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

This week, the European Council adopted the final text of the 
Shareholders’ Rights Directive (2007/36/EC), sealing the Action Plan on European Company Law and Corporate Governance adopted at the end of 2012 by the European Commission, whose aim was to tackle long-term shareholder engagement. The text has since been revised with a view to ensuring that shareholders have timely access to all the information relevant to general meetings and facilitate the exercise of voting rights by proxy, towards the enhancement of long-term financing commitment.
The new rules meant several changes. They mainly revolve around linking remuneration policies to a long-term and sustainable vision of the company; finally setting the right KPIs for business. Further changes are a renewed opportunity for institutional investors and asset managers to be more transparent in their approach to shareholder engagement. Through a comply or explain approach, they will disclose their policy on shareholder engagement.
This wind of change in European governance follows some important additions marked by the Pension Regulator (TPR) in their investment guidance for defined benefits schemes, which were unveiled on the 30th of March. In
a piece for Responsible Investor, UKSIF’s Executive Director, Simon Howard explained the new suggestions for trustees on how to improve their understanding of the managers' work. Howard highlighted the shift in terminology as per the consideration of ‘financially material’ factors for investment performance and therefore ESG, which this time seem to be a conditio sine qua non for schemes. This marks a significant difference from 2014 when the reference was merely conditional.
More encouraging news for the pension industry this week, as the Dutch Pension Federation moves ahead with its plan to draw up an ESG covenant for pension funds. Mandy Ros, spokesperson for Pensioen Federatie, told Eurosif "Dutch Pension Funds intend to work together to reach an International Sustainability Sector Agreement by 2017 in a multi-stake-holder process with NGOs, government and the pension sector in order to share knowledge, further define standards and to increase their impact on responsible investing, by means of OECD-standards and UN Guiding Principles". The idea would be to produce an agreed position presenting the different visions and offerings available, to the extent that they would also be clear, measurable and feasible. This would certainly be a great help to smaller pension funds, who are less well acquainted with ESG issues. Going forward is important, bringing everyone on board is essential.
Happy reading,
Flavia Micilotta
- Eurosif's Executive Director
 



 
ESG
Panama Papers one year on: Work left to be done (EurActiv) The EU has a duty to ensure that its update of the Anti-Money Laundering Directive requires the details of company owners to be made public, to avoid a repeat of the Panama Papers scandal.
 
State aid: Commission investigates alternative to divestment commitment for Royal Bank of Scotland (European Commission press release) An in-depth investigation to assess whether the alternative package proposed by the UK authorities is an appropriate replacement for the commitment for the Royal Bank of Scotland (RBS) to divest Williams & Glyn, required as part of its restructuring plan.



Dutch pensions sector to draw up ESG covenant (Investment & Pensions Europe) The Dutch Pensions Federation plans to draw up an environmental, social, and governance (ESG) covenant for pension funds, which would also involve government and societal organisations. The agreement, for “international corporate social responsibility” (IMVO), is aimed at improving co-ordination and the exchange of expertise between pension funds, which should result in shared definitions and standards, according to the federation.
 
Climate change becomes unavoidable for investors (Financial Times) For many asset managers and pension funds such long-term issues used to be shunted to teams responsible for developing policies on environmental, social and governance issues. Worthy, but perhaps peripheral for those paid according to investment profits. 
 
UK regulator urges long-term focus in trustee guidance (Investment & Pensions Europe) The UK’s Pensions Regulator (TPR) has urged DB pension fund trustees to take a long-term view of investment risks, governance, and strategy in fresh guidance published this week. The lengthy online document detailed the regulator’s expectations of trustees in charge of defined benefit (DB) pensions, and came as part of a wider push to improve scheme governance.
 
The carbon buyers’ club: international emissions trading beyond Paris (Bruegel) The effort to define rules for international emissions trading faces the strong desire of nation states to develop their own climate policies, which collides with the need for tradable units in one country to be equivalent to tradable units in another country. To overcome this dilemma Georg Zachmann proposes a club of carbon-buying countries that would regulate only imported mitigation outcomes.
 
Capital Markets Union: MEPs adopt reforms of the prospectus regime (ALDE press release) MEPs have today approved a final deal on a new prospectus regulation, an important step towards the creation of a Capital Markets Union. A Prospectus is a document produced by companies in order to inform investors of the key attributes of the issuing company, the securities they are offering, and any potential risks to the investment.

 
INVESTORS
Erafp rejects over 83% French executives remuneration resolutions in 2016 (Investment Europe) French public pension fund Erafp has voted against 83.1% of executives’ remuneration resolutions in French companies’ general meetings over 2016, it reported in a detailed review of its last year exercise of voting rights.The calculation has been done on a sample of 40 French companies’ general meetings in which some 810 resolutions were monitored by Erafp.

AP1 invests $250m in low-volatility 'resource-efficient' equities fund (Investment & Pensions Europe) Swedish national pensions buffer fund AP1 is investing $250m (€235m) in a new fund launched by Osmosis Investment Management targeting low-volatility stocks that are also considered efficient in their use of environmental resources.
 


Investors buy into “landmark” social inclusion bond from European social development bank (Responsible Investor) Investors have bought into a new €500m social inclusion bond from the Council of Europe Development Bank (CEB), the European institution set up more than 50 years ago to deal with post-World War II refugee upheavals and which is now helping to deal with the continent’s current migrant issues.

Ethical Investment Tide Lifts 'Greenwash' Concerns (Investopedia) Investors are ploughing ever more into ethical funds to back their views on issues such as global warming and gender equality, but such investments can be confusingly similar to standard funds, except for higher fees and 'green halo' marketing.
 
With Impact Strategy, Ford Foundation Courts Controversy (Institutional Investor) Ford is plowing $5 billion into impact investing. But can it bridge the gap between grantmaking and investment goals?
 
 
ASSET MANAGERS
Shareholders to march on AGM season buoyed by Paris & TCFD (Environmental Finance) With more than 100 environmental shareholder resolutions already filed, it is financial firms as well as the oil & gas majors that are in the firing line.
 
PRIIPs Rules are Finally Finalized (at Least for Now) (On the Regs) With all signs indicating that the revised PRIIPs rules will be approved by Parliament, asset managers can emerge from their holding pattern and implement their PRIIPs solutions. While the Commission’s revised proposal will likely satisfy the critics in the Parliament, the industry’s concerns remain unaddressed.


 
PRIIPS: Apples and oranges (Funds Europe) David Stevenson looks at the progress of Priips and finds a directive that asset managers first pushed for has turned out to be a burden for them.
 
FRC will name companies where accounts reviewed (Economia ICAEW) In a bid to improve the transparency of its operations, the Financial Reporting Council (FRC) has confirmed that it is to publish the names of companies whose financial statements it has reviewed. And, despite opposition among some commentators, it has decided to name them only after the cases are closed.
Quote of the week
"It's not about free trade, it's about fair trade. And part of that will be free, and the other part of that will be regulated very strictly so that we do not compromise on our norms and our values."

Frans Timmermans, European Commission First Vice President, delivering the Carlos de Amberes Foundation commemorative lecture in Spain.
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