RI ESG Briefing, October 22: KfW, Norges Bank, ICMM, Asset Owners Disclosure Project

Environmental

German development banking giant KfW has issued another green bond denominated in euros, raising €1.5bn in the process and bringing the total volume outstanding for such debt to around €5.5bn. Among the 60 investors that snapped up KfW’s latest green bond were pension investors AP2 and APG; Dutch development bank FMO; and the Swedish retailer IKEA. The triple ‘A’ rated bond, due in October 2020, pays a coupon, or interest rate of 0.125% per annum. KfW’s green bonds are certified as environmentally beneficial by Norway-based CICERO (Centre for International Climate and Research – Oslo).

Norges Bank Investment Management has published an updated water expectation document to serve as a “starting point” for its interaction with companies on the topic of water management. Boards should ascertain that relevant water challenges and opportunities are integrated in corporate strategy and investment planning, risk management, and reporting,” the fund says – adding they should ensure that responsibilities are clearly defined within the organisation and they should “guide, monitor, and review” management in these efforts.

Allianz Global Investors (AGI) has become the latest financial firm to join the Climate Bonds Initiative, the London-based NGO that promotes green bond investing, as a partner. By supporting the initiative, partners get access to the NGO’s data on the green bond market, advice on market positioning as well as ample networking opportunities. Said Franck Dixmier, Global CIO Fixed Income at AGI: “Joining the Climate Bonds Initiative reflects our support for the development of the green bond market. We think green bonds represent a compelling opportunity to promote investment in climate-related solutions.”

Social

ImpactAssets, the US-based nonprofit financial services firm, has released its 2015 impact investing showcase, the ImpactAssets 50 (IA 50), a free online resource for investors and financial advisors. The fifth annual guide features fund managers representing private debt and equity investments that deliver social and environmental impact as well as financial returns. Fund managers included in the IA 50 2015 manage an estimated $13.3 billion in assets devoted to creating measurable, positive impact.

Institutional investors say businesses need to provide them with non-financial information that outlines visible, measurable risks to the company’s performance or risk losing their potential investment. The finding comes from the 2015 annual survey by EY’s Climate Change and Sustainability Services, Tomorrow’s Investment Rules 2.0, the second consecutive survey looking at institutional investors’ views about the use of non-financial information in making investment decisions. The global survey of more than 200 institutional investors found that non-financial factors, including those related to environmental, social and governance (ESG) risks, influence business operations and investors’ decisions.h6. Governance

Norges Bank Investment Management has reportedly criticised stock exchanges for selling market data to high-frequency traders. The Financial Times quoted Chief Investment Officer Øyvind Schanke as saying in a speech at the World Federation of Exchanges annual meeting in Qatar that it “looked and felt” like insider trading. Schanke argued, the FT reported, that large investors were disadvantaged by letting banks and hedge funds put their trading systems adjacent to exchanges’ IT systems.

The Asset Owners Disclosure Project (AODP), the independent not-for-profit global group, has responded to remarks by Australia’s Future Fund on climate change. Future Fund Managing Director David Neal spoke at a Senate Hearing earlier this week and AODP Chair and former Liberal Leader John Hewson questioned the “blind faith” the sovereign fund appears to have has in asset managers and in short-term markets. “Mr Neal has outsourced accountability to investment managers. While the world’s leading funds are realising that managers and short-term markets are part of the problem, the Future Fund still clings to outdated risky models,” Hewson said. “Mr Neal talks endlessly of his reliance on fund managers without saying how he controls their carbon diet or protects the fund from risks that short-term managers don’t see until it is too late,” he added.

Responsible mining body the International Council on Mining and Metals (ICMM) has written to Christiana Figueres, Executive Secretary of the UN Framework Convention on Climate Change (UNFCCC) to offer support for an international climate change agreement. A statement endorsed by the CEOs of the 23 ICMM member companies says: “We support an effective binding global agreement on climate change. We support a price on carbon, and other market mechanisms that drive reduction of greenhouse gas emissions and incentivise innovation.”

Japan’s new corporate governance and stewardship codes are taking time to have an impact on investor behavior, according to a Financial Times report citing comments from CLSA strategist Nicholas Smith and a new paper by the American Chamber of Commerce in Japan on the role of the giant Government Pension Investment Fund (GIPF). “Until the GPIF turns activist, there is little to suggest anyone else will,” the paper says.

Corporate governance firm Nestor Advisors has published its fifth report examining the governance of Europe’s 25 largest banks. The 2015 report takes a “long view” of governance change in the sector, identifying the drivers for change and the issues that still need to be tackled. Some of these issues, like culture and reputation, are hard to crack, Nestor reckons.