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Articles by Toby Belsom
Inside PRI data: Insights on current practice
July will mark the half-way point between the creation of the UN’s Sustainable Development Goals (SDGs) and the 2030 target to achieve them.
You’ve filed a shareholder proposal - what now?
In many countries, this year’s annual general meeting (AGM) season is fast approaching. A growing number of investors have been busy filing shareholder proposals – that is, putting forward asks to companies, to be voted on by shareholders at their AGMs. However, drafting and filing the proposal is just one part of the picture.
Sustainability outcomes: How can investors support the development of meaningful data?
At this year’s World Economic Forum in Davos, warnings by about climate inaction and companies’ misleading sustainability claims loomed large. UN Secretary-General António Guterres called on global businesses to review their climate pledges, highlighting that they are often based on “dubious and murky” criteria, leaving the door “wide open to greenwashing”.
Part II: ESG factors and returns - a review of industry research since 2021
Since our 2021 review of selected industry research on the connection between ESG factors and returns at a portfolio and equity level, a range of new papers has been published on the topic by leading asset managers and investment banks. This blog summarises our observations on how industry research has developed and some emerging themes. The end of the blog includes links to the research referenced.
Why we need to talk about resourcing stewardship
Stewardship functions are largely under-resourced. Investors must be prepared to pay more for stewardship, but how much more are we talking about and what is stopping them?
Altruism or self-interest: What drives employees to invest in their companies?
ACADEMIC BLOG Employee share ownership is a motivational tool and a savings vehicle for employees, as well as a major source of financing for companies. In many countries, companies and governments encourage this type of mechanism through discounts on the share price, an attractive employer matching contribution, or tax benefits. As a result, employee share ownership is very widespread.
Sustainability information is crucial for valuing companies - and high-quality data is key
Standard-setters, policy makers and regulators have made significant strides this year towards standardised sustainability disclosures by companies, launching several major consultations. The value of corporate sustainability information is clearly becoming more widely understood. Sustainability issues can affect the financial performance of a business and hence its value over the short, medium and long term.
And now the hard part… implementing climate commitments
As COP26 ended in Glasgow, participants committed to a decade of action to align with the Paris Agreement and its call to limit global warming. With the conclusion of COP27, it is worth checking on progress. In the intervening year, the Glasgow Financial Alliance for Net Zero has grown to more than 550 financial institutions, the Net-Zero Asset Owner Alliance now claims 80 investors and membership in Climate Action 100+ has climbed to more than 700.
Criticising ESG incorporation does not make it any less essential
PRI DISCLAIMER The information contained on this website is meant for the purposes of information only and is not intended to be investment, legal, tax or other advice, nor is it intended to be relied upon in making an investment or other decision. All content is provided with the understanding that the authors and publishers are not providing advice on legal, economic, investment or other professional issues and services.
The 2022 AGM season: Which ESG issues have shareholders targeted?
The 2022 season of annual general meetings (AGMs) has delivered on its promise of progress, controversy, and a sense that more action is required. Listed equity investors have demonstrated once again that they are willing to utilise voting to voice their ESG concerns. The number of ESG-related resolutions being filed has increased. This year a record number of 576 resolutions have been filed, compared to last year’s 499 resolutions (also a record).
ESG incorporation in real estate - what best practice looks like
ESG incorporation best practice Real estate investors have a long history of responsible investment largely due to the relative homogeneity of the underlying assets – buildings. Unlike more diverse asset classes, real estate has benefitted from the development of sustainability certifications and comparable datasets. For example, BREEAM, one of the largest providers of green building certifications in the world, was established in 1990.
Sustainability-linked loans: A strong ESG commitment or a vehicle for greenwashing?
ACADEMIC BLOG Financing agreements between investors and firms are increasingly taking environmental, social, and governance (ESG) concerns into account, reflecting a growing demand from financial stakeholders and broader society that they do so. Despite bank loans being the primary source of debt financing for firms around the world, little is known about their role in the rapidly evolving ESG-contingent financing space.
Incorporating climate change in private markets: An investor resource guide
This resource guide is aimed at direct and indirect private equity and real assets equity investors looking to identify publicly available resources and initiatives to help them incorporate climate change considerations throughout the investment process.
What does PRI data tell us about asset owner action on responsible investment?
PRI’s asset owner signatories are increasingly placing responsible investment at the centre of the relationship between themselves and investment managers. More and more clients and beneficiaries want it, regulators are demanding it and both academic and industry evidence support it. In Inside PRI data: asset owner action, we review what PRI data tells us about common themes and differences in the way our global asset owner signatories approach responsible investment.
CBD COP15: What does the global biodiversity framework mean for investors?
The first part of the 15th meeting of the Conference of the Parties (COP15) to the Convention on Biological Diversity (CBD) was held virtually between 11-15 October 2021. The aim of COP15 is to establish a Global Biodiversity Framework (GBF) which will set out a vision for worldwide action to preserve and protect nature. This is dubbed to be equivalent to the Paris Agreement for biodiversity.
As COP 26 approaches, climate metrics, targets, and transition planning advances
The recently released status report from the Task Force on Climate-Related Financial Disclosures (TCFD) shows the state of climate disclosure advancing rapidly. Eight national or supranational regulators have now adopted TCFD-aligned disclosure requirements, including the EU, Japan, UK and Brazil, and investors representing $194 trillion in assets now support the framework.
Private equity sponsors and lenders align to standardise ESG disclosure during due diligence
By Sanaz Raczynski, Head of ESG at Kohlberg & Company; Allison Spector, Head of ESG at One Rock Capital Partners and formerly at Churchill from Nuveen; Peter Dunbar, Senior Specialist and Carmen Nuzzo, Head of Fixed Income, Investment Practices, PRI As private companies’ disclosure of ESG information remains limited, investors continue to struggle to compare their relative ESG performance.
How compatible is shorting with responsible investment?
Few would claim that the hedge fund industry has fully embraced responsible investment. Hedge funds remain largely absent from some of the leading collaborative initiatives such as Climate Action 100+ and only a relatively small percentage of PRI’s growing signatory base are hedge funds.
Shareholders pressing for climate risk disclosures are doing companies a favour
By Caroline Flammer, Boston University; Michael Toffel, and Kala Viswanathan, Harvard Business School Climate change poses increasing risks and costs to companies, from tech firms in Silicon Valley to financial institutions in Europe. But in the absence of mandatory disclosure requirements, can private actors – such as shareholders – elicit greater corporate transparency with respect to climate change risks?
Barriers to net zero: How firms can make or break the green transition
By Ralph De Haas and Helena Schweiger, EBRD Office of the Chief Economist; Ralf Martin and Mirabelle Muûls, Imperial College London In line with commitments under the Paris Agreement, many countries are aiming to reach net-zero carbon emissions by 2050. This green transition will require massive corporate investments in cleaner technologies to reduce firms’ carbon footprint. Against this background, large companies like Apple, BP and British Airways have recently committed to climate neutrality.
Mapping natural capital hotspots of depletion
All businesses depend on nature for the benefits it provides, from clean air and water, to pollinating crops and disease control. The estimates that over half of global GDP is moderately or highly reliant on nature. However, as natural capital is depleted, it loses its capacity to provide those benefits – known as ecosystem services - upon which businesses, economies and society rely. The portfolios of investors depend on and impact nature.
Reflections from three webinars on incorporating ESG into asset manager selection, appointment and monitoring
By Toby Belsom, Director, Investment Practices, PRI, and Felix Soellner, Senior Analyst, PRI In light of the pandemic, the three signatory events we ran after the launch of the PRI’s guides on the incorporation of ESG factors into asset manager selection, appointment and monitoring (SAM) were online rather than in person. They provided a fascinating, valuable insight into the issues, challenges and practices of nine leading asset owners from North America, Europe, Africa and APAC.
Inevitable Policy Response: Biden Climate Leaders Summit confirms momentum
By Mark Fulton, Founder, Energy Transition Advisors and Eric Ling, Engagement Manager, Vivid Economics Significant impact – but still a long way to go on ambition by the 2025 Paris ratchet. The Inevitable Policy Response (IPR) has called for significant climate policy action since 2019. Our recent update of policy forecasts showed acceleration and confirmation relative to our 2019 forecast that significant action would be taken by the 2025 Paris ratchet time.
How do hurricane shocks impact local public finance dynamics in the US?
By Rhiannon Jerch, Assistant Professor of Economics at Temple University, Matthew E. Kahn, Bloomberg Distinguished Professor of Economics and Business and Director of JHU’s 21st Century Cities Initiative, Johns Hopkins University and NBER, and Gary C. Lin, Postdoctoral Fellow at the Johns Hopkins University ACADEMIC BLOG Natural disasters such as Hurricanes Katrina, Harvey, and Sandy have imposed significant costs on US cities.
Keeping up with credit rating agency progress
By Carmen Nuzzo, Head of Fixed Income, PRI and Sixtine Dubost, Analyst, Investment Practices Market participants are still split about whether credit rating agencies (CRAs) give enough prominence to environmental, social and governance (ESG) factors in their credit rating opinions, but there is no doubt that the signposting of these has improved.
PRI responsible investment policy database: key signatory trends
One of the primary factors that makes the PRI unique is the wealth of data collected during the annual signatory reporting process. I cannot think of any other single repository of information on asset managers and asset owners integrating ESG factors into stewardship practices and the investment process. In fact, the PRI reporting process is the largest reporting project on responsible investment (RI) in the world.
PRI signatory responsible investment policy database: key trends
One of the primary factors that makes the PRI unique is the wealth of data collected during the annual signatory reporting process. I cannot think of any other single repository of information on asset managers and asset owners integrating ESG factors into stewardship practices and the investment process. In fact, the PRI reporting process is the largest reporting project on responsible investment (RI) in the world.
Do PRI signatory investors walk the talk?
By Rajna Gibson Brandon (University of Geneva), Simon Glossner (University of Virginia – Darden School of Business), Philipp Krueger (University of Geneva & Swiss Finance Institute), Pedro Matos (University of Virginia – Darden School of Business) and Tom Steffen (Osmosis Investment Management) ACADEMIC BLOG The practice of responsible investing, whereby institutional investors incorporate environmental, social, and governance (ESG) issues into their investment processes, is no longer a...
Making polluters pay - the problem with limited liability
Limited liability is a defining feature of corporations. Corporate law generally affords limited liability protection not only to the individual shareholders of corporations, but also to corporate parents of subsidiaries. The use of subsidiaries is pervasive, in the US and globally. However, because parents are generally insulated from the liabilities of their subsidiaries, this organisational structure creates incentives to engage in riskier behaviour than would be socially optimal.
Time for change at Exxon
By Edward Mason (@edwardcmason), Head of Responsible Investment at the Church Commissioners for England These are extraordinary times for the oil and gas industry. Unprecedented demand destruction is putting the sector under extreme pressure. As investors, we are thankful for the measures companies are taking to ensure their short-term survival. This is not, however, a time to lose sight of the long-term climate challenge facing the sector.
Crisis recovery: the time for hedge fund saints, not sinners
Hedge funds must contribute meaningfully to the investment challenges presented by COVID-19 and climate crisis The ongoing COVID-19 and climate crises are having significant impact, not only on our health but also on our food, water supplies, security, as well as ecosystems, livelihoods, and economic growth.
COVID-19, capital allocation and ESG: Shell and the investors’ dilemma
For the UK investor, it is difficult to underestimate the importance of Shell’s dividend cut last week – its first since the Second World War, triggered by the ”pace and scale of the societal impact of COVID19 and the resulting deterioration in the macroeconomic and commodity price outlook”. The announcement contrasts with the news last week that BP is retaining its dividend (for the moment, at least).
Secret offshore vehicles and investor concerns
By James O’Donovan, Finance Professor at City University of Hong Kong, Hannes Wagner, Finance Professor at Bocconi University, and Stefan Zeume, Finance Professor at University of Illinois ACADEMIC BLOG The deliberate lack of transparency created by tax havens is what makes them attractive. To illustrate this opaqueness, consider that even basic estimates of the size of global offshore assets vary widely, ranging from $7 trillion to $32 trillion (Tax Justice Network 2012, BCG 2014, Zucman 2015).
Now is the time for governments to set standards on infrastructure and the SDGs
Of all asset classes, infrastructure is the one where government has most direct influence over investors’ sustainability performance. In many cases, governments define the type and scale of infrastructure projects that eventually provide opportunities for infrastructure investors. They may also set the environmental, social and governance standards expected of such projects at planning, procurement, construction and operational phases.
Global warming, local policies
By Söhnke M. Bartram, University of Warwick and CEPR, Kewei Hou, Ohio State University, and Sehoon Kim, University of Florida ACADEMIC BLOG In response to mounting concerns of climate change risk, governments around the world are pushing for regulations to curb greenhouse gas emissions in various forms and with varying intensity. There is no consensus on what the optimal policy approach might be and as a result, climate policies are highly fragmented across different jurisdictions (see Figure 1).
Highlights of the signatory survey on passive strategies and ESG
Passive investing is often presented as a win-win scenario for asset owners – cheap, consistent and does what it says on the tin. The effectiveness of this argument among institutional and retail investors is reflected in the growth of passive funds, which now represent at least 45% of S&P 500’s assets. It will be interesting to see if the recent market volatility puts a break on some of the growth in passive strategies.
PRI collaborative engagement on tax transparency: outcomes report
About the report This report summarises the outcomes of the PRI collaborative engagement on corporate tax transparency, which ran from 2017 to 2019. The engagement sought to: create awareness within companies of investor concerns around aggressive corporate tax practices and expectations of responsible tax practice; improve company disclosures across tax policy, governance and financial reporting; and identify best practice.
Advancing tax transparency: outcomes from the PRI collaborative engagement 2017-2019
About the report This report summarises the outcomes of the PRI collaborative engagement on corporate tax transparency, which ran from 2017 to 2019. The engagement sought to: create awareness within companies of investor concerns around aggressive corporate tax practices and expectations of responsible tax practice; improve company disclosures across tax policy, governance and financial reporting; and identify best practice.
Stalemate at COP25 must not continue into 2020
Despite demands from public and private stakeholders, including an increasingly vocal younger generation, overall this year’s COP25 was a disappointment due to the lack of ambition demonstrated by many governments.
Policy matters: a year in review
2019 was the year responsible investment policy mattered. Here is a selection of 2019 highlights: January The France AMF published a roadmap on sustainable finance continuing French leadership in sustainable finance. The International Organisation of Securities Commissioners (IOSCO) published a consultation on sustainable finance in emerging markets and the role of securities regulators – a first for IOSCO.
Research highlights evolving ESG landscape
Paul Gompers may not be a household name, but back in 2003, he laid the foundations for much work that correlated ESG factors and rankings with corporate and shareholder returns. Groundbreaking research that laid the way for much of the research around ESG and returns which supports the incorporation of ESG into investment decisions. Gompers’ work was one of the first pieces that pointed to a correlation between shareholder rights and profitability, sales growth and M&A.
CEO quarterly update: It’s imperative 2020 becomes a defining year for climate action
This year, we’ve seen an unprecedented level of action around climate change in many parts of the world. But despite this activity, we still face an uphill battle. As UN climate chief Patricia Espinosa noted at COP25 in Madrid, “we have been struggling.” With so little concrete action taking place in 2019, it is imperative that we ensure 2020 becomes a defining year for climate action.
Could corporate lobbying pose a significant threat to responsible investment and a sustainable financial system?
Over the past few years, momentum has been building behind responsible investment and the drive for a more sustainable global financial system. Increasingly, investors are incorporating environmental, social and governance (ESG) factors and climate impacts into their decision making.
When investors call for climate responsibility, how do mutual funds respond?
By Marco Ceccarelli, University of Zurich - Department of Banking and Finance; Swiss Finance Institute; Stefano Ramelli, University of Zurich - Department of Banking and Finance; and Alexander F.
Strategic asset allocation and responsible investment
Two weeks ago, we hosted a one-day event for PRI signatories in The Hague. One segment of this well-attended event was a small workshop on strategic asset allocation (SAA). Attended by 15 specialists in the field, the discussion focused on how issues such as climate change, demographics and resource depletion should influence and might be reflected in this process.
RI trends: in conversation with Thalia Vounaki, the PRI’s Senior Manager, Data
Thalia Vounaki, the PRI’s Senior Manager, Data talks the PRI’s Digital Communications Manager, Ruth Wallis, through the major RI trends among PRI signatories opted into climate reporting in AUM, an increase of 6% Tell me about a day in the PRI data team once the reporting cycle has closed It’s 1 April.
RI trends: in conversation with Thalia Vounaki, the PRI’s Senior Manager, Data
Thalia Vounaki, the PRI’s Senior Manager, Data talks the PRI’s Digital Communications Manager, Ruth Wallis, through the major RI trends among PRI signatories in AUM, an increase of 6% opted into climate reporting Click here for more RI trends Tell me about a day in the PRI data team once the reporting cycle has closed It’s 1 April.
Firing the starting gun on SDGs in infrastructure investing
Investment in infrastructure is critical to the achievement of the Sustainable Development Goals (SDGs). Not only is there a specific goal – SDG 9 on industry, innovation and infrastructure – dedicated to it, but investment in infrastructure can underpin direct and indirect contributions to many others: renewable energy for SDG 13 on climate action or SDG 7 on affordable and clean energy is an obvious example.
Firing the starting gun on the SDGs in infrastructure investing
Investment in infrastructure is critical to the achievement of the Sustainable Development Goals (SDGs). Not only is there a specific goal – SDG 9 on industry, innovation and infrastructure – dedicated to it, but investment in infrastructure can underpin direct and indirect contributions to many others: renewable energy for SDG 13 on climate action or SDG 7 on affordable and clean energy is an obvious example.
The passive investment surge: a responsible investment opportunity
If the last 10 years saw a seismic shift in the way retail and institutional assets have moved from active to passive strategies, then the next ten might see another mass market shift as increasing pools of assets start to incorporate ESG factors into investment practice and process. These mega trends – ESG integration and passive investment – are increasingly overlapping.
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