RI ESG Briefing, February 1: Deutsche Bank begins roll back on coal

Environmental

Deutsche Bank has made its first move towards reducing coal financing, following similar pledges over recent years by seven other banks, including Credit Agricole, Societe Generale, BNP Paribas and SEB. The bank has said it will reduce its exposure to thermal coal and will stop lending to greenfield thermal coal mines and new coal-fired power stations entirely. The NGO BankTrack said that the move doesn’t go far enough. “Many of Deutsche Bank’s European competitors are… also beginning to exclude their corporate financing of companies which base over 50% of their revenues or power generation on coal,” it said. “This sets a clear bar for what Deutsche Bank needs to do next.”
Hackney, a local authority in London, has committed to reducing the carbon reserves linked to its pension fund by 50% over the next six years. The fund has some £1.2bn under management, across active and passive strategies. It told RI it was considering investing through a low-carbon index to help it manage the carbon reserve levels of its passive approach, but had not committed to do so yet. “The fund’s long-term ambition is to move away from fossil fuel investments, and I can foresee a time when our fund will have no fossil fuel investments,” said Cllr Robert Chapman, Chair of Hackney’s Pensions Committee.
South Pole, the global company that provides climate-change services and data, has bought Australia’s Climate Friendly for an undisclosed sum. Climate Friendly is the country’s primary carbon offset and renewables provider, and will be absorbed into South Pole Group in order to increase South Pole’s global presence. Its work will be split into a ‘carbon and renewables’ unit and a ‘Carbon Farming Initiative” unit. Link.
The Development Bank of Japan (DBJ) announced on January 24 on its website that it has become an issuer member of the Green Bond Principles. It is the first issuer in Japan that participates in the Green Bond Principles. Responding to the growing demand for SRI bonds, the DBJ issued green bonds in 2014 and sustainability bonds in 2015 and 2016. It plans to continue issuing SRI bonds in the future, according to its policy.

Social

Research from KfW shows that nine out of 10 small- and medium-sized enterprises (SMEs) in industrialised and emerging economies have made efforts to achieve social and ecological goals. This includes campaigning for good working conditions, pressuring suppliers on ESG issues and working for environmental protection. The findings are a result of the KfW Competitiveness Indicator 2016, which interviewed more than 3,100 SMEs globally. For the full results, see here. Governance

The OECD has published a comprehensive study of the corporate governance frameworks of 14 Asian countries. The study is mainly based on a survey in which officials from financial and securities regulators have provided input. It compares key topics between the 14 jurisdictions — from shareholder voting rights and diversity in boards to executive payment disclosure. The study also traces back the latest amendments to governance codes and relevant legislation. The jurisdictions surveyed by the OECD are: Bangladesh, China, Hong Kong, India, Indonesia, Korea, Malaysia, Mongolia, Pakistan, Philippines, Singapore, Thailand, Chinese Taipei and Vietnam.
The Insurance Regulatory and Development Authority of India has launched a consultation to seek views on its Stewardship Code for Insurers, which ends on February, 15 2017. The Code has seven principles which include common recommendations such as publicly disclosing their stewardship responsibilities; collaborating with other institutional investors or monitoring their investee companies. “Considering the fiduciary role played by the insurance companies as investors on behalf of the policyholders, it is felt that greater transparency is needed as regards the manner in which the investments are managed by them,” the IRDAI consultation stated. The board of directors of insurers in India will have to approve the stewardship polices based on those principles.
In a joint letter to the UK Prime Minister, the heads of bodies representing international investors, professional directors, governance professionals and workers, have urged Theresa May not to shelve the debate on corporate governance reform, which she has pledged to tackle with an ongoing consultation, without establishing a mechanism to oversee the application of Section 172 of the UK Companies Act. Section 172 requires directors to promote the success of the company for the benefit of shareholders and in the interest of workers, consumers and other stakeholders. All signatories urged May to create a mechanism that allows stakeholders, whose interests should supposedly be protected by the law, to make a complaint and find an appropriate remedy. The signatories are Kerrie Waring, Managing Director of the International Corporate Governance Network; Simon Walker, Director General at the Institute of Directors; Frank Curtiss, President of the Institute for Company Secretaries; and Frances O’Grady, General Secretary of the Trades Union Congress.