RI ESG Briefing, October 17: IIGCC releases climate guide for pension trustees

Environmental

The Institutional Investors Group on Climate Change has released a guide to help European pension fund trustees and board members meet their fiduciary duty to address climate risk. The investor group, which represents €21trn, has worked with TPT, Legal & General Investment Management and the Finance Dialogue to produce Addressing Climate Risks and Opportunities in the Investment Process to “help senior decision-makers ensure their organisations are not only meeting regulatory requirements, but also well-placed to take advantage of the benefits from investing in low-carbon opportunities”.
An academic initiative prompted by calls from Norges Bank Investment Management and other institutional investors has resulted in 11 papers being selected to help investors better understand key climate finance issues. The Review of Financial Studies Climate Finance Initiative was announced last year, and saw 106 papers submitted, which were whittled down to just 11. Topics include pricing uncertainty triggered by climate change, the impact of sea level rises on real estate investments, climate policy risk and pricing in bank lending. The initiative is being hailed as “the first formal body of knowledge at the intersection of climate science and finance”. A conference to showcase findings was hosted by the Imperial College Business School.
Renewable energy is to see a boom in investment, according to a new report from Bank of America and the European Bank for Reconstruction and Development. Renewables have reached ‘grid parity’ – in which they are as cheap or cheaper than conventional energy sources – in many places, and the continued introduction of competitive auctions will lead both to a steep drop in electricity prices and an increase in investment in many countries.
Masdar, the Abu Dhabi renewable energy company owned by state investment company Mubadala, has signed a green revolving credit facility to fund investments in its global clean technology and sustainable real estate projects. The three-year facility was arranged with Société Générale, Sumitomo Mitsui Banking Corporation, UniCredit, and First Abu Dhabi Bank.
PRI co-founder Carlos Joly has said Norway’s sovereign wealth fund should divest its holdings in oil and gas companies, or risk turning Norway into a “has-been rich country”. The comments from Joly, who co-chaired the expert group that drafted the PRI, came in an open letter to Finance Minister Siv Jensen. Norges Bank wrote to the ministry last year, urging it to sell off more than NOK300bn (€32bn) worth of oil and gas equities, but a commission later argued against such a divestment.h6. Social

Canadian politicians’ are reportedly “alarmed” that the $366.6bn Canada Pension Plan Investment Board (CPPIB) increased its holdings in US immigrant detention firm Geo Group almost 13-fold over the past year. According to the story, published by The Guardian, CPPIB grew its investment from 12,000 shares to 153,500 shares – worth $4.2m – in the year ending August 2018, as well as upping its investment in the second biggest US private prison company, CoreCivic. CPPIB pointed out that the holdings amounted to just 0.001% of the fund, and were from passive investments.
Meanwhile, CPPIB has released its latest sustainability report, which claims that in 2017 it voted against Chair nominations at 45 Canadian firms because they didn’t have any female directors and, within a year, nearly half had added female directors to their boards. On climate, it pointed to a number of developments over the last year: it has established a Climate Change Steering Committee, Climate Change Toolkit and a Dynamic Global Energy Outlook. It also established a dedicated renewable energy group and has since invested more than $3bn in the sector, as well as issuing a green bond to finance renewables.
Equfund, a community benefit society, is looking to raise £5m from the British public with a new Sanctuary Bond, designed to combat escalating homelessness in the UK. The minimum investment is £1,000 with a maximum of £250,000. Investment is offered over a 3-15 year period with zero interest and inflation-linked options. Funds raised will be used to purchase and renovate properties to let to the “hidden homeless” – for example families with young children fleeing domestic violence.

Governance

Brazil’s second largest pension fund, Fundação Petrobras de Seguridade Social (Petros), has become the 17th signatory to the country’s stewardship code. The code, curated by the industry body Associação de Investidores no Mercado de Capitais (Amec) is also backed by Aberdeen Standard, BlackRock, Hermes IM and Robeco. Petros has R$81bn under management.
The Church of England has reportedly not attended Amazon and Google AGMs for at least three years, though it has insisted its investments mean that it is “in the room” to raise concerns over the tech giants’ tax practices. The church said it engages with the firms in other ways, but would not disclose any further information. A spokesman for the Church Commissioners said: “To judge our work solely on our AGM attendance would be wholly misleading,” and pointed to the church’s ethical investment policy, which favours private engagement, opting for “public escalation” only in “exceptional cases”.