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July 26, 2017: PRI welcomes launch of the FSC stewardship standard

NEWS BITES - PRIVATE COMPANIES

The PRI today welcomed the launch of Australia's first compulsory asset stewardship code for fund managers by the Financial Services Council (FSC).

The Internal Governance and Asset Stewardship Standard, which will be mandatory for all of the FSC's fund manager members, formalises a code of practice for how they should meet obligations for transparency within their internal governance and stewardship practices. This includes rules for how they disclose their voting policies and engage with investee companies on material environmental, social and governance (ESG) issues.

The development of an Australian stewardship code was one of several recommendations put forward by the PRI in its Australia roadmap in December 2016 to enhance investment industry policy and practice on responsible investment and bring these into line with global best practice. Stewardship standards have already been developed in many markets in recent years, including the UK, US, Japan, Hong Kong, South Korea, Malaysia, Brazil and Singapore. The PRI's Principle 2 states: We will be active owners and incorporate ESG issues into our ownership policies and practices.

The recommendations outlined in the roadmap, which was supported by UNEP FI and The Generation Foundation and developed in close collaboration with the Australian Council of Superannuation Investors (ACSI), the PRI's Australian signatories, policy makers and lawyers, will allow a fiduciary to fully integrate ESG risks.

The PRI believes that asset owners and investment managers should be effective stewards of the assets they hold for their beneficiaries. Asset owners should appoint, select and monitor asset managers on their ability to align stewardship activities with their investment beliefs, policies and guidelines, and the PRI will continue to work with its Australian asset owner signatories to support them to do this. Ultimately, the PRI believes an industry-wide stewardship code covering both asset owners and managers should be developed by the industry.

INDEX

SECTION 1 UNITED NATIONS PRINCIPLES FOR RESPONSIBLE INVESTMENT PROFILE

SECTION 2 PRESS RELEASES: 2017

SECTION 3 OTHER NEWS: 2017

SECTION 1 UNITED NATIONS PRINCIPLES FOR RESPONSIBLE INVESTMENT PROFILE

1.1 ACTIVITIES

United Nations Principles for Responsible Investment is a network of investors who work towards the implementation and practice of the principles for responsible investment. The principles provide a voluntary framework for the investment community, by which they can incorporate environmental, social and corporate governance into their decision-making. United Nations Principles for Responsible Investment was founded in 2005 and is based in New York, New York.

1.2 SUMMARY

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Website: http://www.unpri.org

Industry: Miscellaneous Commercial Services and Supplies

SECTION 2 PRESS RELEASES: 2017

July 26: PRI welcomes launch of the FSC stewardship standard

The PRI today welcomed the launch of Australia's first compulsory asset stewardship code for fund managers by the Financial Services Council (FSC).

The Internal Governance and Asset Stewardship Standard, which will be mandatory for all of the FSC's fund manager members, formalises a code of practice for how they should meet obligations for transparency within their internal governance and stewardship practices. This includes rules for how they disclose their voting policies and engage with investee companies on material environmental, social and governance (ESG) issues.

The development of an Australian stewardship code was one of several recommendations put forward by the PRI in its Australia roadmap in December 2016 to enhance investment industry policy and practice on responsible investment and bring these into line with global best practice. Stewardship standards have already been developed in many markets in recent years, including the UK, US, Japan, Hong Kong, South Korea, Malaysia, Brazil and Singapore. The PRI's Principle 2 states: We will be active owners and incorporate ESG issues into our ownership policies and practices.

The recommendations outlined in the roadmap, which was supported by UNEP FI and The Generation Foundation and developed in close collaboration with the Australian Council of Superannuation Investors (ACSI), the PRI's Australian signatories, policy makers and lawyers, will allow a fiduciary to fully integrate ESG risks.

The PRI believes that asset owners and investment managers should be effective stewards of the assets they hold for their beneficiaries. Asset owners should appoint, select and monitor asset managers on their ability to align stewardship activities with their investment beliefs, policies and guidelines, and the PRI will continue to work with its Australian asset owner signatories to support them to do this.

July 13: United Nations Principles For Responsible Investment: PRI responds to the Sustainable Finance High Level Expert Group interim report

A high-profile advisory body to the EU - the Sustainable Finance High-Level Expert Group (HLEG) - has called for 'urgent and transformational' action to accelerate the transition to a low carbon, sustainable economy.

The HLEG, in which the PRI participates as an international observer, was established in December 2016 and is tasked with advising the European Commission on a strategy to fully integrate sustainability into Europe's system of financial regulation. The group comprises 20 experts from the finance sector, civil society and academia.

Source: Company Website

July 13: United Nations Principles For Responsible Investment: PRI launches private equity fund terms guide

The PRI has today launched guidance on the incorporation of ESG provisions in private equity fund terms, the result of a year-long consultation with PRI signatories, expert counsel and industry associations.

The guidance identifies current and emerging best practice, as well as potential constraints, and offers practicable options to LPs and GPs that are considering how they might incorporate responsible investment into fund terms.

The main aims of the guidance are to demystify what ESG provisions are, clearly outline what they are trying to achieve, and work towards industry consistency and harmonisation on this aspect of responsible investment.

Fiona Reynolds, Managing Director of the PRI, said: "We have experienced an enormous amount of goodwill from both LP and GP signatories, who use the PRI as a platform to work towards an alignment of expectations and to understand best practice as it evolves. The influence this is having on the private equity industry is transformative."

Marta Jankovic, Senior Responsible Investment and Governance Specialist, Head of ESG Integration Alternatives at APG Asset Management, Chair of Invest Europe, and Co-Chair of the PRI signatory working group, said: "The PRI guidance aims to highlight the evolving practice in the market on the topic of responsible investment provisions, explaining what drives LPs to have certain requirements and how these are implemented in practice."

Alison Hampton of HgCapital, Co-Chair of the PRI signatory working group, added: "In providing this guidance, we see potential benefit to both LPs and GPs so that over time their approach to formally articulating ESG commitments can become more harmonised."

With this guidance, entitled Incorporating responsible investment requirements into private equity fund terms, the PRI private equity programme delivers the second in a trilogy of tools designed to support LPs and GPs throughout manager selection, appointment and monitoring.

In November 2015, the PRI published the LP Responsible Investment Due Diligence Questionnaire as the first tool.

The third and final step will be to deliver guidance on monitoring and reporting on ESG factors during the lifetime of the fund.

July 11: PRI launches Germany roadmap

The PRI, UNEP FI and The Generation Foundation have published their eighth roadmap - The Germany roadmap - which builds on the report Fiduciary duty in the 21st century.

Many industry experts involved in this study indicated that ESG integration in Germany is on average less advanced than neighbouring France, the Netherlands, the UK and Scandinavia. Despite this, recently momentum is growing with sustainable finance initiatives in Frankfurt and Berlin.

The Federal Government has taken several actions to address levels of ESG integration, including commissioning analysis on financial stability risks relating to climate change.

To encourage full integration of ESG issues across German capital markets, the roadmap has made recommendations based on four priority themes: government leadership; legal clarity and consistency on ESG integration for institutional investors; guidance for fund managers; and high quality disclosure of ESG factors by investors as part of the implementation of the CSR directive.

The recommendations in the roadmap draw on 25 interviews with key German stakeholders. The roadmap also identifies policy examples from other mature financial markets, such as the US, UK and Canada, and importantly, at the European-level which have been the subject of other country roadmaps of our fiduciary duty project.

"The German roadmap is the last of eight in-depth studies produced by the PRI, UNEP FI and The Generation Foundation as part of the Fiduciary Duty in the 21st Century Project, said Nathan Fabian, PRI.

"Each examines a key economy and provides policy and investment practice actions to embed ESG in fiduciary duties.

"The sustainable finance agenda is gaining momentum in Germany, most recently with the launch of the Frankfurt Declaration.

"We are grateful for the input of our signatories and partners from across government and industry and look forward to working together to put these recommendations into action."

"A widely understood fiduciary duty is a key factor for the development of a sustainable financial system.

June 29: United Nations Principles For Responsible Investment: PRI perspective: investors must drive implementation of the FSB Task Force final report

The FSB Task Force on Climate-related Financial Disclosures (TCFD) marks a turning point on how companies, banks, insurers, investors and regulators understand and respond to climate risk and opportunity. Its recently-released final report marks a vital step forwards on climate change - crucially providing investors and companies with a common financial language for it.

Over 360 investors with US$19 trillion are asking the G20 to support the task force's recommendations, including: Aegon NV, Alliaz Global Investors, AP4 (Fourth Swedish National Pension Fund), Australian Council of Superannuation Investors, Mirova, MN, New York State Comptroller, OPTrust and Zurich Insurance Group.

In addition, more than 100 firms have provided statements of support to encourage take-up of the recommendations.

For PRI signatories, the TCFD brings a sharp focus to the financial impacts of climate-related risks and opportunities, providing:

Source: Company Website

June 05: United Nations Principles For Responsible Investment: PRI launches South Africa roadmap

Today, the PRI, UNEP FI and The Generation Foundation published a new report - The South Africa Roadmap - which builds on the report Fiduciary duty in the 21st century.

ESG issues are critical to the South African economy and society, with ESG-related corporate failures prompting the country's leaders to take action, including more investment in sustainable energy as part of the government's National Development Plan. The National Treasury has also convened a Sustainable Finance Working Group to ensure that sustainability themes are reflected in national legislation and regulation.

The roadmap makes recommendations to ensure South African institutional investors understand that their fiduciary duties require them to consider material ESG issues in their investment processes and decision making. This builds on South Africa's long-history of pro-ESG initiatives, most notably in the form of Regulation 28, the Code for Responsible Investing in SA, and the pioneering work of the Johannesburg Stock Exchange in its support of integrated reporting by listed companies.

"This roadmap will inform the PRI's work plan for South Africa in the next few years," said Adrian Bertrand, head: Africa & Middle East, PRI.

"We are most grateful to our many valued signatories and stakeholders consulted in the development of this roadmap.

"The PRI is committed to partnering with our signatories and stakeholders to implement the recommendations of this roadmap and welcome further inputs as to how best we can collaborate as an industry to achieve this in South Africa."

The roadmap seeks to ensure that the effect of these initiatives is reflected in the day-to-day investment practice of South African pension schemes and asset managers. This requires interventions in four categories: regulatory guidance (building on Regulation 28 and PF-130); enhanced stewardship (enabling CRISA's role); investor education (ensuring ESG is embedded into trustee core competencies); and corporate reporting (ensuring that material ESG factors are reported by South African corporations).

In addition, the roadmap contains a new trustee training initiative.

May 24: United Nations Principles For Responsible Investment: PRI releases briefing document on US regulation and climate change

In a move to bring clarity to proposed changes in the US around policy and regulation issues, the PRI has released a briefing document for both US and global signatories.

Since President Trump took office in January this year and began to assemble his administration, the political tide has turned in favour of looser securities regulation, a weaker commitment to climate change and environmental legislation and a more protectionist trade policy.

This is borne out by the number of new proposals have crossed desks at the SEC, Department of Labor, and the U.S. Treasury, which have the potential to impact financial and environmental legislation, including the ability of shareholders to bring proposals to annual general meetings and a loosening of climate change policies.

Responding to these concerns, the PRI has prepared this regulation update, outlining and summarizing for investors some of these proposed changes and their potential impact. Many U.S. asset managers and owners have embraced, embedded and endorsed ESG incorporation across the marketplace as a critical pillar in the achievement of long-term value creation. And the message that companies are rewarded for ESG-focused business practices through higher returns by investors as well as stronger brand loyalty by consumers, work ethic by employees, relationships with vendors, and support from local communities is increasingly being heard across the U.S. and other countries.

While the PRI does not expect federal policymaking to have significant negative implications on the level of interest and business case for responsible investment-thanks to growing

investor support around ESG issues and the strength of policies at the state level-we are concerned about any winding back of shareholder rights in the U.S., and the message that withdrawing from the Paris Agreement would send to other countries.

"Given the uncertainty around new regulatory and policy proposals in the US, it is vital that investors keep engaging policymakers on these issues," said PRI managing director Fiona Reynolds.

May 17: United Nations Principles For Responsible Investment: PRI and ERM launch project to develop private equity reporting guidance

The PRI has launched a project to develop guidance for Limited Partners (LPs) and General Partners (GPs) on how to report on and monitor the ESG integration practices of GPs during the lifetime of a fund.

The PRI is pleased to announce that ERM has been appointed as the consultant on this project and will be responsible for conducting the research and co-authoring the guidance with the PRI. They will be supported by a global working group of over 40 PRI signatories.

The objectives of the project are:

present the value creation case to both LPs and GPs of reporting and monitoring ESG-related practices during the life of a fund;

give a range of flexible options relevant to LPs and GPs on how to report and monitor ESG practices and issues that apply to investors at different levels of ESG integration maturity;

encourage a more consistent approach from LPs and GPs on ESG-related monitoring and reporting which will lead to a more streamlined approach across the sector.

"ERM is proud to work with the PRI on this project to develop practical guidance for LPs and GPs in order to enhance the effectiveness of their monitoring and reporting of ESG-information during the life of a fund.

"From our experience working with private equity and other organisations, we know the value that can be achieved through taking a comprehensive approach to integrating ESG factors to deliver improved business performance," said Keryn James, CEO, ERM.

Fiona Reynolds, managing director, PRI said: "With the start of this project, we begin the final stage in the selection, appointment and monitoring series. When completed, the private equity industry will have a full suite of tools available from the PRI for incorporating ESG considerations into the LP-GP exchange and dialogue.

"The size and diversity represented in the working group is testament to the demand for these tools.

SECTION 3 OTHER NEWS: 2017

July 24: United Nations Principles For Responsible Investment; Proxy season 2017: analysing the trends

With the 2017 proxy season now complete, it is time to take stock of the outcomes, analyse the voting trends and learn lessons for next year. The 2017 proxy season saw a record number of shareholder resolutions related to environmental, social and corporate governance issues uploaded to the PRI's Collaboration Platform. These covered a huge range of topics, from reducing pesticide use to gender pay equality, and from board diversity to managing food waste.

This proxy season we also launched a vote declaration system, a platform designed to give investors the opportunity to declare how they intend to vote on a range of shareholder resolutions, with the aim of increasing transparency around proxy voting activities.

INSIGHTS FROM THE COLLABORATION PLATFORM

This proxy season, an unprecedented 241 shareholder resolutions were filed or co-filed by PRI signatories and uploaded onto the PRI's Collaboration Platform, representing an increase of 180% on 2016. Shareholders voted on 146 of these resolutions, while the remainder were either withdrawn by the lead filers or omitted by the US Securities and Exchange Commission (SEC). 37% of resolutions posted onto the Collaboration Platform related to governance issues, 33% to environmental issues, and 14% to social issues.

July 21: The PRI is recruiting for two new working groups looking at the SDGs: asset allocation and active ownership

The PRI is currently recruiting members for two new working group focused on the Sustainable Development Goals. The first one looks at how the relevance of the SGDs to asset allocation and the second one is focused on the inclusion of the SDGs in active ownership activities in listed equity and corporate fixed income.

Interested signatories are invited to get in contact by 11 September.

Background

In September 2015, the global community committed to adopt a set of goals - the SDGs - to end poverty, protect the planet and ensure prosperity for all as part of a new sustainable development agenda. Each goal has specific targets to be achieved over the next 15 years.

The UN Commission on Trade and Development (UNCTAD) has estimated that meeting these targets will require US$5-7trn in investment each year from 2015-2030. But the UN and member countries cannot deliver on the SDGs alone; only an estimated US$1trn annually will come from public funds, leaving a gap of US$6trn annually for private capital to fill.

In response to this new global challenge, the PRI has made the SDG agenda an intrinsic part of the next 10-year Blueprint for Responsible Investment. To help align signatory investment decisions and the PRI's work with the SDGs, an Advisory Committee has also been formed (see members and terms of reference here ).

The PRI is currently finalising a publication with PwC to present the SDG Investment Case for investors which will be officially presented at the PRI in Person annual event in September 2017.

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