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RI ESG Briefing, July 13: Transition Pathway Initiative, McKesson, HSBC, FTSE Russell, ASX, Envonet

The round-up of the latest ESG developments

Environmental

A new free online environmental and climate-related financial disclosures tool has been launched. Envonet is an online web portal that enables users to quickly access and compare companies’ environmental and climate-related financial disclosures. The platform, which adheres to the framework of the Financial Stability Board’s Task Force on Climate-related Financial Disclosures, will initially holds 2016 disclosures for 40 listed companies in the electric utility and oil and gas industries globally.

Less than half of Australia’s largest listed companies have a climate change policy or emissions reduction target, says the Australian Council of Superannuation Investors (ACSI). The finding was published in the Council’s 10th annual sustainability report. It was also revealed that 70 of Australia’s 200 top companies (ASX200) did not make any climate related disclosures in 2016. The ACSI is an association of 37 Australian and international asset owners that collectively manage $1.5tn in assets and own on average 10% of every ASX200 company.

$4.6bn in solar funding was raised in the US in the first half of 2017 – up slightly compared to the same period in 2016 ($4.5bn) – according to global clean energy consulting firm Mercom Capital Group. In 2017, funding fell in the second quarter with $1.4bn raised in 37 deals compared to the $3.2bn raised in 60 deals in the first quarter – which the report attributes to “a great deal of uncertainty in the [US] solar markets right now”.

The Investor Confidence Project (ICP), the energy efficiency standardising project, is being extended in Europe to make projects more attractive to investors and building owners. The ICP will now cover energy efficiency projects for industry, street lighting, and district energy. The expansion will be supported by the ICP’s Investor Ready Energy Efficiency (IREE) Certification, which was launched last year and awards commercial and multifamily residential buildings retrofitted in line with the ICP’s framework.

Social

The Global Impact Investing Network (GIIN) has announced Deloitte as advisory collaborator for its Market Roadmap Project, which seeks to chart a future course for the impact investing industry as it enters its second decade. The US based not-for-profit will lead the “broad consultative initiative”, which marks the ten-year anniversary of the coining of the term ‘impact investing’, to identify the actions needed to enhance the scale and effectiveness of impact investing across the world.
Investors representing £100bn in assets have urged UK based luxury goods retailer Marks & Spencer to become a Living Wage employer. Coordinated by UK campaign group ShareAction and including the Strathclyde Pension Fund, the group have written to the company’s CEO, Steve Rowe, ahead of its Annual General Meeting (11 July 2017). All 15 signatories to the letter say they want to invest in socially sustainable companies which focus on long-term success and they view the real Living Wage as an important indicator of this approach.

The wider UK social investment market in the UK has almost reached £2bn, according to the latest annual review from Big Society Capital with £893m of investment provided by Big Society Capital (BSC) and co-investors by the end of 2016. The 2016 annual review finds that there is increasingly more social investment products available outside secured lending such as risk finance and crowdfunding. But challenges to the market still remain such as finding co-investors for risker investment such as innovation and a slow drawdown of BSC funds from frontline social enterprises and charities.h6. Governance

The Transition Pathway Initiative (TPI), the Church of England (CoE) and the UK Environment Agency led climate data analysis project, has found that specialist small- to mid-cap coal mining companies are falling behind their larger more diversified peers in their ability to manage carbon emissions – with some companies not publicly acknowledging climate change at all. The latest assessment, carried out by the London School of Economics’ Grantham Research Institute, evaluated the management policies and processes of the world’s 20 largest coal mining companies.

Labour union the International Brotherhood of Teamsters has urged shareholders in pharmaceuticals wholesaler McKesson to vote against the company’s executive pay practices – and called for it to appoint an independent chairman. A letter to investors – signed by General Secretary-Treasurer Ken Hall – also criticized the drug distributor for its role in the opioid drug epidemic in the US. McKesson holds its AGM on July 26.

HSBC has triggered an investigation into the palm oil practices of one of its client’s subsidiaries – potentially saving thousands of hectares of primary rainforest – in the wake of evidence brought by environmentalist groups, Greenpeace and the Environmental Investigation Agency. The allegations centre on Noble Plantations’ – part of Hong Kong based Noble Group – activities in Papua. In March 2017 HSBC, ABN Amro, ING and Rabobank all helped set up a $750m bond issued by Noble Group. The company has been ordered by industry body, the Roundtable on Sustainable Palm Oil, to stop work until the investigation is complete.

Index firm FTSE Russell is reportedly likely to restrict the inclusion of companies with unequal voting rights in some of its indexes. The move would help address investor concerns over falling corporate governance standards, Reuters reported, citing CEO Mark Makepeace. The firm launched a consultation on the topic last month in the wake of the Snap listing. Makepeace was quoted as saying there is a “strong consensus dislike of these types of share structures”.

Australia’s largest stock exchange, the Australian Securities Exchange (ASX), has become the latest Partner Exchange of the United Nations Sustainable Stock Exchanges (SSE) initiative. The ASX joins over 60 exchanges worldwide to voluntarily commit to promoting long-term sustainable investment and improved ESG performance among its issuers.

The Association of Chartered Certified Accountants (ACCA) has examined 15 African countries’ corporate governance frameworks in a recent report. Comparing the frameworks against the OECD Principles of Corporate Governance and KPMG’s Board and Governance Principles, South Africa was found to have the best practice when it came to corporate governance – followed by Kenya, Mauritius, Nigeria, and Uganda. The report also found that most markets (10 out of 15) have aligned their corporate governance requirements with more than 80% of OECD Principles.

An investor led class action, spearheaded by the UK’s Universities Superannuation Scheme, against Brazil’s Petrobras has reportedly been partially ‘declassified’ in the light of a separate previous ruling by the US Supreme Court on the jurisdiction of the Exchange Act and the Securities Act. The Brazilian scandal-hit state-owned oil and gas giant had been accused of fraud relating to the doctoring of its balance. The US ruling centres on the fact that notes which do not trade on any US-based exchange – such as Petrobras’ – do not fall under the jurisdiction of the Exchange Act and the Securities Act.