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RI ESG Briefing, November 24: RIAA, ClientEarth, Natural Capital Coalition, conflict minerals

The round-up of the latest environmental, social and governance developments

Environmental

Environmental law firm ClientEarth has set out new legal guidelines that it says will enable trustees “to take control” of how their shares are voted at company annual meetings. The aim is to prevent another “missing 60%” scenario, where asset managers voted in opposite directions on climate resolutions from one company AGM to the next. Edward Mason, the Church Commissioners’ Head of Responsible Investment, said: “Having co-filed shareholder resolutions in both the UK and US over the past two years, the Church Commissioners have experienced at first hand the discrepancies in fund manager voting on climate change highlighted by ClientEarth in this important briefing.”

The Natural Capital Coalition, the Natural Capital Finance Alliance and VBDO, the Dutch SIF, are developing a Finance Sector Supplement to the Natural Capital Protocol, the framework for information and action by businesses on their relationship to natural resources such as climate, water, energy, biodiversity and waste. The supplement aims to help provide guidance for financial institutions (including asset owners and asset managers) regarding the consideration of natural capital impacts and dependencies into lending, investment and insurance. They have launched a high-level consultation on the scope and content of the supplement and are inviting input and comments. Link

The UK’s Green Finance Initiative, run by the City of London, has launched a six-point plan to make the country a “collaborative global hub for green finance”. Suggestions include “giving powers to a new or existing independent body to set a long-term path for a greener UK economy”, “developing open-access green corporate benchmarks”, helping develop green infrastructure as an asset class, extending analysis of climate risks and implementing the Financial Stability Board’s Taskforce on Climate-Related Disclosure’s upcoming guidance. The report also proposes the promotion of voluntary principles to maintain market integrity, tagging green loans, creating a network of green financial centres, educating asset managers and other market player about climate risk, and creating certainty around government support for low-carbon industries.

Social

A new study investigating the corporate role in impact investing has been released by Prudential Financial and the CEO Force for Good (CECP), a coalition of CEOs who believe social impact is a measure of business performance. The study, Investing with Purpose, found that one-third of companies globally report being “somewhat” or “highly” active in impact investing. “We are at the start of seeing something that has the power to change the world.” said Daryl Brewster, CEO, CECP.

Impact Investing Australia has released an inaugural report analyzing impact investment activity and performance. The report reveals that there has been a steady increase in the number of impact investments over recent years, with the bulk of 2015 transactions involving debt finance to social enterprises. Green bonds issued by Australian banks dominated an increase in dollar value of investments over the same period. The report involves input from Mercer, insurer QBE and the Responsible Investment Association Australasia and First State Super, who wrote the forward to the report.

The 2016 Access to Medicine Index has been launched. The project found that GSK leads for the fifth time ahead of Johnson & Johnson, Novartis and Merck KGaA. “Critically, these companies show needs-orientation, matching actions to externally identified priorities in the access agenda,” it said. “For example, they invest in R&D for urgently needed products, even where commercial incentives are lacking. Their access strategies support commercial objectives, with clear business rationales.” Link. Governance

The Responsible Investment Association Australasia (RIAA) has launched a new report benchmarking superannuation funds, finding that over two-thirds of the largest superfunds in Australia now have embedded a commitment to responsible investment. The inaugural Superfund Responsible Investment Benchmarking Report surveyed the largest 50 superfunds in Australia – a universe that accounts for around A$1.3trn (€911bn) of assets under management. Some 86% of funds now have in place some form of responsible investment approach – from ESG integration, screening, corporate engagement or sustainability themed investing – across at least one asset class.

The European Union has agreed a draft regulation on ‘conflict minerals’ that aims to stop the financing of armed groups and human rights abuses through the trade of minerals from conflict areas. Under an informal deal that has been agreed by the European Parliament, the member states and the Commission, all but the smallest EU importers of tin, tungsten, tantalum, gold and their ores will have to do “due diligence” checks on their suppliers. Large manufacturers will in addition have to reveal how they plan to monitor their sources to comply with the rules.

Japan’s Financial Services Agency is mulling a “fair disclosure rule”, mandating listed Japanese corporations to disclose “material information that could influence investment decisions” to the public immediately if they have provided it to individuals, such as directors and analysts at securities companies or asset management businesses, the Nikkei reports. The new rule, part of legislation on financial products trading, could be applied as early as 2018.

UBS Group has been rated by Standard Ethics, a so-called independent sustainability rating agency. The Swiss financial institution has been “reassigned” an E+ rating, Standard Ethics announced on 16 November, after having its previous EE- suspended since 8 March 2016. “Anything above “EE-” indicates good compliance” the agency’s footnotes explain.

Union Investment – the investment arm of the DZ Bank Group – uses ESG to help it assess companies’ management quality. Speaking at an event hosted by the EU’s Climate Knowledge and Innovation Community (Climate KIC), Thomas Deser, a portfolio manager at Union Investment, which manages €261bn of assets, said “if a company cannot answer certain questions around ESG, they are normally falling behind in their wider business management as well”.

The Egyptian Stock Exchange has issued guidance on reporting on ESG performance and the UN Sustainable Development Goals (SDGs). The guidance comes in three sections: a brief on rationale for ESG information disclosure and why it matters for the Egyptian Exchange, listed companies and financial market; the role of the board in incorporating sustainability; and recommended steps for effective ESG reporting.

ESG intelligence provider RepRisk has launched Director’s Brief, a new corporate benchmarking report that serves as a data-driven strategy and decision-making tool for board members and executives, risk management and corporate affairs professionals, as well as CSR and sustainability teams. It “provides a snapshot of the key ESG challenges and hot spots for a company and its customizable peer list”.

Professional services firm PwC has released a survey that found that private equity players are “making the business case for responsible investment”. The firm polled 111 firms worldwide and found 96% have or will shortly have a responsible investment policy. And 41% said poor ESG performance has seen them demand a material discount or even walk away from a deal – and that a similar proportion would be prepared to pay a premium for a target company with strong environmental, social and governance performance.