ESG in a time of crisis
Defence in ESG
The invasion of the Ukraine is shining the spotlight on the grey areas of green investments once again. The Financial Times (FT), here, asks ‘Are Defence Stocks now ESG?’, bringing to the fore the debate that ‘surely supplying weapons to the invaded underdog in an unprovoked fight is a social good’. Classification and clarity are clearly key and a well-brought discussion.
Meanwhile, Swedish asset manager, SEB Investment Management will allow some of its funds to invest in defence companies from 1st April, as it tweaks its sustainability policy. Read the report in Ignites Europe here.
Failing to prepare
In another FT article, a sustainable finance expert, Sasja Beslik, asserts that ESG investors have failed by not managing risks associated with Russian investments before the latest invasion. Read the article here.
…and preparing not to fail
Stuart O’Brien, partner at law firm Sackers, provides an assessment on how trustees can balance their fiduciary duties in terms of Russia exposure in pension funds in Professional Pensions here. The article looks at the potential impact on schemes, including consideration of non-financial factors and divestment and exclusion.
One of the biggest Russian companies listed in London, Polymetal International, saw a boardroom exodus with the chairman and five other directors leaving the gold miner. Reported on in The Times, here.
On the flipside, the FT, here, raises challenging questions about ethics of the dual role of Gareth Penny, who is a chair at both Ninety-One and Russia’s Norilsk Nickel.
And a Citywire roundtable highlights the divided opinions of fund chiefs over pressure to divest including; JO Hambro Capital Management, Jupiter Fund Management, Capital Group, Vanguard Europe, Rowe Price, BNP Paribas Asset Management and GAM Investments. Watch the debate here.
Ignites Europe brings to the fore the question of whether fund boards should look to waive fees, including comment from FBC senior adviser, Philip Warland, here.
ESG for the future
Health food pledge
In a good example of engagement bearing fruit, ShareAction announced Unilever’s commitment to setting a new benchmark for public reporting on the healthiness of food sales. Read the announcement here and the article in the FT here.
UK Stewardship Standards
The UK’s Financial Reporting Council (FRC) has published an updated list of signatories to the UK Stewardship Code, which includes Schroders, State Street Global Advisors and Goldman Sachs Asset Management. Ignites Europe here, while Financial News reports on those who are notably absent from the list here. The FRC announcement is here.
For our FBC members who couldn’t attend our meeting with the FRC and FCA last week, make sure you look out for the recording of the session, available in your member portal in the coming days.
An interesting view is reported on in Ignites Europe here, that policymakers’ “obsession with labelling things” is distracting from the “real work” that ESG investors could contribute to, according to independent expert, Harald Walkate. He goes on to point out that “People should think more about what exactly they’re trying to enable, [whether it is] better investment insights, risk management [or] solving societal problems?”.
Financial Conduct Authority (FCA) Spotlight
In a diversion to EU regulations, the FCA is consulting on permitting UK authorised funds to separate Russian and Belarussian assets, that are difficult to sell and/or hard to value, from the fund’s other core investments (into a ‘side-pocket’). Read the full details here.
The Financial Conduct Authority (FCA) has warned that a high turnover in anti-money laundering staff may lead to gaps in firms’ financial crime net. The ‘Dear CEO’ letter is reported on in Financial News here.
In its quarterly consultation, the FCA is proposing to amend the research and inducement rules for collective portfolio managers so that they are subject to the same rules as investment managers. Points 3.3-3.5 are the ones to look at regarding this, here.
US mutuals Vs. UCITS
A new report from the European Fund and Asset Management
Association (EFAMA) compares the costs of UCITS and US mutual funds. Taking into account various cost calculating methods, as well as the differences in fund distribution between Europe and the US, the report reveals a more nuanced perspective on whether European citizens can fully benefit from the single market for investment funds after all. Read the report, here.
Graham Bentley, chief investment officer at Avellemy makes some useful points on the failure of clients to understand the role of risk, in Money Marketing here.
Research from Monterey Insight shows that Irish management companies now oversee $439.3bn (€370.7bn) of assets held in 812 Luxembourg-based funds. Attributed to Brexit reinforcing the ties between the two domiciles, Ignites Europe reports here.
An excellent piece of research here from Barnet Waddingham, all about attitudes to ESG investing by pension schemes as ‘asset owners’ (pension funds and in-house asset managers). This includes the view of their trustees, with their responsibilities similar to those of the directors of funds. Read the full research here.
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