RI ESG Briefing, March 1: Japan’s GPIF ‘looks into asset manager pay’ to tackle short-termism

Environmental

The Irish government is allocating €22bn, one fifth of its entire budget for capital investments, and will launch a Climate Action Fund to help mobilise finance in the area. The country wants to reduce carbon emissions by between 80% and 95% by 2050 and the pipeline of projects being targeted includes the conversion of Ireland’s only coal plant to gas, the introduction of at least 500,000 electric vehicles by 2030, and a ban on new diesel urban busses by next year. The Climate Action Fund will have an initial endowment of €100m and an annual income of at least €50m, according to a statement

The New Zealand Superannuation Fund is currently on track to achieve its targeted carbon commitments. The pension giant pledged to reduce the carbon reserves in its portfolio by 40% and its carbon emissions by 20% before 2020. Its progress was reported in statements made by the outgoing Chief Executive, Adrian Orr, to the NZ Parliament’s Finance and Expenditure select committee. Orr said the efforts were based on risk mitigation rather than ethics.

Listed alternatives firm Man Group has released a podcast on natural capital accounting, The third episode in the group’s ‘Perspectives towards a Sustainable Future’ podcast series highlights the case for natural capital accounting as a way of long-term sustainable resource management. It assesses whether the current ways of accounting for resources such as fish, water and minerals are adequate.

The International Finance Corporation (IFC) — the private sector arm on of the World Bank – has published the first Global Progress Report for the Sustainable Banking Network (SBN), a group of financial sector regulators and banking associations from 34 emerging market economies including China, Nigeria, and India. The network aims to “transform the financial markets towards sustainability”. The report presents a systematic view of progress toward sustainable finance among the emerging economies of the SBN, which represents $42.6trn in banking assets or more than 85% of the total banking assets in emerging markets.

Social

Savers in defined contribution (DC) pension schemes will be able to find out where their money is invested and how it is being managed, following the publication of new transparency regulations from the UK Department of Work and Pensions. The amendment to the 2015 Pensions Scheme Bill has been welcomed by ShareAction, whose Head of Policy, Bethan Livesey, said: “We see this as an excellent first step towards shining a light on an area which has remained hidden from savers for too long.”

Firms run by women deliver more stable returns for investors, according to research from Nordea. Analysing returns on capital employed and share price performance over a 12-year period for the 100 biggest Nordic companies, the researchers found that doubling the number of women on boards and in senior management positions led to more stable returns. As reported by BloombergMarkets, Johan Trocmé, Director of Research Insights at Nordea, said: “The pressure on these management teams and on these boards is greater than before. […] the cost of not staying on top of things can be you no longer have a business in two years, five years, 10 years time.”

US non-profit impact investment firm ImpactAssets has updated its ESG investment fund database, ImpactAssets 50 (IA 50). Its 2017-2018 revised list features 50 private capital fund managers that provide social and environmental impact alongside financial returns. The free online database offers a range of sorting and filtering options, to enable investors to access “a centralised information source in a fragmented field,” it said.h6. Governance

Japan’s Government Pension Investment Fund (GPIF), which oversees the world’s largest pension scheme, is reportedly investigating the pay of its external portfolio managers over concerns it incentivises short-term performance over long-term growth. The move ties in with a recent emphasis on stewardship by GPIF, as it works to ensure it is able to guarantee the pensions of Japan’s rapidly ageing population. GPIF, which describes itself as a “super-long-term investor”, will use an HR consultant to determine a timeframe over which performance will be optimised.

The IFC plans to launch a new corporate disclosure and transparency ‘toolkit’ to help companies in emerging economies access global capital markets by giving foreign investors greater transparency around risks. It forms part of the IFC’s broader strategy, IFC 3.0, which seeks to mobilise private capital to low-income countries.

The MDB is also organising a series of workshops in partnership with the Central Bank of Iraq to improve corporate governance standards in the country’s banks. Key managers in the Central Bank will be trained by the IFC before the roll-out of workshops for board members of Iraqi banks. Topics include risk management, banking sector governance and the right composition of boards.

Teachers in Florida are calling on the Florida Retirement System Pension Plan to divest stocks of gun manufacturers, after it was revealed that it had some $500,000 (£441,000) invested in the makers of the assault rifle used in the recent Parkland, Florida high school massacre. According to a recent securities filing, the state-run pension fund held 41,129 shares in American Outdoors, formerly known as Smith & Wesson, along with investments in other gunmakers including Sturm & Ruger Co., Vista Outdoor Inc. and Olin Corp. Any exclusion will have to be approved by Republican governor Rick Scott, or by passing a Bill which is currently also controlled by Republicans.

221 Japanese institutional investors, including 28 pension funds, have now signed up to Japan’s revised Stewardship Code, according to the Financial Services Agency. The code has eight principles in comparison with the seven under the UK stewardship code, with an emphasis on monitoring investee companies.

GIC, Singapore’s sovereign wealth fund, has reportedly urged Japan to improve its culture of corporate governance, despite recent efforts by PM Shinzo Abe’s administration to implement structural reforms. The fund’s Chief Executive said that even though 80% of firms listed on the Tokyo Stock Exchange’s First Section have at least two independent directors, accounting irregularities have not been prevented. GIC divested its holdings in Olympus after the manufacturer was found to have concealed huge losses in 2011.

A shareholder proposal for California-based Sanderson Farms to curb human-class antibiotic use among poultry has received strong shareholder support with 43.1% of votes cast in favour. The practice, which prevents the birds from getting sick in cramped and unhealthy conditions, has led to a documented rise in drug-resistant bacteria or ‘superbugs’ that could result in an estimated 300m deaths by 2050 – the evidence of which is disputed by Sanderson Farrms. The proposal was filed by non-profit, As You Sow, and supported by Oxfam America.

Deregulation is reportedly being considered by the SEC which will allow all companies, not just smaller ones, to privately negotiate with investors before pursuing Initial Public Offerings. This would expand on the 2012 US Congress decision to allow fledgling companies and startups freedom to “test the waters” for an IPO. If approved, the move, along with an earlier decision to allow all companies to secretly file IPO papers could potentially be effective in increasing the number of public companies, 50% down from the 1990s. Link