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RI ESG Briefing, November 22: 300 Club refocuses on asset owners

The round-up of the latest ESG market developments

Environmental

The low-lying Pacific island state of Vanuatu is reportedly considering suing not only fossil fuel companies but developed nations for their role in global climate change. Reuters was quoting Foreign Minister Ralph Regenvanu of the 280,000-population state spread over c.80 separate islands.

Campaign group Unfriend Coal has released research showing that four European insurers continue to underwrite the expansion of Polish coal, as the country prepares to host the UN Climate Summit in December this year. According to the NGO, Germany’s Talanx, Austrian insurers Vienna Insurance Group and UNIQA, and Poland’s PZU still have not made any commitments to stop insuring coal; after Allianz, Generali and Munich Re pledged to do so earlier this year.

Sustainalytics has published a report on the opportunities surrounding solutions to ocean plastics. The report, which can be read here, examines the plastics economy and highlights companies that are well-positioned to mitigate plastic pollution risks and deliver sustainable solutions.

Social

Aberdeen Standard Investments and UK homelessness charity The Big Issue are launching an online, mobile-first impact investment funds platform for retail investors. Dubbed The Big Exchange, Aberdeen Standard Investments, Columbia Threadneedle Investments, AllianceBernstein and Alquity will join as founders and offer their impact funds on the platform. Funds will be offered at a price which will be amongst the lowest in the market, according to a statement. The platform will allow investors to select their preferred area of impact (matched to the UN’s Sustainable Development Goals) and risk appetite. It is expected to launch next year and offer 30-40 impact funds. Users will be able to choose from ready-made bundles or individual funds, and track not only performance but impact through the app.

A new report exploring market-based solutions to childhood obesity has been released by UK social investor Big Society Capital, together with Guy’s & St Thomas’ Charity and the Food Foundation. Healthy Returns: Opportunities for market-based solutions to childhood obesity explores opportunities for investors and funders to help address the prevalence of childhood obesity in urban, deprived communities through impact investment.

Cornerstone Capital, an ESG investment advisor, has released a report examining donor-advised funds (DAFs), irrevocable philanthropic funds from which the donor can make charitable grants and receives tax relief. According to Cornerstone, investing DAFs provide a bigger scope for impact as donors allocate capital to issues they care about and subsequently redeploy the returns into new “mission-aligned initiatives in need of capital”. However, only a “minor fraction of DAFs” are currently deployed in this way.

The International Finance Corporation (IFC) is inviting feedback on draft impact investing principles it has developed in partnership with asset managers, asset owners and industry associations, including LeapFrog Investments, the US Government’s Overseas Private Investment Corporation (OPIC), and The Rise Fund, the impact investing arm of private equity group TPG Growth. Its nine Operating Principles for Impact Management will be up for consultation until the end of December 2018.h6. Governance

The 300 Club group of leading investment professionals, originally established in 2011 by Hermes’ Saker Nusseibeh, has tweaked its mission statement to emphasis its focus on asset owners. Stefan Dunatov, senior vice president, investment strategy & risk at Canada’s BCI is chair of the body. Formerly Chief Investment Officer with Coal Pension Trustee Services, he said: “Asset owners should be at the heart of everything that the investment industry does. Over the past seven years, our focus at The 300 Club has been to ask uncomfortable questions about behaviours within the industry, and our latest focus is to ensure that these questions promote the interest of asset owners themselves. Changing economic and geopolitical circumstances combined with the looming threat of a pensions and savings crisis mean that we, as an industry, cannot afford to ignore the demands of those who at the very centre of our business.”

Japan’s Government Pension Investment Fund has awarded a research mandate to Nissay Asset Management (NAM) for the analysis of global “ESG information disclosure standards/frameworks” alongside input from investors and corporates. According to NAM, it introduced ESG ratings of Japanese listed equities since 2008.

Just five out of 60 US-based ESG funds and ETFs investing internationally held shares in Nissan prior to the governance scandal that hit the Japanese carmaker this week, Bloomberg reports quoting Morningstar’s Global Head of Sustainable Research, Jon Hale. Nissan was ranked last on governance metrics among 41 global auto companies by Sustainalytics, the ESG data provider 40% owned by Morningstar and whose data underpins Morningstar’s own sustainability fund ratings. Nissan Chairman Carlos Ghosn was arrested this week over allegations of financial misconduct. Scientific Beta, an index-maker linked with France’s EDHEC Business School, also announced today that investors in a series of indices it designed for Desjardins Global AM were not exposed to Nissan, Renault and Mitsubishi.

The American Chamber of Commerce in Japan (ACCJ) has petitioned the Japanese government to require listed companies to disclose material ESG issues and to put into place “a series of progressively tougher consequences” for laggards, beginning with a public notice. According to the ACCJ, “Japanese corporations with poor ESG policies are often perceived by analysts to present a relatively higher risk profile”, putting them at a disadvantage. The paper was authored by the Chamber’s Alternative Investments Committee which has spent more than a year on the recommendation. The ACCJ claims to be “one of the most influential business organizations in Japan” and has released a number of recommendations which communicates its “official position” on a number of issues.

A report commissioned by the Investor Responsibility Research Center Institute (IRRCi), has found that most S&P500 companies have not adopted fully integrated reporting. According to it, only 14 companies have issued fully integrated reports, although the figure has doubled from 5 years ago. On a positive note, sustainability reporting has become increasingly mainstream with 78% of S&P 500 corporates issuing sustainability reports although only 36% of the reports were independently assured.