RI ESG Briefing, May 29: Solactive, KLP, Canada’s CDPQ, BlueBay, Investment Association, Robeco, CtW

Environmental

South Korean firms have issued more than 5trn won ($4.27bn) worth of environmental, social and governance-related bonds so far in 2019, according to a report in the Korea Herald. This already surpasses total issuances last year, a few years since the asset class was introduced into the Korean market in 2013. LG Chem, an EV battery-maker issued the largest volume of ESG bonds issued by a Korean company at $1.56bn.

Nordea is supporting efforts by the Atea Sustainability Focus (ASF) network to encourage the IT sector’s transition to a circular economy which will substantially reduce its carbon footprint. ASF has developed a roadmap for this transition which include the development of an ISO standard for circularity within the IT sector, establishing a task force on circularity and providing training on circularity design. Link

CANDRIAM has announced a sponsorship deal with “the greenest football club in the world”. The package for the UK’s Forest Green Rovers, the first UN-certified carbon neutral football club, includes pitch side board advertising and client events.

Guernsey Green Finance and the UK’s Green Finance Initiative have committed to collaborating to promote the development of green and sustainable finance. Sir Roger Gifford, Chair of the UK Green Finance Initiative, said: “There is no greater imperative for bankers and investors than financing the transition to a low-carbon future. It’s both natural and necessary, therefore, to combine with our colleagues in Guernsey in support of climate finance.”

Social

KLP, Norway’s largest pension fund, has said it will no longer invest in gambling companies and alcohol makers – and that it recently sold equities and bonds in such firms worth c. $320m. It means around 90 companies have been added to KLP’s exclusion list.

In a retailer first, the Co-operative Group has reportedly raised £300m for a bond to support goods and producers bearing the Fairtrade mark, the certification which guarantees better pay conditions for farmers and workers in developing countries. The bond, which is classified as meeting the UN Sustainable Development Goals, was twice subscribed by financial institutions and pays an annual interest rate of 5.125%. The proceeds will be used to increase the Fairtrade product offering in Co-op shops, by funding shipping, development of new products, and marketing.

Openinvest, a US investment platform start-up, has launched an investor tool for shifting money out of firms headquartered in states with “extreme anti-abortion laws”, including Alabama, Georgia Arkansas and Ohio. The company said it wanted the tool to encourage policy reversals in eight states that have seen new restrictions on abortion passed. According to Reuters, the tool also promotes firms in states that support reproductive rights.

Crédit Agricole, Deutsche Bank, Unicredit and Lloyds are the largest investors and financiers of controversial weapon exports, according to a new report. The paper published by NGO Facing Finance identifies the top ten European banks with some of the highest investments in 11 global arms companies, companies that have since 2015 been exporting to unstable/crisis-affected countries in the MENA region (Middle East and North Africa) and countries involved in the war in Yemen.h6. Governance

Frankfurt-based index provider Solactive has bought a stake in Minerva Analytics, the UK proxy advisory and corporate governance specialist for an undisclosed sum. Minerva (formerly Manifest) will leverage Solactive’s offices in Frankfurt, Hong Kong and Toronto to expand its global reach. Solactive executives Steffen Scheuble and Roger-Marc Noirot will join Minerva’s board as non-executive directors alongside founders Sarah Wilson and Tim Clarke.

The Caisse de dépôt et placement du Québec (CDPQ) has removed the CEO of its real-estate lending arm, Otéra Capital, after an external investigation revealed “serious misconduct”. This related to the financing of several companies associated with the CEO, Alfonso Graceffa, by a subsidiary of Otéra. In the wake of this, a number of changes to CDPQ’s governance have been introduced such as the separation of CEO and Board Chair.

The Investment Association, the UK fund management trade body, is calling for companies to improve the transparency of their approach to paying dividends. The IA wants companies to publish a ‘distribution policy’ setting out their approach to paying dividends to shareholders. This new approach must set out the company’s approach to dividends policy alongside other ways of returning capital to shareholders, in order to promote a more transparent, long-term approach.

BlueBay Asset Management, the fixed income specialist, and Verisk Maplecroft, a risk consultancy, have found that markets do not appear to be pricing in environmental or climate risks for sovereign debt. According to a recent report, analysis reveals that investors prefer sovereigns with ineffective environmental regulations and are not on a decarbonisation pathway.

The US Securities and Exchange Commission (SEC) is considering revising rules on thresholds for shareholder proposals and on the use of proxy advisory firms, according to media reports. Advanced notice for the proposed rules – the first step in the rule issuance process – is expected in April 2020, according to projections in a recently published regulatory agenda. Under current rules, shareholders with a minimum of $2,000 of company stock or 1% of eligible voting shares for at least one year can submit proposals.

Pension funds are inadvertently supporting blacklisted companies by investing in banks which underwrite debt and equity capital, Oxford research has reportedly found. According to the study, presented at the eighth annual World Pensions Forum in Brussels, the $1trn Norwegian Pension Fund Global (GPFG) has allocated 7.4 %, or $40.7bn, to banks financing firms that the GPFG has excluded. Link

Combatting greenwashing calls for more integrated thinking and engagement, Robeco’s Head of ESG Masja Zandbergen has written in a blog post. According to Zandbergen, strategies that merely apply exclusions should no longer be labelled “sustainable”. She wrote: “Robeco questions whether investing in these companies and engaging with them might be a better way of creating change.”

CtW Investment Group has written to other shareholders of Alphabet, Google’s parent company, soliciting support for a shareholder proposal requesting worker representation on the board to address employee unrest over a range of issues. In its filing, CtW, a US shareholder stewardship group representing union-sponsored pension funds, said: “Adding a non-executive employee representative to the Board will help restore employee confidence in senior leadership and help resolve the cultural crisis”.