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RI ESG Briefing, Oct. 23: OPtrust, GPIF, Pensioenfonds PGB, LGPS Central, PKA, Council of Institutional Investors

The latest industry developments.

Environmental

OPTrust, the C$20.3bn (€13.3bn) Toronto-based investor, is working on aligning its plans to cut climate risk with its stance on ‘member-driven investing’ – its version of liability-driven investing, according to a report in Pensions & Investments citing CIO James Davis.

Japan’s GPIF – the largest single pension fund in the world with over $1.5tn in assets – has become a supporter of Climate Action 100+, the investor initiative focused on effective shareholder engagement around climate. Signatories commit to engaging with “systematically important greenhouse gas emitters” to improve corporate governance on climate change, curb emissions and strengthen climate-related financial disclosures. Société Générale’s Lyxor Asset Management arm has also joined.

Dutch multisector fund Pensioenfonds PGB says it is reducing its investments in coal in what it says is the first concrete step it has taken to align with the Paris agreement.

The HSBC UK Pension scheme is to invest £250m in solar plants, wind farms and other renewable energy infrastructure – capable of collectively generating “enough clean electricity for the entire population of Oxford”. The investment, intended to support the UK’s low-carbon industries and associated supply chains, will be managed by renewables specialist Greencoat Capital. Russell Picot, Chair of the Trustee Board at HSBC Bank Pension Trust, said such inflation-linked assets are well suited to the scheme’s long-term liabilities.

Some 161 investors with more than €21trn in assets have called on pension funds to integrate climate risks and opportunities into their investment processes in a new report. The Institutional Investors Group on Climate Change (IIGCC) – which counts firms such as Legal & General, BlackRock and Aviva among its members – also encouraged pension fund boards to move beyond regulatory requirements around climate action, including the UK government’s new guidance. IIGCC chief executive Stephanie Pfeifer said integrating climate change considerations “simply makes financial sense”.

Danish pension fund PKA has made a commitment to allocate 10% of its assets to climate-related projects by 2020. Announced at the Global Climate Action Summit in San Francisco last month, the investments are expected to total around 30 billion DKK (€4bn). Most of PKA’s current climate-related investments are in wind farms and biomass, in a portfolio which has returned 10% annualised since inception.

Social

Ten southeast Asian regulators – including that of Malaysia, Singapore, and Thailand – are reportedly set to introduce standards for social and sustainability bonds to help boost the region’s bond market. The Association of Southeast Asian Nations (ASEAN) Capital Markets Forum announced its latest initiative less than a year after the introduction of its green bond standards.

Yale University may consider exiting “socially irresponsible” private equity and hedge fund investments, it has reportedly said in its ethical investment policy. Yale, which has about 60% of its $29.4bn endowment in such alternative assets, said it “might be able to avoid certain investments”, or work with external managers to “liquidate the relevant position”. The news comes amid student pressure for the university endowment to address ethical issues like gun violence. The policy said divestment from private prison firms, however, was “unwarranted”.

The Responsible Finance & Investment Foundation (RFI) has announced a new initiative to bring transparency and accountability within the responsible finance industry. The CDIT Initiative (pronounced “Seed It”), with an initial 25 signatories, aims to promote trust between the financial sector and civil society, and tackle “large informational barriers in translating general responsible finance principles into concrete actions that have been shown to be successful”.h6. Governance

Hermes Equity Ownership Services has been appointed to provide voting and engagement services to LGPS Central Ltd., a UK pooling vehicle managing £14bn for nine Local Government Pension Scheme funds. LGPS Central is one of eight pooling vehicles across England and Wales, and follows the lead of another – the Brunel Pension Partnership pool – which announced in September it would use Hermes’ stewardship and engagement arm.

The Council of Institutional Investors, the US investor body, has welcomed the CommonSense Principles 2.0, a set of corporate governance principles that were unveiled on October 18 by a group of business and investment leaders. The principles are an updated version of a code developed in 2016 by JPMorgan Chase Chairman and CEO Jamie Dimon and other business leaders. “We see significant improvement in CommonSense 2.0,” CII Executive Director Ken Bertsch said. Link

A new report from Ceres, Environmental Defense Fund (EDF) and the Principles for Responsible Investment aims to be a tool to help oil and gas companies and their investors to bring methane reporting in line with the TCFD framework. It is called Setting the Bar: Implementing the TCFD Recommendations for the Oil and Gas Industry.

Governance services firm Glass Lewis has teamed up with ESG research house Sustainalytics to offer a corporate governance data solution for institutional investors. The service delivers governance data on 20,000 companies to investors in a “monthly data deliverable” consisting of more than 2.5m individual data points, which a focus on areas such as director elections, board independence and executive and director remuneration.

Broadridge Financial Solutions has published a new report on implementing the revised Shareholder Rights Directive across European member states. The report explains the opportunity to advance corporate governance and the core areas of change for firms involved in the proxy voting lifecycle, while highlighting the need for harmonisation across national jurisdictions.

London-based investment manager Brooks Macdonald, managing assets of £10bn (€11.3bn), has announced the launch of its “Responsible Investment Service” in response to demand from clients. The new service, headed by Investment Director, Ben Palmer, offers both an “avoidance-based approach” and a strategy which “actively seeks to invest in funds that provide solutions to sustainability issues, or that have strong corporate policies and outputs relating to ESG”.

MSCI has launched a suite of six indexes incorporating a range of ESG exclusions, including around tobacco, weapons, coal and oil sands extraction. The suite is made up of: MSCI EMU ESG Screened Index; MSCI USA ESG Screened Index; MSCI Europe ESG Screened Index; MSCI World ESG Screened Index; MSCI Japan ESG Screened Index; and MSCI Emerging Markets IMI ESG Screened Index.

The Imperial College Business School has announced an upcoming free online course aimed at educating investment professionals on climate change, including the scientific basis of the phenomenon along with associated financial risks and opportunities. The 20-hour course is also aimed at “risk and strategy managers anticipating the impacts from the Financial Stability Board’s Task Force on Climate-Related Financial Disclosures (TCFD) recommendations”. Click here to be notified upon the launch of the course.

Nearly 80% of salmon farms with eco-certification do not meet the label’s sustainability requirements, a new review has found, with cases of sites retaining their eco-status despite sea lice levels up to 21 times the recommended limit.