RI ESG Briefing, January 22: Reaction to EU climate change proposals from investors, companies

Environmental

There has been a mixed reaction to the European Commission’s 2030 energy and climate proposals, outlining a 40% cut in greenhouse gas emissions by 2030. The Institutional Investors Group on Climate Change (IIGCC), which represents European investors worth €7.5trn said they were “an important first step to restoring investor confidence in the EU’s vision for a low-carbon energy future”. And plans for reform of the Emissions Trading Scheme and the establishment of a reserve mechanism which can support a strong carbon price were welcome.

Companies, under the Prince of Wales’s Corporate Leaders Group banner, said that a 40% reduction in European emissions by 2030 was the minimum necessary to ensure the region maintained its climate leadership role in the run up to the critical UN climate meeting in Paris in 2015. But the body regretted the absence of a stronger policy framework around energy efficiency.
The Climate markets & Investments Association (CMIA) said the package “does not do enough to promote a strong low carbon investment signal”.

Investment firm Climate Change Capital said: “European leaders need to endorse the 40% target to tackle the carbon bubble. Overvaluing high carbon assets will come to an end when we realise the behaviour of these companies cannot continue and institutional investors will realise their assets are in the wrong place.”

Social

The Pension Protection Fund, the UK pension ‘lifeboat’ scheme, is seeking to invest in funds lending mainly to companies with a UK presence. It wants to appoint one or two investment managers capable of originating lending transactions directly with companies and managing the investments. According to the tender, the manager must co-invest alongside the PPF in the deals. The PPF is committed to responsible investment across its portfolio and will assess managers’ ability to comply with its RI policies as part of the procurement. The deadline for responding is February 4.

Christian Brothers Investment Services (CBIS), which manages $5.3bn for Catholic institutions worldwide, has become the first US Catholic signatory of the Principles for Responsible Investment (PRI). Daniel Nielsen, Director of SRI at CBIS, said: “As a PRI signatory, CBIS will also be able to promote the concerns of Catholic investors among other faith-based and responsible investors from around the world.” CBIS is owned by De La Salle Christian Brothers in the US and the Generalate of the Brothers in Rome.h6. Governance

The National Association of Pension Funds (NAPF), the UK industry body, has responded to the Law Commission’s review of fiduciary duties. It said it was “unconvinced” that providing more clarity through statute, for example by imposing a more explicit duty to consider specific factors when devising an investment strategy, would be beneficial. It argues pension fund trustees already have a good grasp of their fiduciary duties and understand that their duty is to act in the best interests of members to provide an income in retirement. The NAPF suggested the Law Commission considers writing an open letter to trustees and investment intermediaries summarising the key conclusions.

Tyson Foods, the world’s largest meat processor, has, just ahead of a shareholder vote on a proposal on its use of gestation crates for pregnant pigs, written to its farmers urging them to shift from the controversial practice. As a result, Green Century Capital Management, The Humane Society of the United States, and the United Methodist Church Benefits Board have withdrawn their resolution.

The Swiss National Bank (SNB) has become what’s believed to be the first central bank to exclude companies from its CHF70bn (€56.7bn) stock portfolio on the basis of ethical considerations. The SNB said its Board decided last year to exit companies involved in making outlawed weapons (e.g. cluster bombs), human rights violations or “serious and systematic“ environmental damage. It followed Swiss news reports that showed the SNB held $690m (€508.5m) worth of stock from “questionable” US companies. Citing an SEC filing, the reports listed Textron (cluster bombs), Lockheed Martin and Alliant Techsystems (nuclear weapons) as well as Walmart (labor relations) among other examples. The SNB said the holdings were due to index investment. The bank declined to provide any further detail.

Environmental data outfit Trucost has unveiled a new set of sustainability metrics called the Natural Capital Leaders Index. The index is designed to recognize companies demonstrating natural capital leadership – and identify those that are ‘moving the needle’ by decoupling growth from natural capital impact. It features two categories: ‘Natural Capital Efficiency Leaders’ and ‘Natural Capital Decoupling Leaders’. “At Trucost we believe a new era of sustainability metrics is needed,” writes CEO Richard Mattison.