Do the Asset Managers Walk the Talk on PRI?

Green Finance Advisor of Friends of the Earth (HK)

A recent research conducted by Dutch investment manager Robeco’s Wilma de Groot and Jan de Koning, and Sebastian van Winkel of the Erasmus School of Economics, suggests that asset managers continue to predominantly vote against social and environmental proposals. Their results have important implications for investors striving for direct impact on the sustainability agenda of corporates.

They investigated asset manager characteristics that influence ESG voting patterns using a decade of voting data with more than 20 million observations. Not only did they found that Asset managers predominantly vote against social and environmental proposals, most ironically, asset managers who have signed up to the United Nations-backed Principles for Responsible Investment (PRI), a network in which membership means you are pledging to support ESG as part of your investing strategy, are nevertheless failing to do so as well.

The PRI was started in 2006 with the stated mission of encouraging action that benefits “the environment and society as a whole.” But shareholder voting records reveal that’s just not happening. Only 35% of PRI signatories backed U.S.-based environmental resolutions as recently as 2018, and only about 24% voted in favor of social proposals.

“In order to ‘walk the walk’ instead of ‘talking the talk’, asset owners can encourage their managers to increase the number of proposals filed on environmental and social topics. This may be an important first step as the currently low figures could be sending a negative signal to directors about the importance of these issues. Asset owners can also make the assessment of sustainable voting practices an integral part of their manager selection, due diligence and monitoring,” de Groot adds.

The PRI has subsequently released a new investor guidance for voting on shareholder resolutions, urging investors to see voting not necessarily as part of an escalation strategy but rather as a tool for clear, effective and accountable investment stewardship.

“Greenwashing” could be everywhere, whether it is your MPF, mutual funds, or ETF, which labelled them as Green or ESG focused, or a stock or bond issue, or even Asset owners and asset managers which claimed themselves as environmental friendly. ESG conscious investors should definitely pressure the asset managers to do better and walk the talk!

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Tech Giants Redeeming Themselves with Green Investments?

Alexandra Tracy, Green Finance Advisor of Friends of the Earth (HK)

In the sustainability Olympics, big tech doesn’t usually score very high. Growing concerns about privacy and use of consumer data have been exacerbated by accusations of partisanship and censorship, with recent actions by some firms calling attention to how much control they have over social media and communications. This comes on top of years of controversy about how little tax many of these companies pay and whether this is fair.

Then there are the significant environmental impacts associated with the tech sector, from mining for key manufacturing inputs to disposing of unwanted devices. In 2019 alone, people discarded 53 million metric tons of electronic waste. Meanwhile, the exponential growth of energy use in data centres around the world, a rapidly expanding source of carbon emissions, highlights the need to address the industry’s contribution to the overall carbon footprint. Amazon, Google, Microsoft, Facebook and Apple together use as much power in a year as New Zealand!

Perhaps paradoxically, tech companies have announced some of the most ambitious climate targets in the world. Starting with Google in 2010, the big names have been signing large clean energy deals to power new data centres, and seem now to be looking to outdo each other in their green aspirations.

This can be seen also in the sizeable investment commitments that these companies have been announcing over the last year. In January 2020, Microsoft launched a Climate Innovation Fund, which will invest US$1 billion into accelerating existing climate solutions and creating new technologies. Later in the year, Amazon revealed its Climate Pledge Fund, a US$2 billion venture capital programme for sustainable technologies. This followed on the heels of the announcement by its founder, Jeff Bezos, of his Earth Fund, which he will kick off with US$10 billion.

Most recently, Apple has just announced a US$200 million fund dedicated to supporting nature based solutions to climate and environmental challenges. Its Restore Fund, a joint venture with Conservation International, will invest in forestry projects that aim to reduce carbon emissions and restore biodiversity. This is important to the company’s efforts to meet its pledge of carbon neutrality by 2030, as more sustainable management of forests will sequester carbon from the atmosphere which can offset part of Apple’s carbon footprint. 

While commentators may be sceptical about some of the motivations behind these plans – and, indeed, raise questions about carbon offsetting by large corporates – any initiatives that will mobilise capital into those areas where it is most needed should be welcomed.  Apple is open about the fact that one of the additional aims of the Restore Fund is to make a financial return on sustainable timber production. We need more interventions like this to demonstrate to the market that you can successfully address carbon challenges and make money at the same time.

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