RI ESG Briefing, Oct. 25: Deutsche’s asset management chief Moreau exits

The latest ESG market developments


New York Attorney General Barbara Underwood has sued oil major Exxon Mobil alleging the company has misled investors for years about the risks of climate change regulations on its business. The suit, filed in New York Supreme Court, seeks undisclosed damages, a court order for a review of the company’s representations, and that the company corrects “numerous misrepresentations” to investors. The company called the allegations “baseless” and a “product of closed-door lobbying by special interests, political opportunism and the attorney general’s inability to admit that a three-year investigation has uncovered no wrongdoing”. A spokesman added: “The company looks forward to refuting these claims as soon as possible and getting this meritless civil lawsuit dismissed.”

Standard Chartered has announced the launch of its refreshed public position statements on environmental and social impacts. The new requirements announced today include: not financing new plantations or livestock ranches which convert or degrade High Carbon Stock forests, peatlands or designated legally protected areas; not financing operations that grow, process or trade soy from the Brazilian Amazon and Cerrado; not financing asbestos mines and mines that conduct Appalachian mountaintop removal. It also covers not providing financial services to clients who conduct testing on animals for cosmetic or personal care products. It will also only provide services to agri-business clients who use cage-free or crate-free production systems for livestock.

Ircantec, the French public sector pension scheme, says it plans to exit its equity and traditional bond holdings in specialised energy and non-European integrated oil and gas companies over climate change concerns. By year-end the scheme plans to have got out of traditional corporate bonds from fossil fuel companies – with the proceeds going into green bonds. Laetitia Tankwe, Ircantec’s responsible investment adviser, is currently in the running for a board seat at the Principles for Responsible Investment.


A new study by Harvard Business School Professor George Serafeim shows that significant positive alpha can be unlocked using a combination of TruValue Labs’ Big Data and traditional ESG ratings from MSCI. “The paper shows that combining big data and analyst-driven ESG information allows one to identify ‘value’ opportunities in the ESG space, and, as a result, construct an investment strategy that delivers alpha while investing in companies with superior ESG performance scores,” Serafeim said. “The combination yields powerful results.” The study – Public Sentiment and the Price of Corporate Sustainability – analyzes data for the years 2009-2018 provided by TruValue Labs and by MSCI.

Responsible Investing continues to be a key area of focus for financial advisors according to the latest Eaton Vance Advisor Top-of-Mind Index (ATOMIX) survey of more than 600 advisors, with nearly eight out of 10 (79%) reporting they incorporate Responsible Investing into their practices. Of those, 44% said it is an important part of their practices, up from 31% in the second quarter of 2018. Thirty-five percent reported increased interest from clients and 60% said Responsible Investing is an ongoing topic of discussion.h6. Governance

Nicolas Moreau is leaving his post as head of Deutsche Bank’s asset management arm DWS to be replaced by Germany private clients head Asoka Wöhrmann, a former global Chief Investment Officer for the entire fund management business. Moreau, a former Chairman and Chief Executive of AXA France, where he developed a strong ESG stance, leaves after DWS reported billions in outflows in the third quarter. Moreau joined what was then called Deutsche Asset Management in 2008 and helped steer it through an IPO and the rebranding to DWS.

The Corporate Reporting Dialogue, the group of sustainability bodies like CDP, the Sustainability Accounting Standards Board and the International Integrated Reporting Council is set to unveil a major “alignment” project on November 7, according to IIRC CEO Richard Howitt. In a speech in Geneva, he said it would be a “major step towards enhancing comparability” amid market perceptions about a “proliferation of frameworks”.

US investor body the Council of Institutional Investors (CII) has filed petitions with the New York Stock Exchange and the NASDAQ, asking both to limit listings of companies with dual-class share structures. CII is asking the exchanges to amend their listing standards to require that, in future, companies seeking to list that have multiple share classes with differential voting rights include in their governing documents provisions that convert the share structure within seven years of the initial public offering (IPO) to “one, share-one, vote”. CII Chair Ash Williams, executive director and Chief Investment Officer of the Florida State Board of Administration, said: “While some companies that are controlled by virtue of special voting rights function as benevolent dictatorships, we have seen others stumble because of self-dealing, lack of strategic planning and ineffective boards.”

Brunel Pension Partnership, the UK pension pool, has announced the first two investments of its Secured Income Portfolio, one of the five Private Market portfolios Brunel has developed to meet its clients’ needs. Secured Income is an outcome-focused portfolio developed by Brunel working in partnership with its LGPS Clients and their investment consultants to deliver UK inflation- linked income returns. Long-lease property is the cornerstone asset class of this portfolio. Brunel has chosen the M&G Secured Property Income Fund and the Aberdeen Standard Long Lease Property Fund, with £169m in aggregate to be invested in each fund.

Governance advisory firm Glass Lewis has updated its policy guidelines for the United States, Canada, Israel, and Shareholder Initiatives, and says that updates to other markets will be released soon. In developing the guidelines, the firm considers regulatory developments, academic research and evolving market and incorporates insights from discussions with institutional investors, trade groups and other market participants, as well as meetings of the Glass Lewis Research Advisory Council. As for Environmental and Social Risk Oversight: “We have codified our approach to reviewing how boards are overseeing environmental and social issues.”

Nordea says it has found “compelling evidence” that ESG research deserves a place in credit investing, as high ESG scores reduce exposure to tail risk and enhance long-term returns. It adds what it calls its “high ESG” bond portfolio shows 8% outperformance versus its “low ESG” bond portfolio. And it says its data “clearly indicates” that changes in ESG ratings act as a leading indicator of creditworthiness. The comments come in a research note by analysts Johan Hallgren, Hugo Fredriksson and Elias Porse and follow analysis of 10,000 EUR-denominated bonds.