RI ESG Briefing, December 7: Malaysian pension fund KWAP planning ESG mandate, signing PRI

The round-up of the latest environmental, social and governance developments

Environmental

Malaysian pension fund KWAP is seeking to launch a global environmental, social and governance mandate, it has said. Speaking at an event hosted by FTSE Russell in London this week, Enick Wan, CEO of the $28bn civil service pension fund – which he described as a dedicated “responsible investor” – told the audience: “We are trying to launch a global ESG mandate for the next financial year,” adding that the firm also expected to become a signatory of the Principles for Responsible Investment in 2017. Wan suggested that investors “sometimes need to change the style of engagement” with companies that don’t align with adequate ESG standards. “Generally we still prefer a softer approach, rather than divesting immediately,” he said. “But sometimes you do need to use the stick.”

The £18.7bn (€22.2bn) Strathclyde Pension Fund in Glasgow has reportedly identified the 10 biggest contributors to its equity portfolio’s carbon footprint and pledged to engage with them as shareholders. IPE.com, citing board documents, said the fund also plans to discuss carbon output with Oldfield Partners, one of its external fund managers. The Oldfield mandate, the report said, accounts for 45% of the fund’s active equity carbon emissions.

A new international network of insurance regulators and supervisors has been launched to promote cooperation on critical sustainable insurance challenges such as climate change. Held in San Francisco, the first meeting of the Sustainable Insurance Forum included insurance supervisors and regulators from Brazil, California, France, Ghana, Jamaica, Morocco, the Netherlands, Singapore and the UK, as well as the International Association of Insurance Supervisors. The California Department of Insurance and UN Environment co-hosted the inaugural meeting of the Forum and California’s Insurance Commissioner Dave Jones said insurance regulators have an “important role” to ensure that critical sustainability risks and opportunities are effectively managed.

Henry Paulson, the former Goldman Sachs CEO who was Treasury under President George W. Bush, is among leading business figures saying that reducing the risk posed by climate change is “both economically and technically achievable” and a major private sector investment opportunity. Paulson and Michael Bloomberg and hedge fund manager Tom Steyer are behind the new report called From Risk to Return: Investing in a Clean Energy Economy from their Risky Business Project. They are calling for a “clear and consistent policy framework” to unlock the investments needed for the transition to a clean energy economy in the US.

Social

The Center for Responsible Business at UC Berkeley Haas School of Business has launched a $5,000 research prize for work on the role of impact investment aimed at improving society or the environment. The goal of the prize, sponsored in part by entrepreneur Allan Spivack (Haas MBA 1980), is to both spur and reward rigorous new research on the ever-widening array of investing vehicles designed to generate social impact. “The big picture is that we have learned to think more broadly about economic returns, as well as about different kinds of capital and the values that each form seeks,” said Adair Morse, Associate Professor of Finance at Haas and Co-Director of the Prize alongside Ayako Yasuda of UC Davis. The deadline for submitting papers is 11:59 PM Pacific time on April 3, 2017. A distinguished panel of judges will select the winning paper in late June 2017 and publicly award the prize in September.h6. Governance

Eighteen leading Dutch financial institutions – collectively managing over €2.8trn – are asking the Dutch government and Central Bank to continue to make a concerted effort with them in support of the Sustainable Development Goals. “The Initiative is the first in the world to bring together national pension funds, insurance firms, and banks around a shared SDG investment agenda,” a statement said, ahead of presenting their plea to Lilianne Ploumen, Minister for Foreign Trade and Development Cooperation, at the Global Impact Investing Network (GIIN)’s conference in Amsterdam. Further conversations will take place over the course of December, including a cross-sectoral stakeholder consultation at the Dutch Central Bank on December 14.

The International Integrated Reporting Council (IIRC) and the International Corporate Governance Network (ICGN) have issued a joint statement calling for “aligned systems of corporate governance and reporting that drive long-term value creation”. The duo, who hold a joint conference in London this week, have suggested practical ways to encourage “longer-term thinking and behaviours” in the capital markets. These include: a focus on the long-term with strategy, performance, governance and prospects aligned to value creation over time; investors as stewards, taking a proactive interest in all aspects of value creation; and reporting as a key pillar of 21st century governance.

Index firm FTSE Russell has launched a new FTSE4Good Emerging Markets Index and FTSE4Good Emerging Latin America Index – as well as launching its new ESG Ratings data model. Celebrating the 15th anniversary of its flagship ESG suite FTSE4Good, it said the new offerings expand the FTSE4Good Index Series to over 15. FTSE Russell also released its new ESG Ratings data model, which provides underlying environmental, social and governance data on more than 4,100 companies across more than 300 indicators. This data will be available to subscribers alongside the Green Revenues (LCE) data model. Link

A new report from the Principles for Responsible Investment has found a “strong correlation” between responsible investment regulation and better environmental, social and governance (ESG) performance by companies. The report a Global Guide to Responsible Investment Regulation, examined nearly 300 policy initiatives and over 3,000 large and mid-cap companies globally. It found that of the approximately 300 policy initiatives over half were created between 2013 and 2016, although investors are sceptical of the effectiveness of policy because of “weaknesses in policy design and monitoring” and “inconsistency” between different government departments and regulators.

Azzad Asset Management, investment advisor to the Azzad Funds, says it has submitted drug pricing proposals to drugs firms Merck & Co. and Gilead Sciences, makers of America’s most popular prescription drugs. The proposals request the companies’ boards to issue a report listing the rates of price increases between 2010 and 2016, including the rationale for them. Shareholders, Azzad said, should be able to vote on the proposals at the firms’ AGMs next spring.

More than 27,000 investors are reportedly proceeding with plans to take Royal Bank of Scotland and its ex-CEO Fred Goodwin to court in a case dating back to the bank’s £45bn bailout in 2008. The Financial Times said the move by the RBS Shareholder Action Group comes despite the bank earlier reaching an £800m settlement with three other investor groups. The FT quoted the RBS Shareholder Action Group as saying it had “no option but to reject this inadequate offer”.