Investors Divest from Companies Not Addressing Climate Risk (Newsletter 6/18)

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Regulatory News

New York State Comptroller Urges SEC to Align with TCFD

New York State Comptroller, Thomas DiNapoli, responded to the SEC’s request for public comment on climate-related disclosure, urging the SEC to require registrants to report according to TCFD recommendations, to disclose Scope 1, 2, and 3 emissions, to account for both physical and transition risks and opportunities, and to utilize existing frameworks such as SASB, CDP, and Climate Action 100+ Net Zero benchmarking to develop its approach.

Investor Updates

Fidelity’s Bolsters ESG Fund Family

Fidelity Investments launched five actively managed ESG funds centered on climate change, gender diversity, and the environment.

The funds will mainly invest in companies combating climate change through corporate strategy or products and services, minimizing environmental impacts, improving sustainability practices, and advancing women in leadership.

LGIM to Divest from 4 Climate Laggards

Legal and General Investment Management (LGIM)’s Climate Impact Pledge Report highlights how the firm has started to divest from companies that have failed to sufficiently address climate change risk. Specifically, LGIM committed to divest from American International Group (AIG), Industrial and Commercial Bank of China, PPL Corp., and China Mengniu Dair. The report also touches on improvements issuers have made related to climate change after engagement with LGIM. For example, 22% of LGIM’s priority engagement companies now set net zero targets. In the 2021 proxy season, 130 companies received no votes from the firm for failing to meet LGIM’s minimum climate-change standards.

Survey Finds Non-Financial Data Impacts Investment Decisions

A survey conducted by Bright Data found that 76% of companies surveyed within the finance, banking, and insurance sectors, said their organization’s investment decisions are impacted by ESG factors. The most critical ESG factors identified were environmental practices, organizational diversity, and corporate governance. Of the responses from those at the most senior level of their organization, 80% said ESG is now incorporated into all business strategy decisions.

BlackRock Acquires Climate Change Scenario Model

BlackRock announced it is buying Baringa Partners’ Climate Change Scenario Model to integrate into BlackRock’s Aladdin Climate platform. The enhancement aims to set the standard for companies and investors to model climate change impacts and the transition to a low carbon economy, especially as many companies and governments are setting net zero targets.

Proxy Season Briefing

Activision Blizzard Kicks the Can for Say-on-Pay Vote

Activision Blizzard’s surprise decision to extend its say-on-pay shareholder vote by a week, in an attempt to avoid losing the vote, was widely criticized by investors. The company issued a release with the results and reasons for extending the vote, noting corrections from previous statements it disclosed. The proposed compensation package on the ballot this year for CEO Bobby Kotick is $154.6 million.

ISS & Glass Lewis Urge Voting Against Boohoo Co-Founder

ISS and Glass Lewis recommended voting against the re-election of Carol Kane, CEO and executive director of Boohoo, a UK-based fast fashion company, due to the development of supply chain labor abuse problems during her tenure.

Caterpillar Climate & Diversity Proposals Do Not Receive Majority Support

A proposal filed by As You Sow, requesting Caterpillar report on climate policies, targets, and performance, in addition to information on its alignment with Climate Action 100+’s Net Zero Benchmark, won 48% of votes, falling just short of majority support. As You Sow’s second proposal, which asked for a report on Caterpillar’s diversity and inclusion efforts, received 33.9% support (Proxy Insight).

Company Spotlight

Strong ESG Commitments within Automotive

Autoliv announced it committed to the Science Based Targets initiative (SBTi), stating plans to be carbon neutral by 2030, and striving for net zero emissions across its supply chain by 2040. For companies setting net zero targets, suppliers will likely feel the most pressure as suppliers contribute to companies’ Scope 3 emissions. The company goes further on its sustainability website, sharing material environmental and social targets for the next one to two years and discloses progress from 2020. Autoliv’s near-term goals and updates show close to a real-time view of the company’s ESG performance. 

Early Adopter of Science-Based Targets

Microcap company Farmer Brothers’ website provides a list of materials that dive into material ESG topics relating to the company and covers what the company is doing in response to each issue. Notably, in the Energy & Climate brief, the company highlights it was one of the first 60 companies to set Science-Based Targets with both mid- and long-term targets set and approved by a third-party. For Scope 1 and 2 emissions, the company set goals of 11% reduction by 2025 and 48% by 2050. For Scope 3 emissions, it set goals of 7% reduction by 2025 and 31% by 2050, all measured against a 2014 baseline.

Companies Adding Diverse Board Members

WSJ study found 456 new independent directors were added to S&P 500 boards over the past year, with nearly 75% of the new directors being women or belonging to racial or ethnic minority groups. Although 70% of directors are still men, Bank of America found that within the S&P 500, boards with above-median gender diversity see a 15% higher return on equity. Recently, Ralph Lauren added Valerie Jarrett to the Board based on her legal and leadership skills and her experience in the private and public sectors. In March, GM appointed Meg Whitman, former President of Quibi and CEO of HP, and Mark Tatum, Deputy Commissioner and COO of the NBA.

News Bites