News that Norges Bank Investment Management is the subject of a new sitcom, “The Oil Fund”, with plotlines taking in the Ethics Council and a debate about how to ‘responsibly invest’ fossil fuel holdings, show how far the RI sector has come.
Although the fact that the Ethics Council apparently becomes the “nemesis” to a star in the investment team is clearly not a good sign, but all drama is ultimately about conflict.
If nothing else, this is as mainstream as you can get (though perhaps not the next ‘Big Bang Theory’ or ‘Friends’) and shows sustainable investment issues have really broken cover.
Indeed, it’s become hard to ignore, given that this weekend alone saw COP24 in Poland come up with a Paris roadmap, investors putting pressure on one of the world’s most systematically important carbon emitting companies and the Governor of the Bank of England floating the idea of stress-testing banks for climate risk.
But some parts of the market are trailing in the wake of all these developments, which almost seem to take place on a different plane of existence.
For example, in the UK, pension trustees are being advised by the AMNT trustee body and UKSIF that they should conduct a “skills analysis” of their investment consultants to see whether they are up to the mark in terms of ESG.
To do this, trustees can in turn can use independent advisors, or “seek feedback from the fund management community”.
This is unfortunate, as it was the “fund management community” that was resistant to the AMNT’s Red Line Voting initiative, a set of voting instructions on ESG issues.As the AMNT acknowledges, fund managers “are often unwilling to adopt the ESG policies of their clients, especially those in pooled fund arrangements” so how trustees are to rely on them here is hard to see.
This is all in the context of a rapidly evolving regulatory environment in the UK and, although the consultants covered by the report do appear to be willing to help trustees on ESG issues, is it a case of the tail wagging the dog or, even worse, the blind leading the blind?
There’s also a parallel universe when it comes to divestment.
“Strong and stable companies that pay good dividends”
On the one hand there’s 350.org’s Bill McKibben saying in The Guardian that divestment is starting to hit the fossil fuel industry and that the 1,000th divestment has just happened.
But on the other are those running pension funds who repeatedly tell us they hold the likes of Shell and BP because they are, in the words of one, “financially strong and stable companies that pay good dividends”.
In the run-up to COP24, 415 investors representing $32trn called for greater government action on climate change. They called for a global phasing out of coal power and fossil fuel subsidies and a “meaningful price on carbon”.
So, at that overarching, policy level it’s clear that investors are at the table. But it’s on the ground where there is an implementation issue, particularly for small funds of the type that the AMNT represents.
How to square that circle? One to ponder over your Christmas dinner perhaps.