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RI ESG Briefing, March 1: Financial Stability Board to continue climate disclosure task force

The round-up of the latest ESG developments

Environmental

The Financial Stability Board has said it welcomes a proposal from the Task Force on Climate-related Financial Disclosures (TCFD) to continue its work until at least September 2018 with a focus on promoting and monitoring the adoption of TCFD by companies and evaluating if the recommended disclosure are effective for users. The TCFD’s public consultation on its recommendation on how companies should disclose climate-related financial risks ended last month. Its final report will be published in June at the G20 Leaders’ Summit.

The first court case that tries to oppose drilling for new oil and gas based on the Paris Agreement will go to the Oslo District Court later this year on 13 November. Nature and Youth and Greenpeace Nordic filed a climate lawsuit against the Norwegian government, arguing that it contravenes the Paris Agreement and violates the Norwegian constitutional right to a healthy and safe environment for current and future generations. The Norwegian government granted licences to a new oil drilling area in the Barents Sea, and the plaintiffs argue that this cannot be reconciled to Norway’s ratification of the Paris Agreement, in which it promised to reduce carbon emissions and limit global temperature increase to 1.5C.

RI understands that the European Banking Federation, which represents over 4,500 banks in Europe, has made green and sustainable finance as part of its strategy this year – in part a reaction to its members who are active in the European Commission High Level Expert Group on Sustainable Finance.

Social

New Zealand has launched its first social impact bond to get people with mental health issues back into work. Termed ‘social bond’ but adopting the social impact bond model of using private capital to tackle social issues, it has raised NZ$1.5m (€1m) to fund Australian company APM Workcare to support 1,700 people in South Auckland. The investors reportedly include private Prospect Investment Management Limited investment fund. There are two classes of investors taking different levels of risk and the programme will last for five years. Link

David Blood, the Generation Investment Management co-founder who is chairman of the UK’s Social Finance, made a donation of £225,000 (€262,375) to the latter according to its most recent accounts. Its turnover for the year ending 30 September 2016 was £3.8m. Separately, Social Finance received a £1m revolving credit facility from Big Society Capital last November. Rebecca McCartney, Investment Associate at Big Society Capital said: “We hope the £1m revolving credit facility will help Social Finance continued growth and its ongoing contribution to the development of the market.”

Pensioenfonds Metaal en Techniek (PMT) and Pension fund Metalektro (PME), the large Dutch pension schemes, have penned an open letter along with the €114bn fiduciary manager MN to Unilever urging it to keep its focus on sustainability and return for the long term. The letter also received support from the €443bn pension manager APG and insurer ASR in the wake of the failed bid for the consumer goods giant from Kraft Heinz.h6. Governance

A meeting of Korea’s Financial Services Commission held on February 13, reportedly discussed the adoption of a Stewardship Code. According to national media , this is a renewed attempt after trade business organisations resisted the idea of investors overseeing their operations and the lukewarm approach of the country’s largest investor, the National Pension Service. The Code is supported by Samsung Asset Management, Mirae Asset, Korea Investment Management, NH-Amundi, Truston, Meritz, Lime Asset Management and Zebra Investment Management. Besides the NPS, neither the Government Employees Pension Service nor the Military Mutual Aid Association have yet expressed its position on the initiative.

The UK Parliament’s Work and Pensions Committee has recommended the government to extend the application of the Corporate Governance Code to private companies with over 5,000 defined benefit pension scheme members. The Committee has also recommended the inclusion of pension scheme trustees in the list of stakeholders to whom company directors must have regard under section 172(1) of the Companies Act 2006. The recommendations are the Committee’s response to the Government’s consultation on corporate governance reform which closed on February 17, and comes on the back of the parliamentary inquiry into the collapse of retailer BHS.

The Local Authority Pension Fund Forum (LAPFF), the UK based shareholder engagement group which represents funds with combined assets of over £175bn, has reportedly called on the UK government to give ‘serious consideration’ to disbanding the UK Financial Reporting Council (FRC), the UK’s independent corporate governance watchdog, and replacing it with an independent companies commission.

Trillium Asset Management, the $2bn Boston based sustainability firm manager has successfully withdrawn its Product Safety and Quality shareholder proposal at US medical manufacturing company, Zimmer Biomet Holdings. The firm’s board has committed to adding explicit oversight of product safety and quality to the charter of the existing Research, Innovation and Technology Committee of the Board.

Petrobras, Brazil’s state oil company, has approved settlements with investors in four more lawsuits in a New York federal court. Reuters reported that the new settlements will raise total provisions for the lawsuits to $372m. The investors included major names such as New York City Employees Retirement System and Lord Abbett Investment Trust.

Green Century Capital Management, the US SRI firm, has organised 38 investors in the US and globally (representing more than $617.5bn in assets) to demand that companies reaffirm and extend zero deforestation commitments specific to Latin America.

The International Corporate Governance Network (ICGN), which represents investors worth $26trn, issued a message of caution ahead of its Washington DC conference about the influence of the Trump Administration’s policy agenda on corporate governance and responsible investment. The ICGN was also due to discuss differential ownership and control structures at its Washington DC conference this week.

A new study by the University of Tennessee Knoxville has reportedly questioned the usefulness of proxy advisory services in helping corporate boards of directors and investors decide whether to keep or change auditing firms. The study found that audit firms are rarely rejected when auditor ratification ballots are included in the proxy materials sent annually to shareholders.