RI ESG Briefing, April 17: Central banks ‘should integrate ESG into their own pension funds’

Environmental

Central banks should integrate sustainability into their own pension funds and reserves where possible, according to the first comprehensive progress report of the new high-level Network for Greening the Financial System. “Acknowledging the different institutional arrangements in each jurisdiction, the NGFS encourages central banks to lead by example in their own operations. Without prejudice to their mandates and status, this includes integrating sustainability factors into the management of some of the portfolios at hand (own funds, pension funds and reserves to the extent possible),” it said. It acknowledged “some voices” had called for the same in approach to monetary policy, and it said that it would consider “exploring the interaction between climate change and central banks’ mandates”.

New York State Comptroller Thomas DiNapoli has directed his staff to develop a “climate action plan” for the state’s $209bn pension fund in response to the recommendations of an expert panel released yesterday. Describing the report as “very thoughtful and very ambitious”, DiNapoli told RI that the fund’s response would hopefully be published in the next couple of weeks. “Climate change is a serious threat to financial markets and the global economy. The transition to a low-carbon economy and the physical impacts of climate change are well underway, and New York must do more to be ready,” DiNapoli said.

South African pension funds must fully consider climate risks when making investment decisions or risk legal action, according to a new legal opinion by one of the country’s leading pension lawyers. The opinion – published by shareholder advocacy group Just Share and environmental law firm ClientEarth – applies to all funds in the country, which represent R4.2trn (€265bn) in assets.

Swedish bank SEB is acting as an advisor in a pioneer project led by Finnish energy company Fortum called Puro which aims to create a marketplace for trading in certificates for the removal of carbon dioxide. “This is an exciting initiative to create economic drivers to accelerate the development,” said Joachim Alpen,co-head of SEB’s Large Corporates & Financial Institutions division. Link

China and the EU released a joint statement at the conclusion of an annual summit which affirmed their commitment to the Paris Agreement and Montreal Protocol, identifying “carbon pricing and fossil fuel subsidy reform” and the mobilisation of private capital as key factors in an effective response to climate change.

Social

The Monetary Authority of Singapore has expanded its Green Bond Grant Scheme to include social and sustainability bonds and renamed the framework the Sustainability Bond Grant Scheme as part of a drive for Singapore to be the epicentre of Asia’s green, social and sustainability bond markets.

The Australian government has announced A$5m (€3.2m) for the establishment of a Social Impact Investing Taskforce. The Taskforce will examine the government’s strategy for its role in the market and draw on the UK’s 2013 Social Investment Taskforce chaired by Sir Ronald Cohen. The Australian government is also providing A$14.1m over five years for social impact investment pilots.h6. Governance

PKA, the Danish labour market pension fund, has welcomed the conviction of Bent Nielsen, ousted founder of tyre recycling company Genan, for fraud. PKA previously acquired Nielsen’s 52% stake, to protect its own 48% stake, in 2014 when the privately-held Genan was teetering on the brink of collapse.

Trillium Asset Management has written to Facebook shareholders asking them to support its proposal for an independent board chair at the social network that it filed with the New York City Pension Funds and the Treasurers of Illinois, Rhode Island, Connecticut, Oregon, Trillium Asset Management and numerous other co-filers. The SRI firm said the resolution for the May 30 AGM is “based on principles of sound corporate governance and Facebook’s particular facts and circumstances”.

Australia’s newly launched Sustainable Finance Initiative (ASFI) is looking for members for four technical working groups that will help create the country’s sustainable roadmap. These working groups will focus on ‘mobilising capital’, ‘creating a sustainable, resilient and stable financial system’, ‘making better financial decisions’, and ‘meeting community and consumer expectations’. The deadline for expressions of interest is April 26. ASFI – which is co-chaired by the Responsible Investment Association Australasia’s (RIAA) Simon O’Connor and insurer IAG’s Jacki Johnson – named its steering committee last month.

S&P Global Ratings has launched ESG Evaluation, that it describes as forward looking, qualitative and data-driven assessment of an entity’s ESG performance and preparedness for future risks and opportunities. It is separate from credit ratings and is currently available for organisations in the corporate, infrastructure, and selected public finance sectors (transportation and power). In the coming months evaluations will be available for more sectors including asset management, insurance and social housing.

Data remains the biggest barrier to ESG investment, according to a new survey from BNP Paribas Securities Services. Technology costs, a lack of advanced analytical skills and greenwashing risks were also cited as barriers in the ESG Global Survey 2019.

State Street Global Advisors has responded to criticisms of the voting record of its gender diversity fund. Head of ESG Rakhi Kumar said while SSGA doesn’t “automatically vote for every shareholder proposal that has the words ‘gender diversity’ in it”, the fund manager uses a “carrot and stick” approach with companies.

The CEOs of Goldman Sachs, JPMorgan Chase, State Street, Morgan Stanley, Citigroup, Bank of New York Mellon and Bank of America faced US lawmakers for the first time since the financial crisis. Despite this backdrop, much of the questioning from the Democrat-controlled House Financial Services Committee related to socially-charged issues such as executive compensation, minimum wage, stock buybacks and diversity. All seven banks received significant bailouts funded by taxpayers.

The Interfaith Center on Corporate Responsibility (ICCR) has called on shareholders to vote down Sturm, Ruger & Co.’s board chairman, Michael Jacobi, and controversial Director, Sandra Froman, citing the gun manufacturer’s “refusal to engage with shareholders about risk oversight, governance failures, and loss of shareholder value”. Sturm Ruger, whose AGM is on May 8, has seen a 12.9% decline in total shareholder return since the November 2016 US election, according to the US based faith investment group.

Amazon could face a shareholder resolution on hate speech filed by the Nathan Cummings Foundation after its request to omit it was rejected by the Securities and Exchange Commission (SEC). It will also face another proposal, filed by the Sisters of St. Joseph of Brentwood and others, relating to its facial recognition technology. Amazon holds its AGM on May 22.