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Pensions, Nonprofits Lean Into Social Investing

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Two new reports on environmental, social and governance investing show pensions and nonprofit firms’ greatest ESG interests, while another report shines a light on which firms are living up to ESG expectations, and which aren’t.

Social investing seems to be the most active area of ESG for pension and nonprofit funds, according to a report by Escalent, a human behavior and analytics firm specializing in industries facing disruption and business transformation.

Social investing was defined as pertaining to diversity, human rights and consumer protection. The report notes a special interest in this area was by tax-exempt organizations and investors representing public defined benefit and Taft-Hartley Act pensions.

According to the paper, institutional investors area taking a “first, do no harm” approach by avoiding those firms that are having problems or bad publicity. It does note that they see corporations recognize the growing trend toward ESG.

“Given this increasing momentum along with the challenge many asset managers face in effectively differentiating themselves in the institutional market, ESG investing could be a means of gaining a considerable advantage,” Escalent stated in the report.

Ins and Outs for Climate Change

In other ESG news, Legal & General Investment Management released its 2019 LGIM Climate Impact Pledge report on corporate leaders and laggards for climate change. The investment firm divests those companies from their fund that don’t follow those practices.

Top global firms noted in the report that have strengthened aspects to reduce climate change include General Mills, Citigroup & Xcel Energy.

Companies L&G voted against or divested from were Metlife, ExxonMobil Corp., Hormel Foods, Korean Electric Power Corp. and Kroger.

“Since last year’s results, there has been an increase in the average scores across each of these sectors [including financials, oil & gas, mining, electric utilities, automakers and food retailers]. In addition, previously high-scoring companies scored even higher, while others are clearly working to catch up,” said L&G’s Meryam Omi, head of Sustainability and Responsible Investment Strategy.

L&G noted there were some companies that were excluded last year that were reinstated for tangible changes in their methods. These included Occidental Petroleum and Dominion Energy. Still on the exclusion list are Russian firm Roseneft Oil, Sysco, Loblaw and Subaru.

Financial firms piloting new climate change scenarios include Westpac, Citigroup, Commonwealth Bank of Australia and BNP Paribas. Among insurers, European firms rank the highest, including Allianz and AXA, which “are conducting climate scenario analysis on assets and have introduced stringent restrictions on coal investments and insurance. Allianz is exploring means to set a science-based target for its asset portfolio to drive climate action, while AXA has a target to grow ‘green’ investments to €12 billion [$13.7 billion] by 2020,” according to the report.

Chubb also “stands out” as an American insurer that engages in climate change discussions, such as changing weather impact on “catastrophic” losses, the report stated.

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