RI ESG Briefing, October 23: Ceres, FRC, Schroders, CalPERS, World Benchmarking Alliance, Norges Bank, ERAFP

The latest sustainable finance developments

Environmental

Ceres has launched a new centre focused on driving action to reduce the worst financial impacts of the global climate and sustainability crises. According to the sustainability shareholder advocacy group, the Ceres Accelerator for Sustainable Capital Markets will work with financial regulators to recognise and act on climate change, and work with asset owners to transition to net zero by 2050. The project has raised $3m in seed funding and is looking to raise another $5m.

The Climate Bonds Initiative says progressive green bond and loan issuance for 2019 has just passed $200bn, marking an all-time high for the green market and “setting the stage” for annual issuance post December to meet Climate Bonds Initiative forecast range for the year of between $230-250bn.
Companies are falling short of investor expectations on climate reporting, according to a new report from the UK’s FRC Financial Reporting Lab. ‘Climate-related corporate reporting: Where to next?’ calls on firms to bridge the gap with expectations and provides practical guidance about where companies can improve reporting, recommending use of the Task Force on Climate-related Financial Disclosures (TCFD) framework.

Schroders says its corporate revolving credit facility has been converted into an ESG-linked facility, with pricing dependent on the fund manager’s performance against three of its ESG Key Performance Indicators (KPIs): membership of the Climate Group and Carbon Disclosure Project RE100 initiative; Women in Finance Charter; signatory to the Principles for Responsible Investment.

AXIS Capital, a specialist Bermuda-based insurer, has announced that it will no longer insure new thermal coal, oil sands and pipeline projects. It will also end policies for companies which generate at least 30% of revenue from thermal coal mining, produce at least 30% of their power from coal or hold more than 20% of their reserves in oil sands. The company has said it will no longer invest in companies which meet the preceding criteria.

The Loan Syndications and Trading Association (LSTA) is working on standards for green loans and sustainability linked loans. Tess Virmani, who leads on public policy at LSTA, is spearheading a working group including Bank of America, Citi and Blackrock. The group will look at standardisation around KPIs, disclosures and further guidance.

Social

CalPERS is no longer investing in private prison firms CoreCivic and Geo Group, according to media reports. The pension fund, which was high on the list of US public pensions with shares in private prisons earlier this year, has faced pressure from NGOs and trade unions to divest on the back of controversy surrounding detention policies under the Trump administration. The move also follows the signing of new state legislature banning new contracts with private prison companies from 2020. CalPERS’ chief of public affairs Wayne Davis was quoted as saying: “It was not a divestment — it was an investment decision. Our CIO Ben Meng, who joined us in January, conducted a comprehensive review of our investments, including our benchmarks and indices. Based on that review, we removed 217 companies including CoreCivic & Geo Group.” CalSTRS divested from the two companies in late 2018.h6. Governance

The World Benchmarking Alliance has launched the Seafood Stewardship Index ranking 30 of the most influential seafood companies in the world on their commitments, transparency and performance to meet the United Nations’ (UN) Sustainable Development Goals (SDGs).

Norges Bank Investment Management has written to the US Securities and Exchange Commission as part of a public consultation on the modernization of regulation S-K Items 101, 103 and 105 covering corporate disclosure. “As intangible assets can be an important driver of long-term value creation, we welcome the SEC’s proposal to include human capital resources as a disclosure topic under Regulation S-K. It is relevant for investors to be informed of human capital measures or objectives that the board and management focus on in managing the business,” it said.

French state pension fund ERAFP has launched a call for tenders to renew its convertible bond management mandates. The public sector additional pension scheme will award three SRI mandates (two active and one stand-by) for the international convertible bond portfolio. ERAFP is launching a call for tenders to award mandates to manage international convertible bonds in accordance with its SRI approach. The indicative size for the two active mandates will be around €700m, it said.

A further 64 institutional investors have filed lawsuits against Danske Bank A/S on the back of its money laundering scandal, media reports have said. A total of 232 plaintiffs are asserting nearly US$800m in losses as a result of a massive Russian money-laundering scheme and cover-up at the bank’s Estonia branch. Grant & Eisenhower director Olav Haazen said the law firm expected to bring another wave of plaintiffs to the case in the coming months.

Investors representing over $11trn in assets – including New York State, PGGM and Aviva – have written to the Australian extractives sector calling on it to do more to rein in trade associations lobbying against climate action. The open letter was convened by the Institutional Investors Group on Climate Change (IIGCC) and its Australian counterpart the Investor Group on Climate Change (IGCC).

Thematics Asset Management, an affiliate of Natixis Asset Management has signed up to the Principles for Responsible Investment. The newly-launched firm includes five fund managers nabbed from Swiss-based Pictet Asset Management, including three who previously ran the Pictet Water fund.

Australian shareholder advocacy non-profit group the Australasian Centre for Corporate Responsibility (ACCR) has filed two more climate lobbying resolutions at Australia and New Zealand Banking Group (ANZ) and the National Australia Bank (NAB). Its resolution at BHP, last week, was supported by 22% of shareholders at the annual meeting of the London listed arm of the mining giant.

ExxonMobil was in court yesterday for the first time over claims it misled shareholders about climate change. The case has been brought against the US oil giant by the New York Attorney General’s office. The New York Times quoted lawyer, Kevin Wallace, who, speaking in his opening statement for the city, argued that “the gap between what Exxon said it was doing and was actually doing was significant, and had an impact on the bottom line”.