RI ESG Briefing, November 28: A Legal Framework for Impact project launched

The latest ESG market developments

Research firm MSCI has made its ESG ratings for over 2,800 companies in the MSCI ACWI [All Country World Index] publicly available via a tool on its website, as part of its “mission to help investors, companies and other industry stakeholders identify the most financially relevant ESG risks and opportunities. Users can view each company’s ESG rating, ESG rating history, benchmark against peers and key ESG-related issues affecting individual companies. The ESG research provider plans to expand the offering to include the 7,500 constituents of MSCI ACWI Investable Markets Index in 2020. 

The World Bank has reportedly issued a $28.6m five-year maturity sustainable development bond aimed at financing the protection and restoration of fresh and saltwater resources and habitats. Credit Suisse Securities’ Impact Advisory and Finance Department acted as sole manager of the transaction for the Low Carbon Blue Economy Note, which was placed with its private wealth management clients globally. The World Bank, which is planning to raise at least $3bn through 'blue bonds', said the issuance touches on the majority of the 17 SDGs.

Swedish pension fund AP4 is inviting applications for a master thesis looking at how debt is calculated in the carbon footprint of fund. The thesis should propose a model to evaluate the fund’s debt portfolio; consisting of corporate credit, covered bonds, quasi government bonds, and government bonds, all issued globally. 

Sustainability specialist WHEB Asset Management has committed to be a Net Zero Carbon business by 2025 at the latest, in efforts to “tackle the climate emergency”. The firm will set an annual carbon budget for emissions from its operations, including “the most relevant Scope 3 emissions”, and report annually on its progress. According to WHEB, the firm has no Scope 1 emissions and has effectively eliminated its Scope 2 emissions since 2018. It will purchase carbon offsets for emissions it is unable to eliminate.

The Principles for Responsible Investment, UN Environment Programme Finance Initiative (UNEP FI) and The Generation Foundation have teamed up with law firm Freshfields Bruckhaus Deringer to analyse whether and how legal frameworks allow for – and incentivise – investors to consider sustainability impact across major markets. The research – A Legal Framework for Impact – will explore existing legal frameworks to analyse the extent to which asset owners can prioritise sustainability impact, including where this may lead to a negative effect on investment return. In the case of investment managers, it will explore how they can or should address sustainability impact where their investment mandate is silent on sustainability impact.

Two impact investment-focused bodies have launched this week in Europe. The Impact Investing Institute , which was announced in July, has launched in the UK with the goal of raising awareness of investing for impact and addressing barriers. Its objectives include mobilising big pools of capital, like pension funds, to increase their impact. Dame Elizabeth Corley is its chair, and Sarah Gordon, a former Financial Times journalist, is chief executive. Meanwhile, in the Netherlands, the Impact Economy Foundation has launched. Herman Mulder, former Director-General and Co-Head of Group Risk Management at ABN AMRO Bank is chair and it involves figures such as Corien Wortmann-Kool, chairman of the board of ABP.  Its first piece of work is a consultation on standards for reporting on impact.

The UK’s Labour Party would set up a Sustainable Investment Board if it were to come into power, leader Jeremy Corbyn told the Confederation of British Industry at a conference last week. The board would include representation from the Chancellor, Business Secretary and Governor of the Bank of England, with seats for businesses and trade unions too. 

The Australian Council of Superannuation Investors (ACSI) has welcomed the resignation of Westpac’s CEO and hastened retirement of its Chairman in the wake of the retail bank’s money-laundering scandal. Following public and investor pressure, Chairman Lindsay Maxsted announced on Tuesday that CEO Brian Hartzer would step down on December 2. Maxsted, meanwhile, confirmed he will bring forward his retirement to the first half of 2020. ACSI CEO Louise Davidson said “Long-term investors made it clear to Westpac that accountability was required. This includes a preparedness to take proportionate action to improve governance and for the impact of these events to be fully reflected in remuneration outcomes.”  She said ACSI would continue to engage with Westpac to determine if further action was needed.

Germany’s Commerzbank has started including the ESG scores of Arabesque S-Ray in its sell side equity research publications for institutional investors. In July, Commerzbank subsidiary Commerz Real was one of a cohort of German financial players to acquire a $20m (€17.8m) stake in Arabesque S-Ray, alongside the State of Hessen, AllianzX, and DWS. Arabesque S-Ray evaluates companies on ESG issues and on alignment with the UN Global Compact.