How Investors Are Integrating ESG (Newsletter 5/14)

Investor Updates

Manulife Commits to Net Zero Portfolio by 2050

In its 2020 Sustainability Report, Manulife announced its commitment to guide its portfolio to be net zero by 2050. The firm will take a sector-based approach to achieve net zero, focusing on heavy emitting industries first and establishing near-term emissions reduction targets within the next year. Manulife committed to seeking third-party validation of its investment and operations targets from the Science Based Targets initiative (SBTi) and tying executive performance goals to its Climate Action Plan.

Buy-Siders Rely on Multiple ESG Data Providers

In a virtual panel on ESG investing, a group of buy-side investors discussed how they have integrated ESG data sources within investment processes. Generally, more advanced investors consult multiple ESG research and data platforms to make informed investment decisions. For example, Calvert uses MSCI, Sustainalytics, ISS, RepRisk, and CDP in its ESG research, and State Street leverages Sustainalytics, ISS-ESG, Vigeo-EIRIS, and ISS-Governance, and ties the data to SASB (Nasdaq). Additionally, investors want to hear directly from companies what they are doing to address ESG risks and opportunities, particularly in relation to the company’s material factors. To get access to more insights on what ESG topics, frameworks, and ratings some of the largest institutional investors look for, contact us.

TCFD Pulls Ahead in Investors’ Eyes

In its institutional investor survey, Morrow Sodali collected responses from more than 40 institutional investors, with assets under management of $29 trillion. Key results from the survey are as follows:

Climate change, then human capital management, remuneration, and board composition are at the top of investor’s ESG agenda.
The most popular framework is TCFD by an overwhelming majority, followed by SASB.
The survey shows growing investor support for activist campaigns, both related to ESG and general topics.

Proxy Season Briefing

American Express Shareholders Win Support for D&I Proposal

As You Sow’s proposal requesting American Express to report on its diversity and inclusion efforts and the effectiveness of its DEI programs received 59.6% support, according to Proxy Insight. Vanguard supported the resolution, stating that the proposal “focused on a specific gap in the company’s disclosures: the board’s role in overseeing American Express’s DEI strategy and its process for measuring the outcomes of the company’s diversity programs.”

Bunge Deforestation Proposal Receives Record-Breaking Support

Bunge’s May AGM saw several shareholder proposals pass with a large majority of votes, including proposals for Bunge to report on its soy supply chain, strengthen its no-deforestation policy, and adopt a simple majority vote. In a rare move, Bunge recommended shareholders vote in favor of the resolution and has plans to produce a report aligned with the proposal. 98.9% of votes were in favor of the proposal, which requests Bunge to report how it will eliminate deforestation (Proxy Insight).

Target to Set a Plastic Reduction Goal

As You Sow and Green Century Capital Management withdrew their resolution in response to Target agreeing to set a virgin plastic elimination goal for its private brand packaging. Target’s goals will be released with the new CSR coming this summer.

Phillips 66 & ConocoPhillips Investors Pass Emissions-Related Proposals

This week, shareholders of Phillips 66 pushed forward a resolution asking the company to publish emissions-reduction targets. A similar resolution received 58% support at ConocoPhillips on Tuesday. The results set the tone for upcoming votes at both Chevron and Shell.

Company Spotlight

Caterpillar Sets 2030 Sustainability Goals

In its interactive sustainability report, Caterpillar unveiled 2030 sustainability goals, specifically stating it is helping customers transition to a lower-carbon economy. In doing so, the company laid out a set of goals to hit from a 2018 baseline to 2030, such as reducing recordable injury frequency by 50%, setting science-based Scope 1 and 2 goals to reduce emissions from operations by 30%, increasing sales and revenues from remanufacturing offerings by 25%, and reducing landfill intensity by 50%. Many of these goals can be tied to the Industrial Machinery & Goods SASB Standards, which Caterpillar currently reports here.

Ratings & Frameworks

MSCI Falsely Triggers Concerns for Corporate Issuers

Late last week you may have received an email from MSCI saying your company’s annual update has been completed, and you should log in to MSCI and review the data. MSCI accidentally sent the email, triggering a panic at many companies. On Tuesday, MSCI sent a correction email telling companies to disregard the notification. MSCI syncs the annual update to a company’s annual reporting cycle – you can expect the ratings agency to issue your company’s next update accordingly.

Morningstar Sustainability Assessments

Morningstar launched two new ESG assessments – Morningstar ESG Commitment Level for asset managers and Morningstar ESG Risk Rating Assessment for companies.

Morningstar ESG Commitment Level provides an analysis of the extent strategies and asset managers are integrating ESG into their investment processes, are already available for about 900 funds and 70 asset managers to the majority of Morningstar members, and the rest will have access late May. Key takeaways from recent assessments include:
- Of 31 asset managers assessed, 5 firms – Amundi, BNP Paribas, HSBC Global Asset Management, Jupiter, and LGIM were issued an Advanced level.
- 13 asset managers received an ESG Commitment Level of Basic. Those include Allianz Global Investors, Invesco, JPMorgan, State Street, and T. Rowe Price.
- 12 asset managers received an ESG Commitment Level of Low, such as Franklin Templeton, Janus Henderson, Mellon Investments, and VanEck among others.
Morningstar ESG Risk Rating Assessment builds on Sustainalytics’ risk research and looks at management and exposure to ESG risks for an absolute assessment and expresses ratings visually by the number of globes that are tied to a risk category. For example, five globes represent a score of 0-9.99 / negligible risk, while one globe signifies a score of 40+ / severe risk.

Featured Article

ESG 101

Irwin, a technology platform for IR professionals, published a beginner’s guide, How to Get Started with ESG, in partnership with ESG Infinite and Clermont Partners. The informational piece breaks down ESG for anyone getting up to speed on the increasingly popular topic.

News Bites

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