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RI ESG Briefing, July 27: FSB, Suncor Energy, Ferrovial, Investment Association

The round-up of the latest ESG news

Environmental

Mark Carney, chair of The Financial Stability Board (FSB) has stressed the body’s current focus on climate change in a letter to G20 Finance Ministers and Central Bank Governors. He said “addressing new and emerging vulnerabilities in the financial system” was a priority for the FSB, citing climate change as a key area. He also called for more efforts to grow local green bond markets worldwide.

Caisse de dépôt et placement du Québec (CDPQ) will provide $59.5 million of term-loan financing to a wind farm in Canada. CDPQ mainly manages funds for public pension and insurance plans and will make the debt investment into the 67.8MW Gaspesie project, operated by TransAlta Renewables. It has a 20-year power purchase agreement in place with Hydro-Québec. CDPQ claims to be one of the largest private investors in the sector in North America, having backed a number of projects in Canada, as well as holding a major stake in renewables heavyweight Invenergy and being a shareholder in the UK’s London Array offshore farm.

Suncor Energy has committed to reducing the emissions intensity of its oil and petroleum products by 30% by 2030, in response to “the way the world views energy development [having] fundamentally changed”. The firm, which specialises in production of synthetic crude from oil sands, will focus on energy efficiency, developing cogeneration and renewables assets at its facilities, and switching to low-carbon fuels like natural gas. It will also look at improving bitumen-extraction technology. In addition to its climate goals, Suncor said it would increase engagement with aboriginal Canadians, including partnering with aboriginal youth groups and increasing the number of aboriginal employees.

China has created a CNY15m fund to protect the South China Sea, according to reports, following a ruling by The Hague earlier this month that the waters has been subjected to unjustifiable levels of environmental damage. The damage has been caused by a number of activities including the creation of man-made islands, the ruling said. Proceeds from the new fund are understood to be earmarked for scientific research and the development of new environmental protection methods.h6. Social

A report out this week reveals the list of European financiers and investors backing Ferrovial, the Spanish operator of Heathrow and toll roads across North America, which earlier this year controversially took over the operation of Australia’s offshore detention camps for asylum seekers. Ferrovial’s biggest shareholders include Blackrock, Vanguard, Columbia Threadneedle, Deutsche Asset Management, Cohen & Steers, and Norges Bank. NGO No Business In Abuse, which developed the report, says it has been meeting with Ferrovial’s investors and financiers who have expressed concern about its new involvement in offshore processing.

New analysis of reporting on conflict mineral issues in SEC filings has found that only 35% of companies describe having an ethical sourcing grievance mechanism in place, such as anonymous hotlines or reporting websites. The benchmarking analysis, released by Source Intelligence, also found many companies reported experiencing difficulty in performing thorough reporting of conflict materials status, due to unresponsive suppliers.

Governance

Nasdaq has updated its listing requirements with a new rule which requires companies to disclose the details of any third-party payments made to directors or director nominees for any services connected to their board position, also known as ‘golden leash’ agreements. This includes any service or consultancy offered since the director in question was appointed to the board, with disclosures to be included in the annual proxy or on a company’s website. It is hoped that the new rule, which comes into play as of August 1, will mitigate problems around conflicts of interest and the promotion of short-term results rather than long-term value.

The Investment Association’s Executive Remuneration Working Group has outlined a ten-step plan to simplify pay structures for UK executives and realign incentives to promote the interests of their companies’ shareholders. Built upon a consultation with300 investors, asset owners and employees, the report suggests that boards disclose the reasoning behind a firm’s maximum pay level, that there be more transparency around bonus target-setting and that directors engage with shareholders in the remuneration-setting process. Nigel Wilson, Chair of the Working Group, concluded: “We need to restore public confidence in executive pay. Our report shows shareholders, Boards and executives agree the current approach is not working, and want constructive collaboration to get it right.”