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RI ESG Briefing, November 15: Institutional investors launch responsible firearm engagement framework

The latest ESG market developments.

Environmental

Swedish pension fund AP2 has announced a prize to recognise an outstanding investor-useful thesis which combines finance and sustainability, either in general or specific issues such as corporate governance or CSR. Only Master students from Gothenburg University and Chalmers University of Technology are invited to participate.
The Climate Bonds Initiative has published its criteria that forestry assets and projects must meet to be certified in a Climate Bond, following a public consultation in the Summer. The criteria were developed by two working groups, including representatives from investors, public entities, environmental and forestry NGOs, and international policy bodies from around the world.

Social

A coalition of US-based institutional investors, representing nearly $5trn worth of assets, have launched a framework for investors to engage with gun manufacturers to address gun safety and reduce investment risk. The Principles for a Responsible Civilian Firearms Industry provide a number of priority engagement areas including the integration of technology to enhance safety and traceability, enforcement of responsible dealership standards and background checks. The coalition includes CalPERS, CalSTRS, Florida State Board of Administration, Maine Public Employees Retirement System, Nuveen and State Street.

CalSTRS have voted to divest combined holdings worth $12m in CoreCivic and GEO Group, two US public companies operating private prisons after the Trump’s administration zero tolerance border crossing policy led to the separation of children from their parents. The divestment is expected to be completed in 6 months.

Tobacco shares have taken a hit after senior US Food and Drug Administration (FDA) officials reportedly said last week that the agency is considering a ban on menthol cigarettes as part of its efforts to curb youth smoking. More than $14bn was wiped out from the combined value of Altria Group, British American Tobacco and Imperial Brands, the makers of Marlboro, Dunhill and Winston cigarettes on Monday after the Wall Street Journal report.

The Corporate Human Rights Benchmark (CHRB), a collaboration to create the first benchmark of corporate human rights performance including APG, Aviva, Nordea and Dutch investor association VBDO, have released their 2018 report . The average scores of companies surveyed across the apparel, extractive and agriculture industries is 27%, with the majority of the 98 companies surveyed “failing to demonstrate their respect for human rights”. No companies were listed in the 90-100% band and only one, Adidas, was graded in the 80-90% band.Nestle has launched enhanced whistle-blower resources in collaboration with SIme Darby Plantation, a major palm oil producer, to address human rights abuses within the palm oil supply chain. Workers will have access to a number of channels, including SMS, toll free and Facebook Messenger, accessible 7 days a week with after-hours options. Outlawed practices in the sector include forced labour, retention of workers’ passports and child labour.

The Islamic Development Bank (IsDB), a multilateral development bank, has announced the listing of a €650m Sukuk on Nasdaq Dubai, its first Euro listing. IsDB has a total of nine USD-denominated Sukuks on the exchange, valued at $1.8bn.

The United Nations Joint Staff Pension Fund (UNJSPF) is allegedly investing in companies operating in illegal Israeli settlements situated in the West Bank, the New Internationalist reports. This is despite the UN’s own resolutions deeming such settlements to be a violation of international law. The report claims the investments – worth around $7.5m – are through two low carbon ETFs the fund started investing in 2014.

Governance

The UK Stewardship Code, which aims to enhance the quality of engagement between investors and companies, is slated for an update in 2019 after a public consultation in January, a Financial Reporting Council (FRC) spokesperson told RI. The update was previously due to take place this year. The Code is an important reference for investors and is the basis of similar guidance in other markets such as the US, Brazil, Japan and Korea.

Alabama’s City of Birmingham Firemen’s and Policemen’s Supplemental Pension System has filed a class-action lawsuit against Ryanair and its CEO Michael O’Leary over claims that the budget Irish airline downplayed the extent of labour unrest and its impact on earnings, potentially in violation of federal securities laws, P&I reports. The action, filed last week in US District Court in New York, also alleges that the unrest was caused by the company’s “aggressive anti-employee practices”.

Norway’s central bank Norges Bank and Californian public pension giant CalSTRS are among a group of institutional investors suing 16 of the world’s largest banks over allegations of price rigging on the foreign exchange market, Reuter reports. The banks being sued are: Bank of America, Barclays, BNP Paribas, Citigroup, Credit Suisse, Deutsche Bank, Goldman Sachs, HSBC, JPMorgan Chase, Morgan Stanley, Japan’s MUFG Bank, Royal Bank of Canada, Royal Bank of Scotland, Societe Generale, Standard Chartered, and UBS.