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RI ESG Briefing, August 1: French central bank teams up with climate think tank

The latest ESG developments

Environmental

The Banque de France and the Institute for Climate Economics (I4CE), a climate change think tank supported by France’s state fund Caisse des Dépôts, are forming a partnership aimed at enhancing the consideration of climate risks and opportunities by the financial sector. It will also support the work of the Banque de France within the new Central Banks and Supervisors Network for Greening the Financial System (NGFS). As a first step in this partnership, Michel Cardona, previously Deputy Secretary General of the Banque de France, has joined I4CE. I4CE is chaired by Pierre Ducret, the former Chief Executive Officer of CDC Climat.

The biggest UK Medical Royal College has decided to go fossil free. The Royal College of General Practitioners (RCGP), which has 52,000 members, invested 4% of its £10.7m portfolio last year in fossil fuels. College Chair Professor Helen Stokes-Lampard, said: “Climate change is a clear risk to the health and wellbeing of our patients. We already face a crisis every winter, but with our summers forecasted to become hotter and hotter, we risk the emergence of a second seasonal crisis, and the NHS [National Health Service] will simply be unable to cope.”

Gold may play positive role in enhancing the sustainability profile and reducing the carbon footprint of investment portfolios over time, according to a new report. The World Gold Council found that carbon emissions for global gold production are significantly smaller than for most other mined materials – although there is currently limited data. The report also found that responsible gold miners are working to cut emissions and improve energy efficiency, and that gold itself may play an important role in technologies that help facilitate the transition to a low carbon economy.

G20 finance ministers and central bank governors met in Buenos Aires, Argentina to welcome the 2018 G20 Sustainable Finance Report. The report put forward three new ideas: securitising sustainable assets, developing sustainable PE/VC, and applying fintech. The communiqué from the meeting can be found here.

Renewable energy generation platform Lekela Power has completed the financial close for West Africa’s largest wind farm, the 158MW Taiba N’Diaye project in Senegal. Lekela is majority-owned by shareholders Actis (60%) and a consortium led by Mainstream Renewable Power (40%), which includes investors such as the IFC and the Rockefeller Brothers Fund.

Social

The state-run Industrial Bank of Korea (IBK) has sold its first social bond for $500m, having been courting investors since May. The proceeds will be used to finance small and mid-sized companies, as outlined in IBK’s green, social and sustainability bond framework, which the bank announced last November. Pricing for the three year bond went from a floating rate at 85 basis points above three month Libor, to 60 basis points above the three month Libor, closing at $500m. The order book closed at more than $1.3bn across 80 accounts. Almost half of the demand for the social notes came from Asian investors (45%), with the US and Europe taking 28% and 27%, respectively.

The UK’s Big Society Capital has announced a profit of £0.8m (€0.9m) profit – its first net profit since it launched in April 2012 with £600m (€767.7m) from dormant bank accounts. The social financial institution makes loans to, or invests in, social investment intermediary institutions (SIFIs) which then lend to or invest in frontline social sector organisations. Around 800 charities and social enterprises have benefitted from investment so far. At the end of 2017 £1.1bn was available and £764m had been used.h6. Governance

VicSuper, the Australian superannuation fund managing more than A$20bn on behalf of 235,000 members, has joined AustralianSuper and HESTA in signing up to the Australian Asset Owner Stewardship Code. The Australian Council of Superannuation Investors, which developed the code to increase the transparency and accountability of stewardship activities in Australia, says there are more signatories to be announced shortly. Signatories to the code are required to publish a Stewardship Statement describing how (and “if not, why not”) they apply six principles.

New Jersey, the worst-funded state pension fund in the US, is building on recent moves to push sustainable investing by working on the ESG policy for its $77bn pension fund. Since Governor Phil Murphy took office in January, New Jersey has withdrawn its holdings in automatic and semi-automatic firearm companies, pressured private equity firms against foreclosing on hurricane victims, and told Target not to work with trucking companies that see their drivers as contractors, rather than employees. The state now also aims to tackle corporate governance reforms for its pension investments. Link

South Korea’s National Pension Fund has reportedly adopted a stewardship code, in a move to strengthen transparency and accountability, and encourage governance reform in the country’s powerful family-controlled corporate groups. NPS is the world’s third largest pension fund with assets of Won636tn (€484bn).

Innophos Holdings, a key player in the phosphate business, has announced that it will no longer participate in a supply chain which sources the raw material from the disputed Western Sahara region in Africa. It comes after Norwegian asset manager KLP excluded Innophos in June over “unacceptable risks” and ethical issues associated with its reliance on phosphate exported from Western Sahara by Canadian company Nutrien.

MSCI has announced the sale of InvestorForce – its performance measurement and reporting software for institutional investment consultants – to Resurgens Technology Partners (Resurgens), for an undisclosed price. Resurgens Technology Partners intends to merge InvestorForce, which had been part of MSCI’s Analytics unit, with its portfolio company Investment Metrics. The transaction is expected to close within three months. Announcement

Brunel Pension Partnership has announced that it has brought £6bn under management, one year after the launch of the firm. The pension pool will be looking after investments supporting almost 700,000 pensions, managing £30bn in funds of 10 local government pension schemes, which it will allocate to managers with expertise in around 24 portfolios. Assets are being transitioned to Legal & General Investment Management, which Brunel announced as its passive equity fund manager in April.

JP Morgan Alternative Asset Management held its first ESG Forum at its New York headquarters in July 17. The event brought together a range of hedge fund managers interested in learning about ESG in terms of institutional client interest, best practices and enhancing alpha.

The €165bn Dutch asset manager Robeco has joined Amec, an investor initiative aimed at defending the rights of minority shareholders and promoting the development of the Brazilian stock market. Robeco has been a signatory of Amec’s Stewardship Code since 2017. Head Active Ownership at Robeco, Carola van Lamoen, said the firm’s Amec membership would “increase the quality of our ESG integration process for Brazilian companies and our engagement in Brazil”. She added: “Amec has been of key importance in helping to improve governance standards in Brazil, as well as guiding listed companies in the application of good management practices in the country.” Amec’s other international members include the likes of BlackRock, Franklin Templeton and Aberdeen.