Bitesize ESG Intelligence - 15 April | Brunswick

Bitesize ESG Intelligence - 15 April

The current and rising themes in the ESG space

  • CFOs speak up on ESG
  • Investors focus on treatment of workers in push for racial audits and more scrutiny of supply chains
  • Asian companies are catching up on ESG, backed by stock exchanges
  • Company tax responsibility emerges as a governance issue after COVID bailouts  

 

 

CFOs can champion sustainability and prevent ESG-washing within the investment chain

  • CFOs have been vocal about the role they can play to integrate sustainability within the strategy of their organisations. They are well placed to ensure that resources are available to back up a company’s sustainability effort and initiative, a CFO told The ESG Agenda. 
  • According to the Wall Street Journal, more CFOs think sustainability can ultimately attract new investors by making their businesses more resilient against the effects of climate change and other ESG-related risks.
  • Expect ESG to become an increasing priority for CFOs, especially as greenwashing claims increase. The US Securities and Exchange Commission (SEC) issued a risk alert warning that some ESG-labelled funds “tout favorable risk, return, and correlation metrics related to ESG investing without disclosing material facts”.  

Focus on treatment of workers intensifies in response to global events 

  • A coalition of 56 global investors representing £7trn in assets under management wants providers of ESG data to incorporate modern slavery into their ratings, Responsible Investor reports. The investors, which include Fidelity International, Schroders and  Australian Super, are also urging the UK government to strengthen the Modern Slavery Act and consider legislative approaches to human rights due diligence in corporate supply chains.
  • In an effort to address racial injustice and economic inequality, more companies are planning to conduct third-party racial audits. The companies are responding to pressure from institutional shareholders and commitment from the Biden administration to root out systemic racism.  

Asian companies are catching up on sustainability, pushed by stock exchanges  

  • In an effort to become the bourse of choice for global investors, the new chief of the Tokyo Stock Exchange will push Japanese companies to adopt more robust governance rules through an ambitious reorganisation, according to Nikkei. Companies with a Prime listing will be expected to meet higher disclosure standards, including against TCFD recommendations for climate. President Hiromi Yamaji said "As countries compete to raise corporate awareness about ESG, Japan cannot be left out".
  • Elsewhere, the Singapore Stock Exchange will launch indexes that comply with ESG principles and encourage green and sustainable bonds. President Loh Boon Chye said that “2020 has been an inflection point,” and more companies are adopting sustainability and ESG practices.
  • In the broader Asia Pacific region, 79% of investors increased ESG investments in response the pandemic, according to a survey of institutional investors by MSCI, slightly higher than the global share of 77%.    

 

Responsible tax emerges as a governance issue in post-pandemic world as US eyes international reform

  • First put on the agenda by the UN-backed Principles for Responsible Investment on the back of exposés such as the Panama Papers, tax responsibility is back on the agenda as a governance issue.
  • Institutional investors such as Norway’s $1trn Government Pension Fund Global recently disclosed that it divested from seven companies due to aggressive tax planning, and investors are increasingly engaging portfolio companies on tax behaviour.
  • Cash-strapped governments have grown weary of aggressive tax avoidance after bailing out entire sectors of the economy during the Covid-19 pandemic. US Treasury Secretary Janet Yellen has called for a global minimum corporate tax rate to end “a thirty-year race to the bottom” that has made government revenues shrink through corporate profit shifting to jurisdictions with lower or no taxation. 

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