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SRI HEADLINES


 The news that shaped the week in responsible investing 
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Dear SRI reader,

Yesterday the 8th of June, the European Commission published the Communication on the Mid-Term Review of the Capital Markets Union Action Plan. The document reiterates the intention to strengthen the third pillar of the Investment Plan for Europe and the role of capital markets in addressing the financial needs of Member States economies.

 
Good progress has been made to address some of the most pressing issues around the key players, particularly interesting are the amendments on Solvency II to encourage insurance companies to invest in 'qualifying infrastructure projects', opening up further the ability of private investors in an asset class with so much potential for sustainability.

Similarly, the Consumer Financial Service Action Plan opens up a greater choice and better access to retail financial services across the EU.

The Mid-Term Review confirms the will for a re-engineering of the financial systems as a necessity for investments to become more sustainable. Integrating sustainability in the EU regulatory's policy framework allows for private capital to be mobilised and directed toward sustainable investment and to ultimately fit in with the SDGs as part of the UN 2030 Agenda. The challenge of the Commission's High Level Expert Group on Sustainable Finance (HLEG) is to capture precisely those elements which are present in the financial system of today that can be re-engineered to deliver sustainable value.

Eurosif is particularly happy about the clear commitment to strengthen the EU's leadership on sustainable investment. The recognition that long-term investment decisions have to integrate wider risks and returns linked to environmental and social externalities is key to a more sustainable financial system. Acknowledging the evident need to integrate ESG considerations in investors' governance is part of this recipe for sustainability which also needs to be reflected in companies.

There is much the European Commission has already been doing and that goes beyond what is acknowledged in the Mid-Term Review. We recognise that and we look forward to the road ahead and the opportunities for a strategic and sustainable European financial system.
Happy reading,
Flavia Micilotta
- Eurosif's Executive Director
ESG
Green finance reaches EU policy ‘tipping point’ (EURACTIV) The mid-term review of the EU’s Capital Markets Union initiative, due on Wednesday (7 June), will mark another step towards the mainstreaming of green finance in Europe, a senior EU official told EURACTIV.

Time the green bond market grew up (Environmental Finance) The exclusion of Repsol's bond from the main green bond indexes highlights that a lack of a clear definition of what is green is hindering the market, argues Keith Mullin.

Passive’s next opponent: climate change (Modern Investor) Trump's withdrawal from the Paris climate agreement may prove to be futile as a wall of passive money is already rebelling on climate related issues.

'We are still in: US cities and businesses launch 'societal' commitment to the Paris Agreement (Edie) More than 900 companies, including Nike, Tesla, Google and Microsoft, have joined former New York Mayor Mike Bloomberg's declaration of defiance against Donald Trump's decision to withdraw from the Paris Agreement, with a vow to achieve and exceed the original commitment.


 

Business is leading the transition to renewables while politicians dither (The Guardian) This current political impasse is frustrating business leaders around the globe – and right here at home. Following Trump’s announcement, Goldman Sachs’ chief executive, Lloyd Blankfein, used his first ever tweet to lampoon Trump, while even fossil fuel companies such as Exxon said leaving was a stupid idea.

European Development Days focus on private sector (EURACTIV) The European Development Days, often called the ‘Davos of Development’ opened on Wednesday (7 June) in Brussels, with many of the VIP speakers stressing that in a difficult international context, the public sector cannot go it alone and therefore the role of the private sector is key.

EU environment and science money moved to military fund (EUobserver) The European Commission is proposing to finance parts of its proposed defence fund with money originally allocated to energy, environmental and scientific programmes. The EU's executive announced its plan to subsidise research and procurement of high-end defence technologies on Wednesday (7 June), but the origin of the money has gone largely under-reported.

ESG investors hit out at Trump’s Paris Agreement renege (Portfolio Adviser) According to Deutsche Asset Management’s second sustainable finance report released Thursday, 58 countries representing over 85% of global GDP have now implemented regulations or guidelines on sustainability reporting, ESG integration or exclusions.

Bolster safeguards through civil society to protect the environment (Eco-Business) Hitting two birds with one stone: Engaging civil society organisations in development will ensure local participation as well as strengthen the environmental sustainability of these projects, writes ADB’s Richeline Tan Mascarinas.

Devon shareholders reject climate resolution (Environmental Finance) Shareholders of US oil company Devon Energy have voted against a resolution calling on the company to do more to report on climate change at its annual general meeting (AGM). The proposal, filed by NGO George Gund Foundation, called on Devon to publish an annual assessment of the long-term portfolio impacts of global climate change policies and technological advances. It received 40.8% of the vote, below the 50% threshold needed.
 
Investors
Japan’s GPIF pushing asset managers on governance, ESG offerings (Investment & Pensions Europe) The world’s largest pension fund has called on asset managers to improve their corporate governance, according to its chief investment officer. Hiromichi Mizuno, CIO of Japan’s ¥145trn (€1.24trn) Government Pension Investment Fund, said because the fund was prohibited from directly owning Japanese companies, the fund’s stewardship activities were focused instead on the role of intermediaries such as asset managers.

Addressing information barriers in the SME funding market in the context of the capital markets union (European Commission publication) This staff working document presents the results of a work stream, launched under the capital markets union (CMU) action plan, to improve the conditions for finance to European small and medium-sized enterprises (SMEs). 

The environment is becoming more confusing for bond investors (Deutsche Bank AM) While politics and growth are playing a greater role again for rates in the U.S., markets in Europe are looking at the ECB and its slow exit from quantitative easing.


 
Shareholder survival is driving corporate decision-making (ICSA) Most company bosses are reasonable people with immense responsibility in a mature and unresponsive market. But shareholders, particularly those representing pension trusts, demand high returns, which create an interlocking ‘circle of need’ to get as much out of the market and then exit as quickly as possible. This is because pension funds, for example, have to pay their own members.

Fundraising for Renewable Resources Exceeds Conventional Energy (Institutional Investor) Investor interest in renewable energy is swelling, less than two years after the Paris Agreement was signed to protect environment globally. Renewables-focused funds have raised $5 billion this year, outstripping fundraising targeting conventional energy for the first time, according to a Prequin report Wednesday.
 
Asset Managers
Tax evasion crackdown will see wealth managers lose $13 billion (International Adviser) Wealth managers around the world will lose around $13bn (£10bn, €11.5bn) of annual revenue due to a global crackdown on tax dodging as clients are set pull out $1.1trn out over the next few years, a new report suggests. 

Future World Fund to start expelling poor performers by March (Environmental Finance) Companies that don’t show positive engagement on climate-related issues will start to be expelled from Legal & General Investment Management’s (LGIM) Future World Fund from March. The Future World Fund is a multi-factor global equities index fund that also has a 'tilt' to address climate change investment risks. Launched in November, HSBC Bank’s UK Pension Scheme selected the fund for its equity default option, which is worth £1.85 billion.

Norway's $960 billion fund wants banks to disclose carbon footprint of loans (Reuters) Norway's $960 billion (£745 billion) sovereign wealth fund will ask the banks in which it has invested to disclose how their lending contributes to greenhouse gas emissions, its chief executive told Reuters on Friday.


 

Double taxation of companies: better resolution mechanism (European Parliament press release) Firms in the EU are a step closer to having an effective and timely mechanism to resolve disputes resulting in their being taxed twice by different Member States. The move follows a vote in the Economics and Monetary Affairs Committee, which was approved by 41 votes to 1, with 1 abstention. The Committee backed stricter deadlines, which Member States must meet to resolve disagreements over double taxation, an arbitration procedure to determine ongoing disputes, as well as the creation of an advisory panel whose opinion would be binding.

Scrutiny on Sustainability Issues Leads Banks to Respond Via Social and Digital Media (International Banker) In this “hearts and minds” battle, we are seeing banks putting greater emphasis on social media and visual instruments such as video to express their side of the argument and explain what it means to be “sustainable” or “responsible” in practice. This is a change from the period following the financial crisis and the subsequent debate about the financial sector’s impact on the economy and wider society, when many banks transformed their sustainability or corporate-responsibility communications into detailed and “rational” presentations of their points of view, fully armed with the facts and figures. Websites and reports were the primary vehicles for this drive towards transparency; text and tables the primary instruments. 

Why asset owners should take heed of the transition to a low-carbon economy (Environmental Finance) Addressing the energy transition is a necessary long-term strategy, but it may throw up risks in the shorter-term as well, say Richard Folland and Shuen Chan
 
QUOTE OF THE WEEK
"The EU should take global leadership in the fight against climate change.

Valdis Dombrovskis, the European Commission Vice-President for the Euro and Social Dialogue, in a speech on sustainable finance at the European Parliament on the 6th of June. 
Copyright © 2017 Eurosif, All rights reserved.


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