ESG Update as at 30 July 2019


Australian and New Zealand ESG Updates

AMP Capital updates ethical superannuation funds

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A series of updates have been announced by AMP Capital regarding its ethical superannuation funds. The first change is a new name: AMP Capital Ethical Leaders. The funds were formerly known as AMP Capital Responsible Investments Leaders funds, however the change reflects a greater focus on ethical considerations and the increasing demand of these options by consumers.

AMP Capital’s ethical offerings are the ethical investment option for several industry superannuation funds.

The main change to the funds is increased investment screening regarding fossil fuels, reducing the revenue a company can make from fossil fuels from 20 per cent to 10 per cent, on top of the already-in-place exclusion for companies that make a material amount of money from the most carbon-intensive fossil fuels.

AMP Capital is launching a youth advisory committee with university students to offer views on AMP’s ethical investments to be considered by the investment team.

AMP Capital has $2.8 billion in funds under management across seven ethical and ESG strategies.

Activist shareholder group pushing for phase out of fossil fuels at Suncorp

At its annual general meeting Suncorp will disclose exposures to fossil fuels, at the request of its shareholders. Activist group Market Forces sponsored the shareholder request on behalf of 100 Suncorp investors.

Suncorp is to reveal its short, medium and long-term targets to reduce investment and underwriting exposures to fossil fuels, plus its plans and progress to achieve its goals. Market Forces says that the company’s targets should fit in with the Paris Climate Agreement to head towards limiting the global temperature increase to 1.5 degrees above pre-industrial levels.

The resolution also requests that these fossil fuel disclosures be published every year in the annual report. Suncorp has stated that its exposure to the fossil fuels industry is not material, being less than 0.5 per cent in the insurance business and investment portfolio, and a negligible proportion of its commercial lending portfolio. Suncorp says it does not finance fossil fuel projects because it doesn’t have an institutional bank.

Additionally Suncorp stated that it does not directly invest in, finance or underwrite new thermal coal mining extraction projects or new thermal coal electricity generation, and it is set to phase out these exposures by 2025.

Pablo Brait, Market Forces campaigner, said that ‘there is now not one single major Australian insurer willing to provide insurance for new, climate-wrecking thermal coal projects’. The activist group is lodging shareholder resolutions with a number of ASX-listed companies to move as many companies as possible away from fossil fuels.


Global ESG Updates

The circular economy - what’s next? Shoes made from coffee

Two Helsinki entrepreneurs are now successfully making cool sneakers from coffee grinds. Son Chu and Jesse Tran are both obsessed with sneakers, but couldn’t find any that didn’t have a detrimental environmental impact. So, they invented some.

Rens is their company that makes coffee grounds and recycled plastic waste into a light, durable material. A pair of their sneakers weighs 460 grams, and 300 grams of that is coffee. There are six plastic bottles worth of discarded plastic in one pair of Rens sneakers, while Rens sneakers are vegan-friendly, waterproof, quick-dry and naturally odour resistant. The company has customers globally and after a recent successful fundraising campaign, is increasing production.

Chu and Tran aren’t the only ones to make use of the circular economy. That is, using food byproducts and waste to create new products. Some examples include hemp, pineapple leaves, banana trunks and sugar cane bark being turned into packaging, biofuel, fertiliser and fibre.

The fashion industry has come under fire for being one of the greatest polluters we have, and one of the most invisible, but the tides are starting to turn.

  • Hugo Boss, a designer clothing company, has a range of footwear made out of a pineapple plant fibre called Pinatex

  • Designer Stella McCartney is backing Mylo, a leather alternative made from mushrooms

  • Italian label Salvatore Ferragamo makes clothes out of orange peel

  • H&M is using algae in the soles of its sandals

Check out the Kickstarter and get yourself a new pair of sneakers!


ESG Research Updates

Impact washing research: 85% of green-themed funds making unsubstantiated claims

A new report published by 2 Degrees Investment Initiative looks into impact washing and how it is derailing sustainable, responsible and impact investing. The report, Impact Washing Gets a Free Ride: An Analysis of the Draft EU Ecolabel Criteria for Financial Products, outlines the flaws in the words we are using to determine what is and isn’t responsible/sustainable/impact investments, and how this terminology could be undermining the ultimate goal.

The European Commission is setting itself up with ambitious goals, including pointing the flow of money at sustainable investments. Investors are keen, and financial institutions are adopting impact-related objectives. Methodologies are being developed to support science-based climate targets.

Regulators globally are setting new benchmarks in reporting and analysis of investments at the institutional level, so retail investors can find the products that match their investing values and goals at the other end. Ecolabel is a tool with this goal in mind. The market is ready and it’s happening.

The Ecolabel scheme is designed to help consumers choose financial products that deliver a scientifically measurable environmental impact, with the goal to reach a market share of 10-20 per cent for labelled products.

Impact investing is defined by intentionally generating a positive and measurable social and environmental impact, and fulfilling a positive impact beyond the provision of private capital. These investments are able to account for, in a transparent fashion, the financial, social and environmental performance of investments.

The 2degrees analysis found that ‘mission drift’ was a common problem, where a fund is set up to solve a certain problem (such as access to financial services), then a big institution steps in with its own product, but is not solving the same problem, since its consumers are not suffering from poor access to financial services.

Eighty-five per cent of the funds studied make unsubstantiated and misleading impact-related claims - this is in violation of existing marketing regulations. The main offender was claiming that investing in the fund/the fund’s investment strategy would result in positive environmental impacts when there was no evidence that this was true.

The report dives into sustainable investing and how we can better define what it is and isn’t, with suggestions and recommendations going forward for institutions, retail investors and regulatory bodies.

Read the full Impact Washing Gets a Free Ride: An Analysis of the Draft EU Ecolabel Criteria for Financial Products report (PDF)