RI ESG Briefing, November 14: ERAFP, Norges Bank, Corporate Knights, ORIX, Pictet, Moody’s, NorthStar, Vigeo Eiris

The latest ESG market developments

Environmental

ERAFP, the €33bn French public sector pension scheme, says it is excluding thermal coal companies. It will require companies in sectors with high energy transition stakes to adopt strategies consistent with the objectives of the Paris agreement – and withdrawing from those that fail to do so and whose thermal coal-related activities exceed 10% of their turnover. It would also “step up its engagement actions” with companies remaining in its portfolio, in particular under the Climate Action100+ initiative, “to redirect their strategies and activities towards a decarbonised economy”.

CalSTRS, CalPERS and Colorado Public Employees’ Retirement Association (PERA) lost over $19bn by investing in fossil fuels over the past ten years, according to a new study from Corporate Knights. The analysis said CalPERS would have generated an estimated additional $11.9bn without fossil fuels, while CalSTRS and PERA missed out on $5.5bn and $1.77bn respectively. While fossil fuels pulled down overall performance, technology, healthcare, retail and entertainment boosted performance, the report said.

Half of automakers will likely struggle with the transition to a low carbon future, according to the most recent Carbon Transition Assessment scores (CTAs) from Moody’s. The report said they were not in a strong position to handle the transition and lagging on the necessary “step change” in production and sales of electric vehicles and the level of investment in new technologies.

Austria-based IIÖ Institute for Real Estate Economics is reportedly developing a climate change benchmark for real estate assets, with funding from APG, ABP, PGGM and Norges Bank Investment Management. Starting in the first quarter of next year, the benchmark will show country-level and sub asset class-level insights, and allow users to measure asset alignment with the Paris goals.

The planned EU sustainable finance taxonomy risks jeopardising the wider sustainable Action Plan by penalising sustainable finance players, according to banks like Triodos Bank, Banca Etica and Ekobanken. Two groups, the European Federation of Ethical and Alternative Banks and Financiers (FEBEA) and the Global Alliance for Banking on Values said the flagship policy would “jeopardise the entire premise of the sustainable finance action plan” because it “loads requirements only onto [those] making efforts in sustainability” in a letter to the Finnish Ministry of Finance.

Social

Costco has committed to reporting on prison labour in its supply chain, following ongoing engagement from Boston-based SRI investor NorthStar Asset Management. The US retail chain began reporting on the issue this year, following a proposal from NorthStar that garnered nearly 29% support at the AGM, and has now committed to an additional two years. It is the first US company to make such a commitment.

Data on global fishing activity and ocean ecosystems is now available on Bloomberg Terminals, off the back of a partnership between Bloomberg and Global Fishing Watch (GFW). Subscribers will be able to use an interactive map to see layers of data, including on fishing vessel location, gear type, climate change, coral reefs, and natural resources.h6. Governance

Norges Bank Investment Management has decided to exclude G4S due to “unacceptable risk” that the UK security firm contributes to or is responsible for serious or systematic human rights violations. It is based on a recommendation from advisory body the Council on Ethics. The panel looked at the company’s operations in Qatar and the United Arab Emirates, where its employees are mostly migrant workers.

ORIX Corporation, the Japanese financial services group that controls Dutch asset manager Robeco, has adopted a new sustainable investing and lending policy. The move formalises the conglomerate’s incorporation of sustainability requirements into investment and financing decisions and will see it use a checklist to evaluate proposed projects on sustainability criteria. It comes alongside a new corporate sustainability policy and human rights policy, as well as a newly launched sustainability team. Key focus areas for sustainability efforts, according to the new policies, include automobiles, real estate, and environment and energy.

Swiss private bank and asset manager Pictet has committed to the Principles for Responsible Banking, the sustainable banking framework developed by the United Nations Environment Programme Finance Initiative and global banks. Pictet committed to the Principles for Responsible Investment in 2007.

Eduardo Gallardo from law firm Gibson Dunn has looked at how corporate directors may consider the environmental and social issues that are “becoming increasingly important to many institutional shareholders”. On an Expansive Definition of Shareholder Value in the Boardroom, was published in the Columbia Law School’s Blue Sky Blog.

Repsol has committed to lobbying “for well below two degrees”, and to reviewing industry associations that contradict its new position. Adam Matthews, the Church of England Pensions Board’s Director of Ethics and Engagement, said the move showed “another European Climate Action 100+ company responding positively and ambitiously to address misalignment of corporate company lobbying”. The Spanish energy group also committed to emissions reductions targets, including Scope 3 (emissions from sold products). Link

Oil equipment and services companies are lagging on climate change mitigation strategies and pollution management, according to a new Vigeo Eiris report looking at the sector. The paper, which analyses 89 firms, found that only 15% had disclosed quantitative GHG emissions reduction targets, while 42% had not reported on resources allocated to the development of green technologies. The report found that, while 89% had public anti-corruption policies, only 8% disclosed the number of internally-reported corruption incidents.

Planet Tracker, the latest spin-off from the influential Carbon Tracker initiative, has released a briefing paper on how investors in sovereign bonds can respond to deforestation of the Amazon rainforest. The briefing paper is the first in a series of “global flashpoint” investor briefs.