lines – part of the ‘Grand Paris’ plan to grow the city out into its suburbs – has kicked off a large scale €5bn Green Euro Medium Term Note (EMTN) Programme making it the first issuer to adopt such a debt financing series of medium duration loans dedicated to green bonds. The EMTN, rated Aa2 by Moody’s, is being arranged by BNP Paribas with Crédit Agricole acting as advisor, and both acting as dealing banks alongside HSBC, Natixis, Barclays and Société Générale. La Société du Grand Paris said it would regularly communicate the environmental benefits of the project to investors, including, it says, energy efficient buildings, biodiversity impacts and CO2 reductions by reducing other transportation.

In what’s believed to be a first, a pension fund member in Australia has taken his fund to court over a lack of information on what it knows about the impact of climate change on his investments and what it is doing about it. Mark McVeigh, 23, is taking the Retail Employees Superannuation Trust (REST) to the Federal Court of Australia – with the support of lawyers at Environmental Justice Australia.

More investors are backing away from coal. Japan’s Nippon Life Insurance Co has said it will no longer extend loans for, or invest in, coal-fired power plants according to an official cited by Reuters. And French insurers Macif and AG2R La Mondiale have also said they would no longer invest in companies planning new coal-fired power plants.

Climate change data analytics firm Carbon Delta has won a project working with 13 investors to deliver TCFD-aligned reporting guidance and an online reporting tool for direct access to climate scenario analysis. The results of the project, which is a commission by the UN Environment Finance Initiative (UNEP FI), will be launched in early 2019.

Social

The PRI, GRI and the UN Global Compact have published guidance to help businesses ensure their SDG-related disclosures are useful for investors. The latest report to come out of a GRI and UN Global Compact collaboration, ‘In Focus: Addressing Investor Needs in Business Reporting on the SDGs’ is intended to help mobilise sustainable finance and further the SDGs. Another report, titled ‘Integrating the SDGs into Corporate Reporting: A Practical Guide’ will follow later this year.

Australia’s impact investment market has hit A$6bn (€3.8bn), a fourfold increase in less than three years. Impact investment products in the Australian market in June 2015 were worth $1.2bn (€758m), but a report by the Responsible Investment Association of Australia shows that figure had skyrocketed to $5.8bn (€3.7bn) by December 31, 2017. Green bond issuances over the last two and a half years accounted for 85% – or $4.9bn (€3bn) – of this total.

Kempen Capital Management, the asset management subsidiary of the Dutch merchant bank Kempen & Co, says it will to exclude all tobacco investments from its funds by the end of December 2018, according to a statement on its website. The exclusion will not apply to mandates, bespoke investment portfolios and multi-management funds.

Food giant Nestlé has reportedly had its membership reinstated at palm oil sustainability group the Roundtable on Sustainable Palm Oil (RSPO) just three weeks after being suspended. The development comes after Nestlé pledged to step up its efforts by submitting an action plan to achieve 100% RSPO-certified palm oil by 2023. The Swiss company had been suspended on June 27 after failing to submit a report detailing a strategy to move away from unsustainable palm oil.

Investment manager Neuberger Berman has become a signatory of the Stockholm Declaration, the multi-investor commitment to furthering the UN Sustainable Development Goals.h6. Governance

‘How do asset managers approach investment stewardship and to what degree do they factor in environmental, social, and governance (ESG) considerations?’ That’s the question posed by BlackRock in a new 18-page viewpoint document called The Investment Stewardship Ecosystem. “For BlackRock, the answers are inseparable from our role as a fiduciary to our clients’ assets. Our mission is to create a better financial future for our clients and our number one focus is on generating long-term sustainable performance.”

CalSTRS’ Chief Investment Officer Chris Ailman has said the giant Californian fund is to review its holdings of private prison firms. He told the Investment Committee last week that it would determine if the $224bn fund should divest from the companies’ stock and bonds. He added he sought to find out if prison operators were violating CalSTRS’s human rights risk factor.

Bumper bonus payments are driving CEO pay in Australia to record highs, the Australian Council of Superannuation Investors (ACSI) has revealed in its latest CEO Pay Report. Reported pay for ASX100 CEOs is the highest it has been in the 17-year-long history of the survey, with the median bonus awarded at 70.5% of the maximum entitlement.

The FAIRR (Farm Animal Investment Risk & Return) investor network has begun the next phase of a shareholder engagement with global retailers and food manufacturers – targeting food giants such as Walmart, Kraft Heinz and Amazon (as owners of Whole Foods) to transition their product portfolios to reduce emissions and water intensity, while maintaining adequate food security, “in accordance with TCFD guidelines” [Taskforce for Climate-related Financial Disclosures].

KBC Asset Management NV and National Elevator Industry Pension Fund have been named co-class representatives in a class action against Twitter, according to law firm Robbins Geller. Judge Jon S. Tigar of the US District Court for the Northern District of California has certified a class of investors who purchased Twitter stock between February 6-July 28 2015. The case alleges that Twitter and former top executives violated the Securities Exchange Act by “concealing declining user engagement and user growth during the class period, misleading investors and causing the stock to trade at artificially inflated prices”.

Ecuador’s highest court has upheld a $9.5bn judgment against oil giant Chevron for causing decades of harm to rainforests and indigenous people. Texaco, now part of Chevron, extracted more than 1bn barrels (1 barrel = 160 litres) of oil from Ecuador and caused oil spills that contaminated groundwater in indigenous communities in the Amazon. Chevron argued that a 1998 agreement signed between Texaco and Ecuador after a $40m cleanup cleared it of responsibility. While the plaintiffs held that the ruling was a step towards securing compensation for indigenous communities, other sources say the constitutional court decision is largely symbolic and that Ecuador would face obstacles pursuing the firm’s assets in foreign courts.

The Commodity Futures Trading Commission (CFTC), the US regulatory agency, has responded to the Vatican’s criticism of derivatives. CFTC Chairman Christopher Giancarlo and Chief Economist Bruce Tuckman addressed specific criticism of credit default swaps contained within a Vatican ‘Bollettino’ last may called ‘Oeconomicae et Pecuniariae Quaestiones: Considerations for an Ethical Discernment Regarding Some Aspects of the Present Economic Financial System’.

The Investor Responsibility Research Center Institute, the nonprofit research organization, says it has selected the John L. Weinberg Center for Corporate Governance at the University of Delaware as its successor organization. The Weinberg Center will receive a grant from IRRCi in excess of $1m as part of the move – enabling it to expand its environmental, social, corporate governance and capital market research.