RI ESG Briefing, November 2: MSCI reports 21% increase in ESG revenues in third quarter

Round-up of the latest ESG developments.


Dutch pension giant ABP is reportedly set to invest over €330m in three US solar parks. Based in California and Nevada, the parks – one of which is the first to be built in an Indian reservation, providing jobs for the local community – will provide energy for up to 370,000 households. ABP Chair Corien Wortmann–Kool is quoted as saying: “This investment matches our ambition to increase by fivefold our investments in renewable energy, such as solar energy, by 2020”.

Danish pension funds, PKA and PFA have agreed to jointly buy a 50% stake in Walney Extension, a 659MW UK offshore wind farm project, from Ørsted (formerly DONG Energy) in a £2bn deal. Each investor will obtain a 25% “ownership interest” in the project, which when completed will be the world’s largest offshore wind farm.

Two-thirds of institutional investors use ESG considerations as part of their investment approach according to new research by RBC Global Asset Management, the asset management division of Royal Bank of Canada. The survey was based on the responses of 434 institutional asset owners and investment consultants.

A consultation, driven by the Ministry of Agriculture, Fisheries, Food and Environment to draft Spain’s Climate Change and Energy Transition Law closed on October 10. The consultation put questions formulated in a broad way, with no explicit mention to climate finance or “comply or explain” mechanisms regarding investors’ climate disclosure such as that of France’s Article 173. Ecologistas en Acción, an environmental NGO, was disappointed with the scope of the consultation and raised concerns over the lack of tougher questions being asked to tackle climate change.

GRESB, the global ESG benchmark for real assets, has launched a new ESG evaluation tool offering investors a preliminary ESG assessment focusing on management and policy.

Fish Tracker Initiative, the new NGO created by Mark Campanale and Nick Robins, has published its first report, ‘Empty Nets: How over fishing risks leaving investors stranded’, detailing how poor disclosure and poor sustainability management across publicly listed companies with revenues from seafood are placing investors at risk.

Major banks – including Barclays, JPMorgan Chase, and the TD Bank Group – are exposing themselves to financial and reputational damage due to their financing of tar sands pipelines, according to the latest report by climate NGOs Greenpeace and Oil Change International.


The Philadelphia Board of Pensions and Retirement has reportedly divested its investments in “for-profit” US private prisons. Scott Stringer, the New York City State Comptroller, congratulated it, saying the industry is “morally bankrupt” and “financially risky”. The New York City Pension Fund itself became the first major public pension system in the US to completely divest from private prison companies earlier this year.

A report commissioned by the European Commission looking at a social innovation strategy has recommended the creation of an EU Social Innovation Agency and the establishment of a £1bn fund to catalyse instruments like social impact bonds. The report, commissioned by the European Commission’s Directorate-General for Research and Innovation and written by consultancy PlusValue, also recommends the development of impact measurement frameworks. Link. Governance

MSCI has reported a $2.4m, or 21.2%, increase in ESG revenues to $13.9m in the third quarter of 2017. “The increase in ESG revenues was driven by higher ESG Ratings product revenues, which is benefiting from increased investments,” the firm said.

The Securities Exchange Commission approved the new audit standard of the Public Company Accounting Oversight Board (PCAOB), which expands the content of the auditor’s report in an attempt to offer additional protection to investors. The PCAOB, the US audit regulator for listed companies, proposed in its standard to disclose the “communication of critical audit matters” (CAMs), which includes the disclosure of auditor tenure.

A report by the Fair Tax Mark and the Local Authority Pension Fund Forum (LAPFF) found that the majority of FTSE 50 companies comply poorly with the required Tax Strategy Reporting introduced by the UK Finance Act 2016. Just 17 companies, or 34% of the sample, published a Tax Strategy adequately following government guidance.

Meanwhile, the US PIRG Education Fund and the Institute on Taxation and Economic Policy published a report that tracks the use of offshore tax havens by Fortune 500 companies, among which the most popular destination is the Netherlands. “Most of America’s largest corporations maintain subsidiaries in offshore tax havens. At least 366 companies, or 73 percent of the Fortune 500, operate one or more subsidiaries in tax haven countries,” the report found.

As stewardship and governance codes proliferate, Hermes Investment Management, the £30bn fund manager owned by the BT Pension Scheme, has outlined its four factors that influence the success of a country’s Stewardship Code as: 1) support from local asset owners, 2) the driving force of a regulator and possibly the government, 3) sufficient interest from foreign investors, and 4) a regulatory environment that provides legal certainty for investors.

The Financial Reporting Council (FRC), the UK’s corporate governance watchdog, has responded to criticisms levelled at it by Sarasin’s Head of Stewardship, Natasha Landell-Mills in a recent “position paper”. In the letter, Paul George, the FRC’s Executive Director, expresses his disappointment about the criticisms, which were published in the Times last month.

UK campaign group, ShareAction, has highlighted the “significant financial risk” that shareholders in Royal Dutch Shell plc and BP face as both energy giants fail to comprehensively adapt their business models in line with a low-carbon transition. Despite the success of the ‘Aiming for A’ climate resolutions in 2015, both companies have been accused of doing the bare minimum, disclosing only the legal requirement in relation to climate risks.

Providing quarterly forward earnings guidance is increasingly on a downward trend among major companies according to a new report from FCLT Global. The report, Moving Beyond Quarterly Guidance: A Relic of the Past, says quarterly guidance does not improve valuation or reduce volatility and leads managements teams to under-invest in the future and contributes to poor earnings growth.