RI Briefing March 27: Latest UK pension fund under pressure to divest

Environmental

Monmouthshire Council in Wales has asked for its pension pool to divest from fossil fuels, according to the BBC. The Greater Gwent (Torfaen) Fund is understood to have £245m invested in fossil fuels, of which £87m is through direct investment. The council voted unanimously for the fund to exit its holdings at the “earliest opportunity”. The move comes as the UK’s new pension pools are developing responsible investment strategies, due to be released by the end of the year.
The UN’s Environment Inquiry – formally known as the Inquiry into the Design of a Sustainable Financial System – is to wind down next week, after completing its mandate. The project, set up in 2014 in collaboration with the UN Environment Programme Finance Initiative (UNEPFI), sought to understand the relationship between sustainability and financial markets, and establish measures to align the two. It is headed up by Nick Robins and Simon Zadek.
Alberta energy infrastructure company TransCanada, the company behind the controversial Keystone XL project, is to disclose its energy transition strategy following a request from Sisters of Notre-Dame Congregation and the Procure Saint-François-d’Assise (the Capuchins) 一 two shareholders from Quebec. The proposal calls on TransCanada to report on how it is assessing long-term climate-related risks and opportunities and the current transition to a low-carbon economy, and to provide an analysis of its business model in various scenarios. Submitted in coordination with Æquo – Shareholder Engagement Services, it will be recommended to shareholders for adoption by the firm’s Board of Directors at its AGM in Calgary today. In January last year, Swedish state fund Sjunde AP-fonden (AP7) put TransCanada and five other energy companies on watch for potential exclusion over climate change [link].
PGGM, the Netherlands’ third largest asset management firm with €218bn AUM, has joined the Climate Bonds Partner Programme. The programme will see the Dutch pension investment giant work in partnership with the Climate Bonds Initiative on green finance and climate investment projects, half the carbon footprint of the assets it manages for Dutch pension fund PFZW, and grow impact investments, including green bonds, to €20bn. PGGM has already built an overall green bonds exposure of more than €1bn. Head of Fixed Income at PGGM Ido de Geus said: “Teaming up with the Climate Bonds Initiative is a great opportunity for PGGM to promote climate change action by backing green bond issuance. We are keen to see more issuance across sectors, regions and currencies, including emerging markets and products other than plain vanilla.”
FMO, the Dutch Development Finance Company, more than doubled its green investments in 2017 compared to the previous year, it has reported in its 2017 annual results. The firm reported a total of €1.3bn in green investments in 2017, compared to €500m in 2016. The report also states that the company’s investments support 900,000 jobs while avoiding 1,600,000 tons of greenhouse gas emissions.h6. Social

John Streur, CEO of Calvert Research & Management has questioned the effectiveness of divesting gun companies, advocating addressing gun safety through engagement, Bloomberg reports. He is quoted as saying: “Divestment is just avoidance and is less likely to result in a system change than engagement”.
ESG research provider RepRisk has released a report outlining the most controversial projects in 2017 globally. The report looks at 10 projects with the highest exposure to ESG and business conduct risks. Including projects in the UK, US, Germany and China, RepRisk says the report highlights “the fact that such risks are not limited to countries in emerging markets”.
California’s $355bn pension giant CalPERS has reportedly rejected a request from the state’s Treasurer, John Chiang to look at divesting national retailers that sell guns illegal in California, following the latest massacre in Florida. The fund has instead committed to engage with companies on the issue, with CalPERS board member Theresa Taylor quoted saying: “If we are divesting, we lose our seat the table”.

Governance

UK press reports suggest that a deal to buy London-based ESG-focused Hermes Investment Management by Pittsburgh-based Federated Investors could be wrapped up shortly. In December last year, RI reported that Federated had signed the UN-supported PRI after speculation of a Hermes bid first appeared. A spokesperson for Hermes said the company did not comment on market speculation.
The Principles of Responsible Investment (PRI) is rallying asset owners, investment managers, and stock exchanges to sign a letter to the International Organization of Securities Commissions (IOSCO), the association of organisations that regulate the world’s securities and futures markets, urging it to use its clout to “support a globally harmonised approach” to ESG disclosures by companies. IOSCO, whose membership regulates more than 95% of the world’s securities markets in more than 115 jurisdictions, is in the process of reviewing Environmental, Social, and Governance (ESG) issues, according to the letter. The letter calls on IOSCO to “endorse” the UN Sustainable Stock Exchanges’ Model Guidance on Reporting ESG Information to Investors; engage the World Federation of Exchanges (WFE) in their “ongoing sustainability work”; and endorse the TCFD’s recent recommendations.