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Industry News: ESG

 

Spotlight on Investors: APG

APG provides management consulting, asset management, pension administration, communication and employer services for pension funds in the group pension market. They provide the pension for one in five families in the Netherlands, amounting to approximately 4.5 million people. APG operates globally with offices in Heerlen, Amsterdam, Brussels, New York and Hong Kong.

APG strives for a careful balance between people, planet and profit. They believe that concern for people and the environment can go hand in hand with good financial performance. APG utilizes its scale to exert influence on companies to comply with international guidelines for corporate responsibility and corporate governance.

Since 2016, they have been using the United Nations Sustainable Development Goals as a guideline for these sustainable investments. At the end of 2017, APG had invested 12% of their total AUM (€55.3 billion) in Impact Investing contributing to 13 out of 17 Sustainable Development Goals.

Click below for more information about APG's steps towards Responsible Investment.

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East Capital rolls out ESG China fund

Opalesque Asia: Swedish asset manager East Capital has launched a UCITS China A-Shares fund that incorporates environmental, social and governance (ESG) investing.

The asset manager specialised in emerging and frontier markets announced the launch of a UCITS version of its successful China A-Shares strategy, providing investors with easier access to investment opportunities on the Chinese onshore equity markets, facilitated in recent years by capital market reforms and the stock connect programme.

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ESG roundup: Sustainable investing is ‘low priority’ for many allocators

IPE: Sustainable investing is a low priority issue for most institutional investors, according to a survey by Schroders.

The UK-listed asset manager polled 650 investors around the world running $24trn (€20.6trn) and found that, although they expected sustainable investing to become a bigger issue in the next few years, it was not currently a high priority for most.

Almost a third (32%) of those questioned by Schroders said that how sustainable an investment was had “little to no influence” on the decision to buy.

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Aberdeen Standard signs ‘green deal’ with The Australian National University

Institutional Asset Manager: Aberdeen Standard Investments is to manage a new Australian Fixed Income strategy with an emphasis on ESG on behalf of the The Australian National University (ANU). 

ANU Endowment Fund has selected Aberdeen Standard Investments to manage a strategy that invests in active Australian Fixed Income with an ESG overlay - facilitating the negative screening of securities issued by any company that derives in excess of twenty per cent of its revenue directly from tobacco, coal, gambling, or adult entertainment.

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PGB to exclude supermarket chains over firearm sales

IPE: The €24bn multi-sector scheme PGB has become the first Dutch pension fund to exclude companies selling firearms to civilians.

As a result of the decision, the scheme said on its website that it would divest its stakes in US supermarket chains Walmart and Kroger. The decision followed a survey of its members conducted in 2017, which indicated that they didn’t want the scheme to invest in controversial weapons.

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Financials fail to prove top diversity in Thomson Reuters index

Investment Europe: Financial groups are failing to beat companies operating in the professional services, pharmaceutical, drinks making, retail, telecoms, cosmetics and other industries, when it comes to the top decile and top quartile rankings in the latest Thomson Reuters Diversity & Inclusion index.

The index is based on relative performance measures covering some 7,000 companies. Each company is scored on diversity, inclusion, people development and news controversy factors. Only those with scores across all four areas are assigned an overall score.

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European pension fund trio backs climate risk investment project

IPE: Several European pension funds, including Sweden’s AP1, are launching a project on climate change risks they say could help inform portfolio decisions in the future.

Dutch pension funds PME, the €46.7bn metals scheme, and Philips Pensioenfonds, are also involved. Alongside Dutch insurer a.s.r., Canadian pensions manager OPTrust and financial technology firm Ortec Finance the three pension funds – which have nearly €100bn in assets between them –  described the work as a “cutting-edge research project to integrate climate change into strategic investment decisions”.

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DWS Launches First ESG Money Market Fund in the U.S.

BusinessWire: DWS Group today announced the launch of DWS ESG Liquidity Fund (ESGXX), the first money market fund available in the U.S. to apply ESG (Environmental, Social and Governance) criteria1. The fund will invest in high-quality, short-term, U.S. dollar-denominated money market instruments paying a fixed, variable or floating interest rate while also filtering for various ESG factors using DWS’s proprietary software – the ESG Engine.

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Spotlight on Investors: Ilmarinen

Ilmarinen is as old as Finland’ earnings-related pension system. Ilmarinen was established in 1961 by Finland’s largest insurance companies and six smaller insurers.

Ilmarinen's responsibility is exhibited in how they take care of a key component of Finnish social security: pension cover. The pension’s earnings directly impacts the wellbeing of Finns. Ilmarinen also promotes good daily workplace practices. They invest pension assets so that the return on them also secures the pensions of future generations. In addition, Ilmarinen supports business in Finland by being a major and active owner of Finnish companies.

To read more on Ilmarinen's Corporate Responsibility, click here.

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Investors ‘Remiss’ in Overlooking Physical Climate Risks – Schroders

IPE: Investors have not been paying enough attention to physical climate risks, as opposed to the risks posed by steps to combat climate change, according to Schroders.

With temperature rises lagging increases in greenhouse gas concentrations in the atmosphere by around 40 years, further disruption from the effects of changing weather patterns looked unavoidable, the asset manager said in a new report. This meant bigger risks to physical assets and infrastructure.

With the exception of the energy sector, companies generally showed an appreciation of the risks posed by the disruptive impacts of physical climate change, wrote authors Andy Howard and Marc Hassler.

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California Pushes to Put Women on Company Boards

BBC: Politicians in California want listed companies based in the state to have at least one woman on their boards. The state's assembly voted in favour of the idea and the bill is expected to pass California's senate, which has backed an earlier version. It would then go to the Governor, Jerry Brown, who is yet to state his position. If the bill becomes law, the state would be the first to impose such a quota.

California would join countries such as Norway and Germany, which have also set rules to increase the number of women on corporate boards

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Pictet Asset Management Launches SmartCity Thematic Fund

Institutional Asset Manager: Pictet-SmartCity is a global thematic equities strategy that aims to exploit the powerful trends driving urbanisation. Its objective is long-term capital growth by investing in companies around the world that are helping to develop the cities of tomorrow.
 
These companies will be active mainly, but not exclusively, in the following areas: mobility and transportation, infrastructure, real estate, sustainable resources management, as well as enabling technologies and services supporting the development of better urban environments. 

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One Man’s Quest to Make Socially Responsible Investing More Responsible

Bloomberg: It’s an age-old investing question. Can you do good and do well at the same time? Ethan Powell is on a mission to prove that you can.

The 43-year-old former hedge funder is using his non-profit finance firm, Impact Shares Corp., to create a new way of doing socially responsible investing. From his office in Frisco, Texas, he’s setting up funds that eschew popular one-size-fits-all ESG models for ones that not only are built hand-in-hand with specific charities, but also fork over the bulk of their fees to those organizations.

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OPTrust Takes Climate-change Action

Top 1000 Funds: OPTrust recently issued their Climate Change Action Plan. Among other things, the action plan commits them to: determine their exposure to industries, geographies and companies that are most exposed; engage with companies on improved performance on ESG factors; and demand better disclosure of the information investors need to properly price climate change-related risk.

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AP7 Targets Anti-climate Lobbying

Top 1000 Funds: Sweden’s AP7, the SEK490 billion ($53.8 billion) pension fund that manages the default option within Sweden’s premium pension system, will increasingly call out corporations on opaque climate lobbying.

Thwarting the practice – whereby companies publicly support the Paris agreement on climate change but also back trade associations that lobby against it – has become one of the most important strands of the pension fund’s active ownership strategy within its SEK454.3 billion ($50 billion) equity allocation.

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Yale’s Endowment Won’t Invest in Outlets That Sell Assault Weapons

Bloomberg: Yale’s advisory committee on investor responsibility recommended the ban to a committee of the board of trustees, which adopted the policy recently. The New Haven, Connecticut-based school, the second-richest in the U.S., announced the change in a statement.

College endowments are often asked by students to shed their investments in controversial holdings, such as those related to climate change or guns. Following the Parkland, Florida, high school shooting in February, financial institutions and businesses involved in the gun industry have faced public pressure.
 

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Spotlight on Investors: CalSTRS

The California State Teachers’ Retirement System (CalSTRS) was established by law in 1913 to provide retirement benefits to California’s public school educators from prekindergarten through community college. CalSTRS is now the largest educator-only pension fund in the world, and the second largest pension fund in the U.S. The market value of the CalSTRS Investment Portfolio was approximately $228 billion as of July 31, 2018.

CalSTRS business decisions consider environmental, social and governance implications, also referred to as ESG issues. From investment strategy to member services, CalSTRS' sustainable practices seek to create long-term value, promote stewardship of their natural resources and sustain the financial integrity of the fund for the benefit of their members and community. CalSTRS believes that establishing a corporate environment with sustainable values is a blueprint for better governance and increased profitability. Read CalSTRS' 8 guiding beliefs.

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German Pension Body Slams European Commission ESG Plan

IPE: German pensions association aba has strongly rejected the European Commission’s proposal to introduce new rules regarding pension funds’ integration of environmental, social and corporate governance (ESG) criteria in investment decision-making.

The Berlin-based industry body said the Commission’s proposal misunderstood or ignored the nature of the EU’s law on workplace pension funds – the IORP II Directive – and apparently also misunderstood the directive’s existing ESG requirements.

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Pension Funds Want ESG Guidelines

Top 1000 Funds: The International Organization of Pension Supervisors (IOPS) is an independent international body representing entities involved in the supervision of private pension systems all over the world. IOPS has 86 members and observers from 75 jurisdictions and territories worldwide. Their main goal is to improve the quality and effectiveness of the supervision of private pension systems throughout the world. This includes enhancing their development and operational efficiency and allowing for the provision of a secure source of retirement income in as many countries as possible.

A recent survey of IOPS members found ESG one of the issues where IOPS should set standards. Considering this, the IOPS is now developing draft guidelines on the application of ESG factors in the supervision of pension fund investment. The use of these guidelines is not be mandatory but they believe they will encourage pension funds in IOPS countries to incorporate these factors in their decision-making process in some way.

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Callan's 6th Annual ESG Survey Reveals Uptick in Adoption and Implementation

Financial Post:  Callan, a leading institutional investment consulting firm, announced the results of its sixth annual ESG Survey, noting that 43% of U.S. institutional investors have incorporated environmental, social, and governance (ESG) factors into their investment decision-making process in 2018. The percentage is the highest recorded in the survey’s history—and nearly doubled since its launch in 2013 (22%).

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LGIM Backs Call for IOSCO to Foster Harmonised Climate Risk Reporting

IPE: The International Organization of Securities Commissions (IOSCO) was “ideally placed” to accelerate progress on climate risk reporting, according to Meryam Omi, head of sustainability and responsible investment strategy at €1.1trn Legal & General Investment Management (LGIM).

Despite “undeniable” momentum behind support for the work of the Taskforce on Climate-related Financial Disclosures (TCFD), the usefulness of climate reporting depended on expanding harmonisation and standardisation across different jurisdictions, she said.

“As a major global investor, we would like to call on IOSCO to acknowledge the TCFD recommendations and encourage their incorporation into international listing standards,” added Omi.

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Investors Warn EC Over Definitions in Sustainable Finance Proposals

IPE: Sustainable finance proposals tabled by the European Commission could sideline many popular ESG strategies or approaches, investors have warned.

The comments were made in feedback on the sustainable finance legislative proposals announced by the Commission in May. The window for feedback closes this week, and submissions have been coming in thick and fast in recent days. 

The Commission proposed a regulation on reporting requirements related to “sustainable investments and sustainability risks”, but the European Fund and Asset Management Association (EFAMA) said that, as currently drafted, the proposal seemed to equate sustainable investments with impact and thematic investing.

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EU Accused of Sidelining Social Issues in ESG Plan

Portfolio Adviser: The European Commission has been accused of sidelining social and governance considerations in its proposed action plan for sustainable finance as it focuses on reducing carbon emissions in line with the Paris Agreement.

 A narrow definition of ESG focussed around environmental factors would have worrying implications for advisers, the Investment Association has said in its submission to the European Commission’s Sustainable Finance Action Plan proposals. Its concerns were specifically in response to the part of the plan focussed on taxonomy, which aims to define what is sustainable and identify areas where sustainable investment can make the biggest impact.

The IA has called for the Commission to spell out its focus on the environment or risk narrowing the definition of ESG

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Spotlight on Investors: New York State Common Retirement Fund

The New York State Common Retirement Fund is the third largest public pension plan in the nation with an audited value of $207.4 billion in assets (as of March 31, 2018) held in trust for the retirement security of the more than one million members of the New York State and Local Retirement Systems (NYSLRS). As a long-term investor, the Fund has an investment approach which capitalizes on market opportunities and weathers market ups and downs.

Annually, the Fund reviews corporate governance practices including how a company is directed, administered and operated, recognizing that firms that adopt good governance practices have greater potential for corporate success and sustainable economic growth.

With an emphasis on environmental, social and governance (ESG) issues, the Fund helps shape corporate policies and practices in ways that safeguard the Fund’s investments and promote corporate responsibility.

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BlackRock Launches First Range of ESG Emerging Market Debt Funds

Investment Week: BlackRock has unveiled a suite of four open-ended ESG-focused emerging market debt funds, using specialist benchmark indices created in collaboration with J.P.Morgan.

The UCITS funds are actively-managed against the JESG EMD indices, an ESG benchmark launched in April by J.P. Morgan in collaboration with BlackRock.
 
Rebalanced monthly, the indices are weighted systematically so issuers with the strongest ESG score have their weights increased. 

 

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Investor Focus on ESG Spurs Change in Luxembourg

Opalesque: Investor interest in ESG is driving change in Luxembourg, according to delegates at the latest Opalesque Luxembourg Roundtable. Delegates say investors are already asking for enhanced disclosures that address ESG issues - a trend which is only likely to get more pronounced as millennials take over positions of power.

"By the year 2025, a whole different generation of people will be making investment and business decisions," says Mike Hornsby of EY. "They will be looking for more ESG information, data and processes. I see this trend in my own client base today where sustainability data on real estate assets, governance considerations, benchmarks, social considerations, and such things are all becoming more mainstream. ESG factors will become a part of the core business and not a niche product anymore."

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Columbia Threadneedle to Pressure US Groups Over Boardroom Diversity

Financial Times: The group, owned by US financial giant Ameriprise, has put in place a policy by which it refuses to support the re-election of committee chairs, who are charged with hiring new directors, where women account for less than 15 per cent of board members. The move is a strong signal that investor concern about diversity is spreading to the US from Europe, where shareholders have been pushing for a greater mix on boards for several years.

According to data from State Street Global Advisors, one in four of the 3,000 largest listed US companies did not have a woman on their board in 2017. Research from Deloitte in 2017 found that women held just 14.2 per cent of board seats in the US, compared with 21.2 per cent in Nigeria, 27.5 per cent in New Zealand, 40 per cent in France and 42 per cent in Norway.

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SJP Replaces Standard Life Aberdeen with Impax on Ethical Fund; Launches Diversified Assets Fund

Investment Week: St. James's Place has appointed Impax Asset Management to run its £286m Ethical fund, replacing Standard Life Aberdeen, as part of its constant review process. The Ethical fund will no longer be managed by SLA's senior investment manager Jamie Cumming.

Impax's Kirsteen Morrison and David Winborne will take control of the fund, with SJP investing £286m into Impax's Global Opportunities strategy, subject to regulatory approval.

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Sustainable Finance Report: The 2 Morgans – Pushing for ESG Investing

Hedge Connection: One of the more important institutional factors driving adoption of ESG principles is the need for a new “lens” of risk management. Consumer trends point toward greater return for sustainable companies and millennials are more than twice as likely as other generations to purchase products from companies they view as sustainable. Institutional asset owners are taking the view that a more quantitative recognition of ESG factors will provide unique insights into long-term risks and opportunities that might not be captured by traditional financial analysis. Summarized by analyst; Stephanie Ellis, BS of Economics at Babson College, 12/2018

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Responsible investments hit major milestone, tipping to over half of all Australian investments: New report

Adviser Voice: The 17th annual Australian Responsible Investment Benchmark Report 2018 (KPMG), the most comprehensive review of the responsible investment sector in Australia, reveals the industry hitting new heights with $866 billion now managed as responsible investments, representing 55 per cent of all professionally managed assets in Australia, up from $622 billion in 2016 (growth of 39% year on year).

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Spotlight on Investors: Kommunal Landspensjonskasse

Kommunal Landspensjonskasse (KLP) is Norway's largest life insurance company and has conducted ethical filtering of its investments in securities since 2002. Transparency has been fundamental to this strategy since the beginning. KLP is responsible for creating returns for the pension assets of more than 550,000 Norwegians. In total KLP manages over NOK 300 billion (USD 35.922 billion). 

The UN’s Global Compact and its 10 principles are an important source of inspiration for KLP's strategy and further work on exercising good corporate governance and active ownership.

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EC Fires Starting Gun on Development of ESG Integration Rules

IPE: The European Commission has asked two of the EU’s financial supervisory bodies for technical advice on potential amendments to EU rules to require the integration of sustainability risks in investment decision-making. 

The advice is being sought in relation to so-called delegated acts that would amend or introduce new rules under EU legislation addressing asset managers, insurers, insurance distributors and investment advisers.

If accepted these rule changes would “explicitly require the integration of sustainability risks, i.e environmental, social and governance risks in the investment decision or advisory processes”.

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NZ Super Looks to Factors, Carbon

Top 1000 Funds: The NZ$33 billion ($22 billion) New Zealand Super is looking to increase its exposure to equity factors while also implementing the next phase of its climate strategy, which includes decarbonising its existing equity factor mandates.

About three-quarters of the fund’s portfolio is passively managed and the use of factor strategies is aimed at getting more out of the passive portfolio.

Specifically, NZ Super is looking to appoint an additional manager this year with a focus on multi-factor strategies.

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Climate-risk Plan for Sovereign Funds 

Top 1000 Funds: The One Planet Sovereign Wealth Fund Working Group has published its framework for integrating climate-change risks and investing in the smooth transition to a low-emission economy. Now the group is encouraging other large institutional investors to adopt the plan.

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UBS Asset Management's Harford Says She's Changed Her Mind on ESG Investing

CNBC: UBS Asset Management's head of investments Suni Harford said she's changed her mind on environmental, social and governance (ESG) governance when it comes to managing money.

"I will say, a couple years ago, I was a skeptic. It was hard to find an investor to pay up for a green bond, for example," Harford said from the Delivering Alpha Conference in New York. "But I'm in a different seat now and it's a very different world. We now have data and technology that facilitates a really robust change to the investment process."

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Man Group Appoints Co-head of Responsible Investment as it Eyes New Strategies

Investment Week: Mitchell, who was previously a sustainability strategist, will take up the role with Steven Desmyter, who will focus on the firm's client service and corporate level responsible investment activities. 

Mitchell will also be responsible for directing the development of impact, thematic and norms-based investment strategies as well as the broader integration of ESG criteria across asset classes and multi-asset solutions.

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SEB: Green Bonds to Raise $185bn This Year Despite Headwinds

IPE: Green bond issuance in 2018 is expected to hit $185bn (€160bn), according to a forecast from Nordic bank SEB.

However, the bank also warned that macroeconomic concerns such as Brexit and international trade tensions could stall new issuance in the short term.

SEB reported in a July market update that $47bn was raised through green bonds in the second quarter of 2018, the second-highest quarterly figure on record. This followed a weaker first quarter figure of $36bn.

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Spotlight on Investors: State Board of Administration - Florida

As part of the State Board of Administration's (SBA) mission to invest, manage and safeguard the assets of its various mandates, the SBA plays a vital role in supporting initiatives to ensure that public companies meet high standards of independent and ethical corporate governance. The SBA acts as a strong advocate on behalf of FRS members and beneficiaries, retirees and other clients to strengthen shareowner rights and promote leading corporate governance practices at U.S. and international companies in which the SBA holds stock. The SBA’s corporate governance activities are focused on enhancing share value and ensuring that public companies are accountable to their shareowners, with independent boards of directors, transparent disclosure, accurate financial reporting, ethical business practices and policies that protect and enhance the value of SBA investments.

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Read the 2017 Corporate Governance Principles: Proxy Voting Guidelines, here.

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Wall Street Is Adding a New ‘Weinstein Clause’ Before Making Deals

Bloomberg: On Wall Street, it’s known as “the Weinstein clause.”

Advisers are adding guarantees to certain merger agreements in light of the sexual misconduct scandals that have enveloped the producer Harvey Weinstein and other high-profile businessmen -- ones that legally vouch for the behavior of a company’s leadership.
 
The development is a concrete example of how business is trying to adapt to the #MeToo era, at least in terms of legal liability. The move is particularly noteworthy given its source: the male-dominated world of M&A advisory where the terms of an offer can make or break a bid.
 
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Goldman Sachs Hires New Chief Diversity Officer

Reuters: Goldman Sachs Group Inc has hired Erika Irish Brown to head the Wall Street bank’s efforts to recruit, retain and advance diverse professionals, according to an internal memo.

Given the title of chief diversity officer, Brown’s hiring comes as the multinational investment bank steps up efforts to diversify senior ranks and investments.

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Jane Ambachtsheer Exits Mercer for BNP Paribas Sustainability Role

IPE: BNP Paribas Asset Management has hired Mercer’s Jane Ambachtsheer as its new global head of sustainability. 

She will join the group on 27 August, BNP said in a statement, and will be based in its Paris office.

Ambachtsheer will oversee the company’s approach to sustainability for the €568bn worth of assets it manages and advises on, alongside deputy head of sustainability Helena Viñes-Fiestas.

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Climate-risk Plan for Sovereign Funds 

Top 1000 Funds: The One Planet Sovereign Wealth Fund Working Group has published its framework for integrating climate-change risks and investing in the smooth transition to a low-emission economy. Now the group is encouraging other large institutional investors to adopt the plan.

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A Timely Facebook Exit Has Head of Sustainable Investing at Nordea Cheering

Bloomberg: Sasja Beslik, the head of sustainable investing at Nordea Bank AB’s $357 billion asset management unit, is making sure everyone knows that his decision to dump Facebook Inc. last month just paid off.

In a tweet that included a graphic showing the 19 percent slump in Facebook shares on Thursday after it published disappointing revenue and user-growth numbers, Beslik wrote “This is why [Nordea] divested Facebook last month, ESG pays off!”

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UK Government Urged to Develop ‘Responsible Investing Framework’

IPE: The UK government should work with the pensions and investment sectors to establish an “agreed responsible investing framework”, a consultancy has suggested.

Aon made the recommendation in its response to a consultation by the Department for Work and Pensions (DWP) on regulatory changes aimed at “clarifying and strengthening” trustees’ investment duties, in particular with respect to environmental, social and corporate governance (ESG) matters.

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ESG in Fixed Interest Doesn’t Have to Cost: Altius

Investment Magazine: Fixed income investors could use an environmental, social and governance approach to add another layer of risk management and do no harm to portfolio returns, an Australian ESG bond pioneer says.

Altius Asset Management chief investment officer Bill Bovingdon, who launched Australia’s first ESG bond fund in 2014, has seen momentum in the process alongside a growing number of competitors.

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Spotlight on Investors: USS

Universities Superannuation Scheme (USS) is the corporate trustee responsible for the management and administration of the scheme. Established in 1974, the trustee has its head office in Liverpool. The scheme is supervised in terms of its conduct of operations and financial reporting by the Pensions Regulator.

USS is an active and responsible long-term investor and steward of the assets and markets in which they invest. This means they need to consider all long-term risks to the performance of their investments, including material environmental, ethical, social and corporate governance (ESG) factors where these have a financial bearing.

The trustee's commitment to responsible investment is captured in the Statement of Investment Principles, Investment Beliefs and Stewardship Code statement.

USS' Responsible Investment strategy covers all asset classes in all markets in which they invest including equities, fixed income, property and private markets. It applies to assets managed internally and to their external asset managers.

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Looking Past the Labels

People putting their money into environmental, social and governance (ESG) investments might be in for disappointment, Greenchip Financial’s John Cook said.

ESG funds, which select companies for their broader environmental and social impact on top of performance, include a lot of big names whose business has little to do with reducing pollution, Greenchip president Cook said.

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For all the Hype, Almost No U.S. Plans Factor in ESG

Environmental, social, and governance factors carry little weight among American private-sector plan sponsors, according to a new poll by consulting firm NEPC.

Just 12 percent of U.S. corporate and health care retirement plan representatives said they had incorporated ESG criteria into their manager selection processes. When defined contribution plans were excluded, only 6 percent considered ESG.

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Asset Managers Support Labour Standards Campaign Group

An investor coalition pushing companies for better data on labour standards has higher ambitions after a successful pilot year, according to an announcement.

Since being launched in July last year, the Workforce Disclosure Initiative (WDI) has attracted more than 20 additional investor signatories, including Aviva, BMO Global Asset Management, and PGGM, which manages the €197bn Dutch healthcare pension scheme PFZW. More than $12trn (€10trn) in assets under management back the initiative.

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ESG Engagement Proposals ‘Neither Practical Nor Purposeful’: PLSA

The UK’s pension fund trade body has rejected changes proposed by the government in relation to trustees taking members’ views into account, saying they were “neither practical nor purposeful”. 

Last month the Department for Work and Pensions (DWP) launched a consultation on proposed changes to the investment regulations for occupational pension schemes, which aimed to clear up confusion – stemming from the wording of the current rules – about trustees’ duties to consider environmental, social and corporate governance (ESG) matters in investment.

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J.P. Morgan Alternative Asset Management Launches ESG Forum Promoting ESG Integration to Hedge Fund Managers

J.P. Morgan Alternative Asset Management ("JPMAAM") is strengthening its efforts to assist hedge fund managers who are interested in increased adoption of environmental, social and governance factors into their underlying strategies and businesses. 

JPMAAM hosted its first ESG Forum at its New York headquarters, bringing together a diverse range of hedge fund managers interested in learning more about institutional client interest in ESG, enhancing alpha with ESG, and best practices for incorporating ESG factors into their businesses

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Kempen to go ‘Tobacco-Free’ by End of 2018

Kempen Capital Management has decided to stop investing in tobacco.

The €60bn Dutch asset manager will exclude all investments in the tobacco industry from its funds, although the policy does not apply to mandates, bespoke investment portfolios and multi-manager funds.

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Canadians Invited to Have Their Say on Proposed Regulations Against Harassment and Violence in the Workplace

Harassment and sexual violence of any kind are unacceptable – period. The Government of Canada made a commitment to Canadians to help ensure that federally regulated workplaces, including Parliament Hill, are free from harassment and sexual violence. The government is taking the next step toward a strengthened federal framework to protect workers and support employers.

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Six Major Sovereign Wealth Funds Will Invest to Fight Climate Change

The managers of the six sovereign wealth funds were present at the Elysée: Yngve Slyngstad, head of the Norwegian fund, who is worth 1,000 Billion dollars, Khalil Foulathi, manager of the Abu Dhabi fund (about 828 Billion), Farouk Bastak for the Kuwait fund (524 billion), Yasir Al Rumayyan for the Saudi Arabia fund (494 billion), Sheikh Abdulla bin Mohammed bin Saud Al-Thani for the Qatar fund (320 billion) and Matt Whineray for the New Zealand fund (20 billion).

"Commercially, these investments make sense for the funds, which was not the case ten or twenty years ago. For example, Saudi Arabia will invest to create 200 GW of solar energy by 2030. This is huge" said Yasir Al Rumayyan. 

Their joint commitment is part of the "One Planet Summit" of December 12, which aimed to mobilize the private sector for the climate, and especially the financial sector. Emmanuel Macron took the initiative to organize this summit after the withdrawal of the United States from the Paris agreement on the climate.

*Above text has been translated from the original article in French.

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Spotlight on Investors: The World Bank

The World Bank Group is one of the world’s largest sources of funding and knowledge for developing countries. Its five institutions share a commitment to reducing poverty, increasing shared prosperity, and promoting sustainable development.

The World Bank Group and Japan’s Government Pension Investment Fund (GPIF) have formalized a partnership that aims to expand markets for sustainable investing.  Under the partnership, the World Bank Group and GPIF will collaborate on initiatives that promote strategies for including environmental, social and governance criteria in investment decisions across different asset classes. Ultimately, the aim is to direct more capital towards sustainable investments.

The research report provides an overview on sustainable investing in fixed income. It discusses the core areas of:

  1. The specific nature and issues of ESG investing in this asset class
  2. The rationale for ESG analysis in fixed income – including research findings
  3. ESG investment tools and ways of implementing ESG strategies in fixed income
  4. On-going challenges to greater integration of ESG into mainstream investing
  5. Suggestions for how to catalyze the further adoption of ESG approaches

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Think Tank Takes ESG Rating Agencies to Task

The American Council for Capital Formation is questioning the ratings process used for ESG investments.

The Washington-based, business-backed think tank argued individual companies "can carry vastly divergent (ESG) ratings from different (ESG rating) agencies simultaneously, due to differences in methodology, subjective interpretation or an individual agency's agenda."

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Asset Managers Support Labour Standards Campaign Group

An investor coalition pushing companies for better data on labour standards has higher ambitions after a successful pilot year, according to an announcement.

Since being launched in July last year, the Workforce Disclosure Initiative (WDI) has attracted more than 20 additional investor signatories, including Aviva, BMO Global Asset Management, and PGGM, which manages the €197bn Dutch healthcare pension scheme PFZW. More than $12trn (€10trn) in assets under management back the initiative.

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5 Things About Sustainable Investing in the First Half of 2018

Morningstar: The first big thing about sustainable investing came along in January, when the head of BlackRock--the world's largest asset manager--urged CEOs to think long term, benefit all their stakeholders, and make a positive contribution to society. In so doing, Fink (CEO of BlackRock) was not urging them to make less money. Just the opposite, he was urging them to position their businesses for long-term profitability by keeping their focus on a bigger picture that includes the role of the corporation in society. Companies focused on minimizing negative environmental and social impacts and accentuating positive ones will be rewarded by increasingly aware customers, will protect their brand, and will attract top talent, enabling them to better navigate the transition to an increasingly low-carbon and digital economy.

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Cerulli Analysts Tackle Tough Topic of ESG ‘Materiality’

While not a new concept, materiality is essential to efficiently integrating ESG factors into the investment process; it all boils down to being able to determine which ESG factors are likely to be linked to stronger investment performance by identifying risks that are related to certain industries.

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Savills IM Shows ESG Credentials by Joining GRESB

Savills IM has participated in the GRESB survey since 2012 and eight of its funds, covering 25 per cent of its global assets under management, are now measured against the organisation’s targets and key performance indicators.
 
Savills IM announced last year that it had achieved green star status for one of its corporate pension funds. The award is given exclusively to real estate management companies and funds that fully integrate ESG elements into their operations. These businesses must demonstrate their ability to measure, implement, manage and develop within very strict ESG frameworks.

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CDPQ Provides CA$150-million in Financing to ContourGlobal’s Concentrated Solar Power Asset Purchase

La Caisse de dépôt et placement du Québec ("CPDQ"), a leading global institutional investor, today announced that it provided CA$150 million (€100 million) in financing to support the acquisition by ContourGlobal Mirror 2 S.à.r.l. (“ContourGlobal”) of a portfolio of concentrated solar power (“CSP”) assets in Spain.

ContourGlobal is a growth platform for acquiring and developing energy assets with long-term contracts across many geographies. In February 2018, ContourGlobal successfully reached an agreement to acquire the CSP assets from Acciona, a Spanish conglomerate group that develops and manages infrastructure and renewable energy assets. The portfolio consists of five CSP assets in the south-west region of Spain whose operation commencement dates range from 2009 to 2012.

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Credit Suisse Banker Sacked Over Bullying

After weeks of rumbling inside Credit Suisse, Paul Dexter, a senior banker in the US, was let go over a complaint of inappropriate behaviour involving an intern. Rumours swirled in M&A circles. 

Only this wasn't a case of sexual harassment, people familiar with the matter said. Rather, unruly workplace behaviour - which, not long ago, might have been grudgingly tolerated by management at many firms - had finally caught up with Mr Dexter.

The dismissal of a single banker at a single bank might seem inconsequential in this #MeToo era. Yet Mr Dexter's rise and fall encapsulates the new realities in an industry that has long celebrated big egos and chest-thumping bravado. It shows how a complaint about one incident is increasingly likely to set off a broader investigation and unearth others, upending a career.

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Castle Hall note: in a previous ESGDiligence Newsletter, we highlighted a new initiative from Credit Suisse to create an anti-sexual harassment role

 

UTAM Releases its First Carbon Footprint Report

UTAM has committed to disclose the carbon footprints of the investments they manage on behalf of the University of Toronto.

UTAM underlined that commitment in September 2017 by signing the Montréal Carbon Pledge, joining more than 120 global investors that are collectively responsible for over US$10 trillion in assets under management. UTAM's first Carbon Footprint Report has been published, which calculates greenhouse gas emissions from companies in the university’s Pension and Endowment investment portfolios as of September 30, 2017.

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Spotlight on Investors: Harvard Management Company

Formed in 1974, HMC manages Harvard University's endowment and related financial assets. 

Approach to Sustainable Investment

A three-pronged approach guides HMC’s sustainable investment work and priorities:

1. ESG Integration — incorporate material ESG factors into manager selection, appointment, and monitoring 
2. Listed Equity Active Ownership — exercise their client’s shareholder voting rights 
3. Collaboration — work with global investors and endowments to develop and define sustainable investment best practices

HMC, with the support of Harvard University, is the first university endowment in the United States to become a signatory to the PRI. As a signatory, HMC is committed to implementing the PRI's six Principles in their management of the University's endowment and related financial assets. HMC reports to the PRI on an annual basis about their sustainable investment activities, and the resultingTransparency Report is published by the PRI. 

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IPE Views: Seeing Climate Change ‘Actions’ for What They Are

With climate change an ever more prominent issue for institutional investors, it is easy to get excited about the different initiatives and announcements that hit our screens on a regular basis. 

It’s important to see them for what they are, and to not conflate managing the risks and opportunities of climate change with action to mitigate it.

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Banks Pivot Toward Greener Finance in Climate Action Push

Financial institutions are beginning to get on board with the global fight against climate change, a movement that was until recently the territory of nonprofit organizations and environmentalists. Natixis, UBS Group and ING Groep are among lenders unveiling large-scale environmental finance and investing initiatives as central banks and regulators step up their warnings on climate risk.

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Geneva Pension Fund Steps Up Climate Change Efforts

The CHF12.8bn (€10.9bn) pension fund for the Swiss canton of Geneva has cut out coal-related companies as part of a wider plan to reduce the carbon impact of its investment portfolio.

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Exclusive: Credit Suisse Creates New Anti-sexual Harassment Role

Credit Suisse has carved out a new role to lead its handling of sexual harassment claims and examine group-wide policies, as Switzerland’s second-biggest bank seeks to boost equal opportunities and create a fair treatment environment.

The appointment of Antoinette Poschung to the new role of Conduct and Ethics Ombudswoman comes after Chief Executive Tidjane Thiam tasked the bank’s conduct and ethics board to review the bank’s handling of sexual harassment complaints.

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#metoo

Morgan Stanley IM Bolsters ESG Offering for $40bn Equity Team

The Morgan Stanley Investment Funds Global Sustain fund is a Luxembourg-domiciled Sicav and will be managed by the firm’s international equity team headed by William Lock.

The fund aims to offer a concentrated, high-quality global equity portfolio with a low carbon impact, which scores well on ESG factors as measured by third parties such as MSCI ESG, relative to broad equity indices such as the MSCI World Index.

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AVPN & Oliver Wyman: Driving ESG Investing in Asia - The Imperative for Growth Report

The report highlights the existing ESG Investing landscape in Asia, and illustrates key observations and common challenges faced by early adopters. It also outlines six practical steps investors can take to initiate their journey into ESG Investing, and provides key learnings and recommendations for those aiming to embark on similar journeys.

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Guernsey Launches World-first Regulated Green Fund Product

The move is part of Guernsey’s plans to become the ‘go-to’ international finance centre for green finance, and the Guernsey Green Fund has the objective of seeking a return for investors while mitigating environmental damage.

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UBS Report: Cracking the Code of Fixed Income ESG Integration

Investor appetite for ESG is evolving rapidly and is moving towards fixed income, UBS Asset Management found in its Next Frontier paper.

Traditionally more prevalent in the equity domain, ESG integration is currently dominating many agendas and now is finding its way to the fixed income market, turning from a ‘nice to have’ to a ‘must have’, according to UBS AM.

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Spotlight on Investors: The Church of England

In 2010, The Church of England signed the UN-backed Principles for Responsible Investment (PRI), committing them to incorporating ESG issues into their investment analysis and decision-making process. The Church of England's Responsible Investment ('RI') Framework sets out how they select, appoint and monitor asset managers.
 
As well as PRI, The Church of England is also part active through the Church Investors Group, Institutional Investors Group on Climate Change, and UK Sustainable Investment and Finance.

 

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Asset Management Roundup: Survey Predicts ESG-Related ETF Boom

More than four-fifths of professional investors expect investment into environmental, social and corporate governance (ESG) related exchange-traded funds (ETFs) to grow over the next five years...

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Social and Sustainable Investing Gets a Boost from an Unlikely Source: Wall Street Activists

Wall Street's activist investors, once known for pushing for extreme cost-cutting or just about anything that would boost the bottom line, are starting to use their money to promote a different kind of corporate action: social and environmental change.

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Does Socially Responsible Investing Work as Advertised?

Socially responsible investing is de rigeur. The well-heeled have always wanted to make their money multiply; now they want to make the world a better place while doing it. Take BlackRock, the humongous asset-management firm. In the wake of the Parkland shooting, and in response to political pressure, it rolled out new funds that wouldn’t invest money in gun manufacturers...

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Schroders: ESG Considerations for Official Institutions

Asset owners are moving rapidly: 43% of official institutions’ assets are covered by some form of publicly disclosed ESG policy and this is only going to grow over the coming years as scrutiny on public asset owners increases.

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EIB, French Institutions Back Amundi's Green Energy Equity Fund 

The European Investment Bank is a lead investor alongside Crédit Agricole Assurances and 15 other mainly French institutions in what it describes as an “innovative” 25-year, buy-and-hold green-energy equity fund structure launched by Amundi Energy Transition.

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Climate Change Roundup: Investor Climate Action Initiative Expands

More than 60 additional investors have signed up to Climate Action 100+, an initiative aimed at reducing greenhouse gas emissions.

Climate Action 100+ launched in December 2017 with 225 investors on board and is now backed by 289 investors with nearly $30trn (€26trn) in combined assets under management, according to an update from the initiative.

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UTAM: Calling on the Government of Canada to Enact Legislation on Slavery and Child Labour

In an era of complex global supply chains spanning many countries, investors must be alert to the potential use of child labour and modern forms of slavery. This requires constant vigilance and advocacy directed at regimes that do not adequately protect human rights. At the same time, the governments of investors’ home countries have a critical role to play by obliging companies operating in their jurisdictions to be accountable for potential labour abuses wherever they do business around the globe.

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ISS: European and U.S. Asset Owners' Approaches to ESG White Paper

Incorporating ESG into investment processes now constitutes both a risk management practice and an asset-raising strategy for many investment managers. As investment managers consider ways to integrate ESG into current investment processes or launch new products around ESG best practices, they’re well served to understand their clients’ differing needs, requirements, and approaches on the topic. In this report, ISS compares U.S. and European asset owners’ approaches to ESG, with the aim of informing investment managers’ evolving strategies.

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Spotlight on Investors: Hermes Investment Management

Hermes started in 1983, firstly to manage the assets of their owner, the BT Pension Scheme, and more recently to support a growing range of external customers, from institutions to advised private investors. Hermes currently reports £33.6 billion of assets under management and £330.5 billion in assets under advice.

Hermes believes that a responsible approach to investing is appropriate across all asset classes and for all investment strategies.

spotlightoninvestors

Asset Owners Pursue ESG

Eighty-four per cent of asset owners globally are pursuing or considering ESG investing, says a survey by the Morgan Stanley Institute for Sustainable Investing and Morgan Stanley Investment Management. Among the 70 per cent of owners who already are incorporating environmental, social, and governance (ESG) factors into their investment decisions, 60 per cent began doing so in the past four years and 37 per cent within the past two years. Risk management (78 per cent) was cited as the biggest factor driving ESG adoption, followed by return potential and mission alignment at 77 per cent each. Despite many asset owners citing performance as an important factor driving their adoption of sustainable investing, respondents said proof of market-rate financial performance was the biggest challenge to ESG adoption (24 per cent), followed by quality ESG/sustainability data (23 per cent), and supply of quality managers/strategies (20 per cent).

Survey

UK Government Lays Out Trustee Duties on Climate Change, ESG

Pension scheme trustees will have to set out the extent to which they take account of members’ views on non-financial matters in the development of their investment strategy under proposals put forward by the UK government...

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Social Finance Forum 2018

The MaRS Centre for Impact Investing ‘Social Finance Forum 2018’ will attract more than 500 investors, entrepreneurs, finance professionals, charity leaders, and public service. Featured speakers include Michael Baldinger, head of sustainable and impact investing at UBS Asset Management, and Marcia Moffat, managing director of BlackRock Canada. It takes place November 7 to 9 in Toronto, ON.

Social Forum

The Hedge-fund Manager who Says he's a #MeToo Scapegoat Plans to Take Legal Action Against $50 Billion D.E. Shaw

Daniel Michalow, who was a senior portfolio manager in the firm's discretionary macro group, plans to take legal action against his former employer next month, a person familiar with the matter said. Michalow plans to file a statement of claim in arbitration next month with the Financial Industry Regulatory Authority.

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Intel CEO Resigns After Investigation into Relationship with Employee

Intel Corp Chief Executive Brian Krzanich resigned on Thursday after an investigation found he had a consensual relationship with an employee in breach of company policy.

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Not Considering ESG Could Mean Failing Fiduciary Duty: Compenswiss

Investors that do not consider environmental, social or corporate governance (ESG) risks in their portfolios risk breaching their fiduciary duty to members, according to the investment chief of one of Switzerland’s biggest asset owners.

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Engage on Palm Oil to Advance SDGs 

Investors seeking to link the UN Sustainable Development Goals to their investment strategies have an opportunity to help reduce tropical deforestation associated with agricultural commodities such as palm oil, cattle or soy.

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ESG: The Swiss Shade of Green

There had been initiatives before that. As early as 1997, Swiss pension funds established the Ethos foundation to help them monitor governance at domestic companies. The proxy-voting agency has since been instrumental in revealing and stopping excessive remuneration packages at large Swiss listed companies. It has probably also helped bring Switzerland to seventh place in this year’s governance monitor of European companies complied by Morningstar. The highest ranked were the Netherlands, the Nordic countries and Portugal. 

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Spotlight on Investors: BMO Global Asset Management

At BMO Global Asset Management, BMO's aim is to be one of the industry’s most innovative and responsive investment managers, offering more options - more service – and more routes to investment success.

For over 30 years, BMO's responsible investment approach has driven the creation of investment solutions and funds. By considering long-term environmental, social, governance and ethical issues, BMO is responsible about investing.

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BMO ESG Profile & Impact Report 2018

spotlightoninvestors

Investors Increase Impact Investing by 58%

Investors committed more than $35 billion to impact investment deals in 2017 and plan to increase allocations by eight per cent this year, says the Global Impact Investing Network’s ‘Annual Impact Investor Survey.’ It shows investors, including pension funds, invested $35.5 billion across 11,136 impact investment deals in 2017. That is up 58 per cent from $22.1 billion across 7,951 deals in 2016. Total impact investing assets were $228 billion, up from $114 billion in 2016. The top sectors where impact investment capital was allocated were financial services, energy, and microfinance. It also found that investors are measuring and managing the impact of their investments against social and/or environmental factors, using proprietary metrics, qualitative information, the GIIN’s own metrics, and other tools and frameworks. The survey found that 76 per cent of respondents set impact targets for some or all of their investments to track their progress versus social and environmental goals.

Survey

CPPIB to Increase Investments in Renewables Via Green Bonds Issue

Canada Pension Plan Investment Board (CPPIB) has become the first pension fund to raise capital via green bonds issue as it seeks to grow its investments in green assets.

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Wealth Managers Failing to Meet Needs of High Net Worth Women

Wealth managers with global retail asset management arms and investment banks are perceived as the worst at serving the needs of high-net-worth women, according to research by business consulting and technology provider Orbium.

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GRESB: The Need for a Resilience Benchmark

Green rating tools are an established way to assess a building’s sustainability. But, asks Philip Hirst, what is their true value, and how can investors use them more effectively? 

At a time when pledges to deliver a low-carbon economy are being made by governments and businesses the world over, the real estate sector – being responsible for 40% of total global carbon emissions – has a huge role to play.

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Key Elements of New York’s New Anti-Sexual Harassment Policy and Training Requirements

The #MeToo and Time’s Up movements have launched workplace sexual harassment issues to the forefront of employment law. All employers, including private fund advisers, must therefore take appropriate steps to address sexual harassment, regardless of whether they are specifically required by law. New York City and New York State officials are not waiting for private employers to act voluntarily, and in recent months both the city and state have passed laws that impose new anti-sexual harassment policy and training requirements on private employers based in New York. 

This article is available in the Hedge Fund Law Report, which Castle Hall strongly recommends as a resource to investors in alternative assets.

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#metoo

LGIM Outs Climate Change Laggards After 12-month Engagement

Legal & General Investment Management (LGIM) has divested from six companies and plans to vote against a number of appointments at major firms because of persistent inaction on climate change.

The companies involved are  China Construction Bank, Occidental Petroleum, Dominion Energy, Subaru, Loblaw, and Sysco Corporation.

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Les principaux investisseurs du G7 s'unissent pour soutenir une initiative en matière de diversité

Un groupe de grands investisseurs mondiaux a annoncé la mise sur pied d'un projet historique visant la progression vers les objectifs clés du G7, en collaboration avec le gouvernement du Canada. Dans le cadre de trois initiatives de développement mondial, le CFA Institute, de concert avec son réseau mondial de sociétés, a été choisi pour créer plus de possibilités dans les domaines des finances et de la gestion de portefeuille en mettant en place un programme de stages à l'intention des femmes qui suivent des études universitaires dans certains pays en voie de développement.

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Volkswagen Scandal Underlines Need for ESG Analysis

In September, German car manufacturer Volkswagen came under fire after admitting defective devices were installed on 11 million vehicles to cheat on emissions tests, leading to CEO Martin Winterkom’s resignation. Volkswagen’s alleged violation of the U.S. Clean Air Act raises a number of questions about the company’s product management practices. The company faces potential recall costs related to 482,000 vehicles, with up to 11 million vehicles possibly affected.

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Spotlight on Investors: CalPERS

CalPERS has a long-standing commitment to sustainable investment and a proud history of leadership and innovation in the field. Acting as fiduciaries first and foremost, the goal of the CalPERS Investment Program is to achieve long-term, sustainable, risk-adjusted returns consistent with fiduciary duty. As a significant institutional investor with a long-term investment time horizon, sustainable investment means taking account of environmental, social, and governance (ESG) factors across all our day-to-day investment business.

In 2011, the CalPERS Board approved the adoption of a Total Fund process for integrating ESG issues as a strategic priority across CalPERS' portfolio. Grounded in the three forms of economic capital — financial, human, and physical — needed for long-term value creation, CalPERS developed strategic themes (Alignment of Interest, Human Capital, and Climate Change) that set the framework for the fund's ESG integration work. 

Read CalPERS Sustainable Investment Practice Guidelines below:

spotlightoninvestors

Leading Canadian and G7 Investors Come Together in Support of Global Development Initiatives

A group of leading global institutional investors, led by Caisse de dépôt et placement du Québec (CDPQ) and Ontario Teachers' Pension Plan (Ontario Teachers'), in collaboration with the Government of Canada, are proud to announce an ambitious project to advance key G7 objectives.

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Super Funds Expand Responsible Investment

Australia’s largest super funds have increased their financial interest in responsible and ethical investing by providing a greater number of investment options in these areas.

A new report from the Responsible Investment Association Australasia (RIAA) shows that nearly half of super funds offer a total of 75 responsible investment options, compared with 24 funds offering just 54 options in 2016.

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Firecracker, Love Letters Ignite #MeToo Moment in Finance

Wafra Investment Advisory Group Inc. fired its head of real estate amid claims of sexual harassment, becoming the latest big investor embroiled in the #MeToo movement.

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#metoo

Closing the Gender Gap in Alternative Investments 

The Emerging Market Private Equity Association (EMPEA) has announced its first initiative aimed at closing the gender gap, which it calls its Gender Parity Acceleration Working Group.

EMPEA has 300 member firms, including both general partners and limited parties, who are invested in more than 130 countries around the globe and who represent more than $5 trillion in AUM.

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Click below to read the Preqin Special Report:

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Willis Towers Watson Joins Effort to Help Canadian Businesses Increase the Number of Women in Leadership Positions

Willis Towers Watson (NASDAQ: WLTW), a leading global advisory, broking and solutions company, announced it has partnered with Women in Governance to support its Gender Parity Certification program. The Parity Certification was established in 2017 with the support of L’Ordre des conseillers en ressources humaines agréés (CRHA) to help Canadian businesses increase the representation of women in leadership positions.

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Hedge Funds Can’t Find the Data in This Noise

Asset managers are under increasing pressure to take environmental, social and governance considerations into account when making investment decisions. That poses a particular challenge for hedge funds, which typically prefer to have as few limits as possible on what they can invest in. So it's no surprise that many of them are less than keen on participating in the revolution.

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How to Avoid ‘Impact Washing’ in ESG’s Fastest-growing Sector

Third-party certification, shared principles or a code of conduct could help guard against product providers exaggerating their impact investing claims, according to a survey by the Global Impact Investing Network (GIIN).

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Swiss Investors Allocate Record CHF391bn to ESG Assets

Last year marked a significant increase in sustainable investment activity from Swiss asset owners and asset managers, according to Swiss Sustainable Finance (SSF).

The organisation – which aims to boost awareness of sustainability issues in Switzerland – reported a clear trend towards activity related to environmental, social and corporate governance (ESG) issues.

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Aon Signs up to UN Principles for Sustainable Insurance

The first business operating in the insurance broking community to adopt the Principles, Aon will be supporting the UN’s goal of leveraging the insurance industry’s role across risk management, insurance and investment to help build resilient, inclusive and sustainable communities and economies.

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Spotlight on Investors: Partners Group

Partners Group (PG) serve over 1,000 institutional investors worldwide who seek superior investment performance through private markets for their more than 100 million beneficiaries. PG has USD 74 billion in assets under management and more than 1,000 professionals across 19 offices worldwide.  

Partners Group realizes potential in private markets by financing and developing great companies, desirable real estate and essential infrastructure. PG creates value in their investments through active and long-term responsible ownership. Since inception, PG has invested USD 83 billion in private equity, private real estate, private debt and private infrastructure on behalf of our clients.

Read Partners Group year-end ESG report below.

Report

spotlightoninvestors

10,000 British Companies Revealed Their Pay Gaps. 

Fortune Magazine: 10,000 U.K. companies with at least 250 employees completed the humbling process of submitting to the British government their gender pay gaps.

Data submitted reveals a median pay gap of 9.7% across the reporting companies.

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From Niche to Mainstream: Responsible Investment and Hedge Funds

Hedge funds globally have allocated at least $59 billion to responsible investment (RI), says a survey by the Alternative Investment Management Association (AIMA) and the Cayman Alternative Investment Summit (CAIS). ‘From Niche to Mainstream: Responsible Investment and Hedge Funds’ shows around 40 per cent of the respondents said they are already investing using responsible investment principles, with total assets in such investments worth $59 billion – a little over 10 per cent of the respondents’ combined hedge fund AUM (assets under management).

Download White Paper

CCGG Provides E&S Guide

The Canadian Coalition for Good Governance (CCGG) has published a practical guide for directors to assess and oversee environmental and social (E&S) matters. The ‘Directors’ E&S Guidebook’ provides practical insights and recommendations for effective board oversight and company disclosure of E&S matters. “Companies and investors around the world are realizing that there must be a greater focus on E&S management as a critical driver of long-term shareholder value. CCGG hopes the guidebook’s 29 principles-based E&S recommendations, covering eight key governance areas, will provide boards of directors with practical information that they can utilize to effectively oversee their company’s management of E&S factors,” says Stephen Erlichman, executive director of the CCGG. 

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AP7 Picks KBI and Impax for SEK3bn Green Impact Mandates

Swedish national pension fund AP7 has awarded two “green impact investment” mandates totalling SEK3bn (€294m).

The SEK427bn pension fund, which manages the default option within Sweden’s premium pension system, said it had picked Ireland’s KBI Global Investors and UK-based fund manager Impax Asset Management to invest in companies that contribute to solutions for climate and environmental problems.

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Swiss Investors Allocate Record CHF391bn to ESG Assets

Last year marked a significant increase in sustainable investment activity from Swiss asset owners and asset managers, according to Swiss Sustainable Finance (SSF).

The organisation – which aims to boost awareness of sustainability issues in Switzerland – reported a clear trend towards activity related to environmental, social and corporate governance (ESG) issues.

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Steps Beyond Carbon Footprinting

Investors need to go much further than carbon footprinting their portfolios to measure environmental risk, a sustainable finance expert has said.

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M&G: Targeting Real World Impact Aligned with the Sustainable Development Goals

The United Nations (UN) put out a strong call to action for the private sector to play a fundamental role in achieving the Sustainable Development Goals (SDGs) over the next 15 years. It is still early days for the SDGs, but momentum is growing. Institutional investors not only recognise that the SDGs are a key part of their fiduciary duty, but achieving them offers opportunities for global economic growth that could lead to better investment outcomes for beneficiaries over the long term.

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Spotlight on Investors: Healthcare of Ontario Pension Plan: Responsible Investing Policy 2017

The Healthcare of Ontario Pension Plan (HOOPP) is responsible for the pensions of more than 339,000 healthcare workers in Ontario. Assets exceed C$75 billion. 

HOOPP believes that the appropriate consideration of Environmental, Social and Governance (ESG) issues is an integral part of the investment decision making process that allows it to gain a more complete view of the potential risks and opportunities in an investment.

Responsible Investing Policy 2017

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European Commission unveils sustainable finance legislative proposals

Asset managers and other institutional investors who claim to have sustainability goals will need to show how their investments are aligned with these objectives under new rules proposed by the European Commission. The information they would have to disclose would include the sustainability or climate impact of their products and portfolios. Speaking at a press conference, Commission vice-president Valdis Dombrovskis said: “On climate change, we are running out of time. The Titanic could not turn to avoid the iceberg at the last minute and we will soon be in a very similar situation.”

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Investors ‘have been hijacked’ over ESG integration: Danske Bank, Invesco

Investment professionals from Danske Bank and Invesco Asset Management argue in a newly published paper (Lost in Translation) that the widespread and varied use of the term ‘ESG integration’ makes it increasingly difficult to know what that term really means. 

The authors state: "when “ESG integration” is disconnected from the investment process – when it is hijacked by screening, scoring, overlaying, filtering or any other form of framework or tool – something vital is lost in translation."

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Legal & General Investment Management launches first gender diversity fund focused on UK companies

Legal & General Investment Management (LGIM) has launched the first gender-oriented fund to focus exclusively on UK listed companies. The L&G Future World Gender in Leadership UK Index Fund (‘GIRL’ fund) is expected to raise gender diversity standards in companies across the UK equity market, by allocating more to companies that have achieved higher levels of gender diversity.

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ESG Reports and Ratings: What They Are, Why They Matter

Harvard Law School: Institutional investors, asset managers, financial institutions and other stakeholders are increasingly relying on these reports and ratings to assess and measure company ESG performance over time and as compared to peers. This assessment and measurement often forms the basis of informal and shareholder proposal-related investor engagement with companies on ESG matters.

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Mercer Investments Beliefs - ESG integration

Mercer has been assessing portfolio managers on the extent to which they incorporate ESG issues and active ownership into their decision-making since 2008. The key aspect to the firm's approach is to understand what decision-makers are doing at the strategy level to address ESG issues. Mercer's ratings aim to capture the level of consistency with which ESG factors are assessed in the process and are a measure of intent.

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Spotlight on Investors: Ontario Teachers' Pension Plan: Principled Approach

Ontario Teachers' Pension Plan (OTPP) is Canada's largest single-profession pension plan with $189.5 billion in net assets. They pay pensions and invest plan assets on behalf of 323,000 working and retired teachers. Since their establishment as an independent organization in 1990, OTPP have built an international reputation for innovation and leadership in investment management and member services.

Ontario Teachers' Pension Plan thinks of responsible investing as a journey because ideas, terminology and tools are evolving, and so are practices. OTPP's ESG analysis is becoming more systematic across the pension plan and they know more about the potential impact of ESG factors on financial returns than in the past. OTPP's investment teams buy and sell assets daily in carrying out their investment strategies and they integrate ESG analysis into their decisions.

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The Task Force on Climate-related Financial Disclosures (TCFD) Launches Knowledge Hub

The Task Force on Climate-related Financial Disclosures (TCFD) launched its TCFD Knowledge Hub in collaboration with Climate Disclosure Standards Board (CDSB). The TCFD Knowledge Hub is a platform designed to help organizations implement the TCFD recommendations by providing over 300 relevant insights, tools and resources. Resources include existing legislation and regulations, frameworks, standards, guidance, research papers, tools and webinars. All resources either directly address the TCFD recommendations or are related to themes or specific requirements within the TCFD recommendations.

The TCFD Knowledge Hub is accessible at tcfdhub.org and The Task Force released its final Recommendations report on June 29, 2017, available here.

Environmental, Social and Governance Factors in Global Macro Investing

In this edition of Global Macro Shifts, Franklin Templeton Investments research-based briefing on global economies, the Templeton Global Macro team, led by Dr. Michael Hasenstab, reviews the importance of ESG factors in macroeconomic analysis and the sovereign asset class, highlighting several case studies to illustrate the team’s thoughts on ESG.

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IPE RE Awards: Sustainability Data Urgently Needed to Make Progress

More information on energy efficiency and the environmental impact of real estate investments is urgently needed if the industry is to move forward in reducing carbon emissions, according to a panel of investors at the IPE Real Estate Conference & Awards.

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PwC: Asset & Wealth Management Revolution: Embracing Exponential Change

Change in the asset and wealth management industry (the ‘AWM industry’) is accelerating at an exponential rate. Although the industry is set for growth, asset and wealth managers must become business revolutionaries, even disruptors, if they’re to survive and prosper. 

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DWS issues four new ESG ETFs

Index-linked funds’ filters will avoid companies exposed to nuclear power, weapons and tobacco as asset manager seeks to cash in on trend for socially-conscious investing.

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AQR: Assessing Risk through Environmental, Social and Governance Exposures

AQR presents an empirical investigation of the potential link between ESG exposures of companies and the statistical risk of their equity. They investigate both contemporaneous risk forecasts and what ESG characteristics convey about future risks that are not captured by statistical risk models.

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CEOs Say Investors Are Demanding More Diversity, Social Impact

Shareholders want more from their companies than earnings growth.

“Investors are now paying much more attention to a company’s culture and what we’re doing from a social standpoint,” Susan Salka, chief executive officer of AMN Healthcare Services Inc., said at the Bloomberg Business of Equality summit in New York.

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Spotlight on Investors: AIMCo Responsible Investment Report 2016 - 2017

Alberta Investment Management Corporation (AIMCo) is one of Canada’s largest and most diversified institutional investment managers with more than $100 billion of assets under management (AUM). AIMCo was established in 2008 as a Crown Corporation to provide investment management services for specified pension, endowment and government funds in the Province of Alberta. AIMCo's 32 clients are increasingly focused on responsible investing and its impact on investment risk and return.

Responsible Investment Report

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Guns Won't Be a Quiet Governance Issue for California Pension

The California State Teachers’ Retirement System will use its clout and money to pressure companies that it owns to stop producing and selling firearms that are illegal in the state.

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Mercer Touts ESG Integration, SDGs

Sustainability has long been a focus for Mercer, who established their responsible investing practice in 2004. This article summarizes Mercer's current thoughts on the opportunity set for strategies that integrate ESG and the investment case for sustainability.

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Fiera Capital: Placements verts…Réflexions sur les placements visant les titres de créance liés aux infrastructures

Partout dans le monde, un grand nombre de caisse de retraite et de fonds de dotation ainsi que d’autres investisseurs institutionnels relèvent le défi d’aligner leurs portefeuilles sur les principes de l’investissement responsable. 

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Alecta Anchors First Close of Emerging Markets Impact Fund

Sweden’s largest pension fund has provided the anchor investment for an impact fund co-investing in emerging markets loans.

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Sustainalytics Launches Carbon Risk Ratings

Sustainalytics, a leading provider of ESG and corporate governance research, ratings and analysis, launched its new Carbon Risk Ratings, which measure companies’ exposure to and management of material carbon risks. The Carbon Risk Rating captures a variety of carbon signals in a single, quantitative assessment designed to support investment analysis, decision-making and reporting. The Sustainalytics’ solution provides insights related to material investment risk that cannot be calculated through the traditional approach of carbon footprinting.

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Companies Have an Aha! Moment: Bullies Don’t Make the Best Managers

After Nike Inc. ousted a handful of male executives for behavior issues over the past few months, some media reports tied the departures to the #MeToo movement and its revelations of sexual harassment and assault. Interviews with more than a dozen former Nike employees, including senior executives, however, paint a picture of a workplace contaminated by a different behavior: corporate bullying. The workers say the sneaker giant could be a bruising place for both men and women, and that females did bullying, too. On May 8, Nike signaled as much when it confirmed four more exits stemming from an internal misconduct inquiry, including the departure of a woman with more than 20 years at the company.

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iA Financial Group Social Responsibility Report  

iA Financial Group has adopted a sustainable development policy. The company introduced this policy in its ‘2017 Social Responsibility Report’. Earlier this year, its board of directors officially adopted a sustainable development policy, thus, clearly expressing the company’s commitment to creating not only economic value, but societal value as well. It has set out seven guidelines. They are to ensure the financial wellbeing of its clients; effectively manage risks; follow high standards of governance; actively contribute to its communities; manage environmental impacts; create a rewarding work environment; and practice responsible sourcing.

Social Responsibility Report

Industry Urges Caution as UK Government Mulls ESG Rules for Trustees

Industry experts have broadly welcomed the move by the UK government to consult on the legal duties of trustees with regard to environmental, social and governance (ESG) risks, but warned any prospective rules or regulations must not be overly prescriptive.

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Gore Spruiks Sustainable Investment

Climate change is the number one threat to the global economy but sustainability is the “single largest opportunity in all of history”, former US vice-president Al Gore told delegates at the Milken Institute Global Conference.

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Spotlight on Investors: CPPIB - Sustainable Investing  

The Canada Pension Plan Investment Board (CPPIB) is Canada's largest institutional investor, with assets in excess of C$300 billion.

CCPIB have recently published their 2017 Sustainable Investing Report.

Mark Machin, President and Chief Executive Officer, states: “The fact is, sustainable investing is the right approach for an organization that aims to deliver strong returns over decades. Given CPPIB’s exceptionally long investment horizon, ESG factors can be significant drivers – or barriers – to the success of the enterprises in which we invest.”

Report

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Follow Up Spotlight on Investors: La Caisse Publishes its First Stewardship Investing Report

Canada's La Caisse De Dépôt et Placement du Québec (CDPQ) was the subject of last week's investor ESG spotlight. This week, La Caisse published its first annual Stewardship Investing Report. This report provides an overview of la Caisse’s strategic directions for stewardship investing and details the concrete measures it has taken on several key issues, including climate change, corporate governance, women in business and international taxation.

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The ‘Slippery Slope’ of ESG Demands

State Street Global Advisors, PGIM, and other managers are making environmental, social, and governance (ESG) criteria part of their overall investment processes, but the head of Ontario Teachers' Pension Plan reminded an audience Tuesday that the real goal remains being able to pay pensions.

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Institutional Investors Release Declaration on Financial Risks Related to Climate Change

Thirty Canadian and international financial institutions and pension funds representing approximately CAD $1.2 trillion of assets under management on October 26, 2017, issued a joint Declaration of Institutional Investors on Climate-Related Financial Risks, calling on publicly traded companies in Canada to commit to enhanced disclosure on their exposure to climate change risks, and the measures they are taking to manage them. The Declaration is supported in principle by 13 organizations.

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Barclays: Sustainable Investing and Bond Returns

Across the world, individual and institutional investors seek attractive financial returns while helping to achieve a positive impact on the communities around them. With growing concerns over climate change and global warming, geopolitical instability and uncertainty in financial markets, this has become even more pressing.

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TCFD Advances Carbon Disclosure Project

Eighteen years ago, a small group of climate enthusiasts from the worlds of finance and investment formed the Carbon Disclosure Project, now known as CDP, from a windowless basement in London. Their hugely ambitious aim was to encourage every business worldwide to report climate change-related data, such as their greenhouse-gas emissions, to investors.

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PRI: Statement on ESG in Credit Ratings 

By signing the ESG in Credit Ratings Statement, credit rating agencies and fixed income investors commit to incorporating ESG into credit ratings and analysis in a systematic and transparent way. To date, the statement is supported by more than 130 investors (with over US$26trn in collective AUM) and 15 credit rating agencies (CRAs).

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Goldman Sachs Sustain ESG Series A Revolution Rising - From Low Chatter to Loud Roar

Environmental, Social and Governance (ESG) topics are permeating the lexicons of society, corporations, regulators, and the investment community alike. We gather data points and anecdotes of rising ESG focus beyond the usual suspects - including earnings transcripts, social media and asset manager initiatives - as evidence of the growing relevance for investors.

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RIA Conference 2018

Alison Schneiderdirector of responsible investment at AIMCoJane Ambachtsheer, a partner and chair for responsible investment at ‎Mercer; and Michael Jantzi, chief executive officer at Sustainalytics; will be among the featured speakers at the ‘2018 RIA Conference.’ Schneider will discuss engagement and the UN SDGs while Ambachtsheer will speak on ‘Global Financial Stability: Climate Disclosure to the Rescue?’ Jantzi will deliver a keynote address. Other sessions will examine ESG integration in alternative assets, managing climate risk across asset classes, and innovative disruption and responsible investment. It takes place June 4 and 5 in Toronto. 

RIA Conference

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ESG’s Popularity Brings New Forms of Risk Management

Australians now expect fund managers to take an ethical approach to their investment portfolios and throughout their organisation, Brightlight Impact Advisory chief strategy officer Sam Richards says.

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Spotlight on Investors: CDPQ   

Created in 1965, La Caisse de Dépôt et Placement du Québec manages almost C$300 billion, making it one of the world's largest investors. La Caisse has been active to highlight the importance of E, S and G factors and has worked to evolve the organization's investment policies to consider ESG criteria.

We are pleased to provide links to key documents outlining CDPQ's responsible investing and climate change initiatives.

CDPQ provides access to three links on Responsible Investment, Investment Strategy to Address Climate Change and Policy on Responsible Investment.

spotlightoninvestors

Avenue Capital to Launch 'Impact' Investment Fund, Source Says

(Reuters) - Avenue Capital Group LLC, a New York-based investment firm with $9.4 billion in assets under management, plans to launch a fund this year that will focus on so-called impact credit investments, according to a person familiar with the matter.

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Pulling away: Inequality as an ESG risk

Fidelity International: Wealth distribution, emerging threats to the status quo, and why inequality is turning into an important sustainability risk - both at a macro and company level.

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Materiality matters: Targeting the ESG issues that can impact performance

Russell Investments has developed a new way to measure a company’s ESG (environmental, social, and governance) score. The new material score evaluates only those issues that are financially important to a company.

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GIIN: The Financial Performance of Impact Investing Through Private Debt

The Global Impact Investing Network (GIIN) and Symbiotics present the first comprehensive analysis of the financial performance of private debt impact investment funds.

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CFA: Handbook on Sustainable Investments

The CFA Institute now provides various materials to support increasing awareness of ESG criteria throughout the investment process.

The Institute's Handbook on Sustainable Investments, prepared in conjunction with the CFA Society of Switzerland and Swiss Sustainable Finance, provides examples and case studies of different approaches to sustainable investment across various asset classes.

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The Catalyst for Reformed Fiduciary Thinking

More than 1,000 people died in Bangladesh’s worst industrial accident when the eight-storey Rana Plaza garment factory near Dhaka collapsed in 2013. Many of the workers, aware that the factory was unsafe, had gone on strike in protest but had returned to the ill-fated building because they had been given an ultimatum to come back to work or lose their jobs.

For investors, tragic events such as the Rana Plaza disaster provide a catalyst to reform the investments processes and the criteria for evaluating investment outcomes.

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World Bank Group: Incorporating ESG Factors into Fixed Income Investment

This research report is the result of a partnership between the World Bank Group and Government Pension Investment Fund (GPIF) of Japan, initiated by the World Bank Group’s President, Jim Yong Kim, and GPIF’s Chief Investment Officer, Hiro Mizuno. The aim is to collaborate on initiatives that promote strategies for including environmental, social and governance (ESG) criteria in investment decisions across different asset classes. Ultimately, the goal is to direct more capital towards sustainable investments and leverage the private sector to achieve the scale of investment needed to meet the Sustainable Development Goals.

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BlackRock: Regulators Should Set Corporate Governance Rules

BlackRock, the world’s largest asset management group, has called for regulators to be tasked with setting corporate governance standards rather than relying on index providers to screen prospective or existing members of their benchmarks.

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Pension Funds Urge Companies to Set Ambitious Emission Targets

European pension funds are among a $1trn-strong group of institutional investors calling on companies to set greenhouse gas emission targets that will help achieve the goals of the Paris agreement on climate change.

Castle Hall note: further information on the Investor Decarbonization Initiative is available here.

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Spotlight on Investors: Implementing ESG 

As our first ESG spotlight, we are pleased to highlight the University of Toronto Asset Management (“UTAM”), with combined pension and endowment assets of approximately C$10 billion.

In 2017, UTAM published their first Responsible Investing Report and published a Responsible Investing Policy. The institution also appointed BMO Asset Management to identify ESG risks in select companies worldwide, signed the Montreal Carbon Pledge, and became a participant in the Climate Action 100+ group.

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spotlightoninvestors

KPMG: Realizing the Return on Gender

It’s been so encouraging to see the progress women have been making across so many industries these past few years. There’s better female representation on corporate boards... And while some sectors are more advanced than others, even traditionally male-dominated industries, like alternative investments, are making some encouraging moves in the right direction. 

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Is it Possible to Enhance Performance While Reducing Carbon Impact? HSBC White Paper

Managing climate risk is imperative for all investors. For those investors who are comfortable with some exposure to carbon intensive sectors, imposing carbon constraints may be an effective approach to achieving a lower-carbon risk profile with a return profile in line with or better than the benchmark.

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Renewables Gain Energetic Support

Fiduciary Investors Symposium: An estimated $3.4 trillion is invested in renewable energy but that is set to grow to much more. The compelling case for investing in renewable energy comprises: consumer demand, revolutionary technology such as electric cars, changing corporate behaviour, and galvanizing factors such as the sustainable development goals (SDGs), a panel of experts has argued.

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Doing our Duty: 
Preventing Sexual Harassment in the Workplace

A paper by the Canadian Human Resources Professionals Association (HRPA) found 40 per cent of HRPA members surveyed reported that their workplace still takes a reactive approach to sexual harassment and 17 per cent report witnessing an employee being sexually harassed or assaulted. ‘Doing our Duty: Preventing Sexual Harassment in the Workplace’ also found close to 20 per cent of members reported an increase in sexual harassment claims in recent months. Information from broader industry can inform development of sexual harassment policies in the asset management industry.

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Asia's ESG Leadership

For investors interested in environmental, social and governance (ESG) strategies, a regionally diversified approach can help capture global growth.

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First State Super Combats Workforce, Franchisee Risk

First State Super, one of Australia’s largest super funds, will delve deeper into the emerging risk of franchise models in Australia to ensure its investments don’t support rights abuses.

Castle Hall comment: an interesting initiative from a leading institutional investor to "look through" investment structures to the underlying activities of portfolio companies.

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Investing With a Purpose: Looking Beyond 
"Social Responsible Investing (SRI)"

Wells Fargo: While the roots of Socially Responsible Investing ("SRI") date back centuries, this movement has only recently developed a widespread, global following among investors, which is accelerating.

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Loomis Sayles Joins ESG Wave 
With Dedicated Senior Role

Loomis Sayles & Co has named Kathleen Bochman as its new director of environment, societal and governance, in a move intended to step up the US group’s efforts across its investment processes.

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Impact Assessment Model Finds ESG Funds
‘Low on Sustainability’

Investment funds aren’t what they say they are when it comes to sustainability or environmental, social and governance (ESG) criteria, according to the company behind a new impact measurement model.

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ESG roundup: Danish pension funds sharpen climate focus

Pension funds in Denmark are working harder on the issue of climate change, spurred on since the signing of the Paris Agreement, according to a new report by WWF Denmark.

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French central bank formalises responsible investment stance

The French central bank has adopted a responsible investment charter that will govern the management of some €20bn of assets.

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Norway’s SWF: no to private equity, yes to green infrastructure

Norway’s giant sovereign wealth fund has been denied permission to invest in private equity – but the country’s government has opened the door to an allocation to green energy infrastructure.

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Cbus, DIF co-invest in renewable energy alongside Australian Government 

Cbus Super and the Dutch Infrastructure Fund (DIF) have jointly bought an 80.1% equity interest in a Western Australian renewable energy producer for around AUD198m (€124.3m).

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GPIF Japan Seeks Better Beta Through ESG

The $1.4 trillion Government Pension Investment Fund of Japan is using ESG as a better beta strategy, to improve the market as a whole, rather than to seek excess returns.

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Is ESG inherently multi-factor?

Multi-factor ESG is probably more successful as a marketing term than it is at providing a coherent approach to mixing ESG and other factors in a portfolio-construction methodology

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HESTA probes deeper on gender diversity

In Australia, industry super fund HESTA is surveying its 70 external fund managers to uncover exactly how many women are instrumental in investing its $43 billion under management.

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