RI ESG Briefing, January 10: Weather events make 2017 the priciest year for insurers, says Munich Re

Environmental

2017 was the most expensive year for insured losses ever, according to German re-insurance giant Munich Re, which estimates the total cost at $135bn. The final insurance bill was swelled by the trio of hurricanes – Harvey, Irma, and Maria – that occurred last year and the severe earthquake that struck Mexico. Including uninsured losses, the total bill for natural catastrophes in 2017 amounted to $330bn, the second-highest figure ever recorded.

China’s State Council has reportedly detailed rules for enforcing its new environment protection tax law, which was due to take effect on 1 January 2018. The regulation specifies taxation targets, the tax-setting basis, conditions for tax reduction and exemptions as well as tax collection management, according to a State Council decree signed by Premier Li Keqiang.

The UK has introduced a ban on microbeads following huge public backlash. The tiny plastic balls are widely used by cosmetic companies in face washes and ‘scrubs’, but have been found to pollute the oceans and end up in the food chain. As a result, the UK has joined the US, Canada and New Zealand in banning the use of microbeads in national manufacturing. The next step is expected to be a ban on the sale of products containing the beads.

The US Department of Interior announced on January 4th, an offshore oil and gas drilling plan in areas that include the Gulf of Mexico (where BP oil spill took place in April 2010), Florida and California, among other States. Rick Scott, the Republican Governor of the State of Florida and Chairman of the $194bn state pension fund, the State Board of Administration, said he opposes it, at least in Florida. Scott said: “I have already asked to immediately meet with Secretary Zinke to discuss the concerns I have with this plan and the crucial need to remove Florida from consideration. My top priority is to ensure that Florida’s natural resources are protected, which is why I proposed $1.7 billion for the environment in this year’s budget.” The same day, Scott sent a letter to the United States Senate Committee on Appropriations urging to pass a significant Hurricane Irma and Maria disaster relief package.

Willis Towers Watson, the London risk management group is the latest firm to join the Climate Bonds Partners Program, the supporter network of not-for-profit Climate Bonds Initiative. It joins the likes of HSBC, Blackrock, and APG as members.

Social

PwC has published research on reporting on the Sustainable Development Goals. The report aims to identify those goals that are being prioritised, and assess the quality of disclosure on them. The financial services giant found that 83% of UK businesses and 62% of the c.500 global firms surveyed are now “reflecting SDGs at some level into their reporting”. “However, while it may appear at first glance that great strides in adoption have been made since January 2016, drilling into the data shows as many as two-in-five firms are still either ignoring or having no meaningful engagement with the goals,” warned the authors.

CalSTRS, the Californian public pension giant, has partnered with Jana Partners, a leading US activist fund manager, to ask Apple to consider the issue of children’s iphone addiction, Reuters reports. In a letter to the Californian tech behemoth, the investors, which own about $2bn of Apple stock, asked it to consider developing software that would allow parents more options to limit children’s phone use.The European Coalition for Corporate Justice and Frank Bold, a public interest law group focused on company law issues, issued a statement on behalf of civil society organisations calling for EU legislation to introduce “a collective redress mechanism to protect all fundamental rights, not only for consumers”. How to provide victims of abuses with access to remedy is also one of the three pillars of the UN Guiding Principles on Business and Human Rights, a voluntary framework widely used by investors.

Governance

The Norwegian Ministry of Finance has published a report on the best practice responsible investment approaches of the world’s largest asset owners, including CalPERS, PGGM and Government Pension Investment Fund of Japan. The report identifies ten common “building blocks” that enhance an institution’s chances of hard wiring RI successfully into robust asset management operations that have a long-term and responsible outlook. The report was produced by Inflection Point Capital Management for the Norwegian Ministry. Link to the report

Women hold only 17.3% of directorships among all MSCI ACWI Index companies, according to the latest Women on Boards report by MSCI. The index and research provider also found that, despite an increase of 1.5% from 2016, based on the current rate of increase, it will take until 2028 to reach 30% women on boards among this universe of companies.

Royal Bank of Scotland (RBS) is potentially facing a proposal from investors calling for the UK state-backed lender to set up a shareholder committee to improve corporate governance, Reuters reports . This the second attempt to set up a shareholder committee, following a failed bid last year. Non-profit ShareSoc and the UK Shareholders’ Association (UKSA) said they had organised more than 100 investors to put forward a proposal for consideration at RBS’ annual general meeting (AGM) next year.

BT Funds Management NZ, the investment arm of New Zealand bank Westpac NZ, has reportedly signed the Principles for Responsible Investment. Westpac NZ General Manager of Consumer Banking and Wealth, Simon Power, is quoted, saying: “Becoming a signatory to the PRI is a tangible step in our continued work in this area and underpins our pledge to all our investors to be responsible custodians of their funds”. To date, 1750 organisations, representing more than $70 trillion in investments, have signed up to the principles.

Campaign group Western Sahara Resource Watch is urging investors to ‘blacklist’ Nutrien, the new Canadian agriculture company created following the merger of Agrium and PotashCorp. The two original firms had been excluded by several investors for their activities in the Western Sahara – disputed territory South of Morocco. http://www.wsrw.org/a105x4025 Norway’s KLP told RI that as both were excluded previously, Nutrien has also been excluded. This was echoed by Norges Bank Investment Management and Sweden’s AP1. Serge Houles, Managing Director, of Sweden’s Informed Portfolio Management, said IPM will need to assess the new company’s policies first. However, he added that “unless it immediately undertakes some drastic changes” Nutrien would be regarded as “’inherit[ing] violations from the merged companies”. At the time of publication, Nutrien did not reply to requests for comment on future procurement and imports policies regarding Western Sahara.