RI ESG Briefing, September 5: Australia’s Perpetual excludes Commonwealth Bank from ethical fund

The latest ESG market developments

Environmental

Legislators in California have stepped up efforts to combat climate change, with two climate bills having passed both houses of legislature. Fossil Free California’s bill SB964 defines climate-related financial risk law for the first time in the US, and requires CalPERS and CalSTRS to report on that risk. The house also voted to require that 100% of the state’s electricity come from carbon-free sources by 2045, media reports have confirmed.

Three Japanese banks will have drop a third of planned coal projects if they are to comply with their own coal policies, new analysis has found. Sumitomo Mitsui Banking Corporation (SMBC), Mitsubishi UFJ Financial Group, Inc. (MUFG) and Mizuho Financial Group (Mizuho) have all recently revised their policies on supporting coal power.

A Swiss firm that uses a costly technology to suck carbon dioxide from the air has raised $31m in new investment, according to media reports. Zurich Cantonal Bank was among investors in Climeworks AG, which uses filters and fans to extract carbon dioxide from the atmosphere at a cost of about $600 a tonne.

Social

The Dutch Banking Sector Agreement on Human Rights has published its first annual report. The initiative saw 11 Dutch banks commit to meeting their human rights responsibilities in the OECD Guidelines and the United Nations Guiding Principles on Business and Human Rights (UNGPs).

UK councils invest over £9bn in fracking companies through local authority pension funds, despite many having voted against the practice in their areas, new data released by 350.org, Platform and Friends of the Earth has revealed. The Greater Manchester Pension Fund invests the largest amount, at nearly £1bn, while the councils of Dumfries and Galloway, Greater Manchester and the London Borough of Merton have the highest percentage (6-7%) of their pension funds invested in fracking.

The California State Assembly has adopted a bill that will see CalSTRS and CalPERS banned from buying debt from the Turkish government, because of its refusal to acknowledge the Armenian Genocide. Adopted with a vote of 36-0 and four abstentions, the Turkish Divestment bill (AB-1597) was sent to Governor Jerry Brown for his signature. CalPERS has $185m and CalSTRS has several hundred million dollars in bonds issued by the Republic of Turkey, which would need to be liquidated within six months of the passage of a federal law imposing sanctions on Turkey.

Californian state legislators have also passed a bill that would mandate a woman on every company board. If signed into law, publicly-traded companies headquartered in California would be required to place at least one woman on their board by the end of next year or face a penalty.

Sustainability still plays a minor role in institutional investors’ asset allocation decisions, a new Schroders study has found. The Schroders Institutional Investor Study 2018 surveyed 650 investors with $24trn in AUM collectively, and found that almost a third of investors (32%) said that the sustainability focus of the investment had little to no influence on their investment decision making.h6. Governance

Listed Australian wealth manager Perpetual has has divested scandal-hit Commonwealth Bank of Australia from its A$1.3bn ethical fund due to revelations of corporate misconduct, according to a Reuters report citing a fund update from Perpetual.

The International Transport Workers’ Federation (ITF) and European Transport Workers’ Federation (ETF) are calling for shareholders to oppose the re-election of Ryanair chairman David Bonderman, the 75-year-old founder of private-equity titan TPG Holdings, and overhaul the company’s corporate governance practices. The airline holds its AGM on September 20. Advisory firm Glass Lewis last month advised clients to vote against the chairman. In a statement quoted by Irish media, Ryanair said it shareholders will pass all AGM resolutions by a large majority this year.

Quantas has recommended that shareholders vote against a resolution calling on the listed flagcarrier to review its involvement in deportations by the Australian government. The resolution, which was filed by Australasian Centre for Corporate Responsibility (ACCR) last month, argues that without the implementation of safeguards, the airline is exposed “to the probability of complicity in serious human rights violations” which – moral concerns aside – could have a “material” impact on the company. Quantas’ AGM will be held on October 26.

Multi-sector pension scheme PGB is to exclude companies selling firearms to civilians in a first for a Dutch pension fund. The decision – which comes after members expressed opposition to investment in weapons and concerns about gun violence in a 2017 survey – will see the €24bn scheme divest from US supermarket chains Walmart and Kroger.

The £30bn Brunel Pension Partnership has appointed Hermes Equity Ownership Services (EOS) – Hermes’ stewardship and engagement arm – to provide voting and engagement services. Brunel said Hermes will work with the pool’s investment managers to promote “investing for a world worth living in” by engaging in an ESG-conscious way.

Camberview Partners, the governance advisory firm founded by former BlackRock executive Abe Friedman, has agreed to be bought by New York-based M&A advisor PJT Partners for around $165m (€143m).

Italian group Generali is reportedly in talks to acquire Paris-based boutique Sycomore Asset Management and expand its range of environmental and SRI funds. Laurent Deltour, co-founder and former CEO of Sycomore AM, stepped down from his role just four months ago. Both Sycomore and Generali declined to comment, according to reports.

One of Scotland’s largest unions has proposed a radical restructuring of local authority pension funds, after the revelation that £138m of Scottish pension cash was funding US immigration detention centres. UNISON is recommending a merger of the 11 pension pots and the establishment of a central ESG unit that would would develop ethical investment in “accordance with the values” of union members.