ESG Roundup: GPIF, World Bank Launch Green Bond Initiative

The world’s largest pension fund and the World Bank Group are forging ahead with efforts “to grow markets for sustainable investing”.

In a statement, the Government Pension Investment Fund (GPIF) said the two organisations had launched a new initiative to promote green, social and sustainability bonds. No further details were provided.

Hiro Mizuno, executive managing director and CIO of the ¥1.5trn (€1.2trn) fund, said GPIF regarded buying these types of bonds “as direct methods of ESG integration”.

According to a statement from the World Bank, asset managers running money on behalf of GPIF had invested more than $500m (€444m) in bonds issued by the International Bank for Reconstruction and Development and the International Finance Corporation (IFC), two parts of the World Bank Group.

Kristalina Georgieva, the World Bank’s CEO, said: “Bond investors can be a key force in moving capital markets towards sustainability when they focus on transparency, purpose and impact. Through our deepening partnership, GPIF is leading by example and demonstrating that ESG considerations go hand-in-hand with long-term financial and social returns.”

In October 2017 the World Bank and GPIF formalised an agreement to direct more capital toward “sustainable investments”, focusing on public bond markets.

According to a report commissioned for the organisations and published a year ago, the practice of integrating environmental, social and corporate governance considerations in fixed income was catching up with that in equity markets, but there were still “significant constraints”. 

IFC pronounces on impact investing

Investor appetite for impact investing could amount to $26trn, according to a new report from the IFC.

The figure relates to appetite for impact investment at commercial returns. It is the result of a top-down “speculative exercise”, in which the IFC’s starting point was the total pool of financial assets owned by households and public and private institutions.

It then assumed that investor appetite for impact investing was 29% of that, corresponding to the share of assets managed under socially responsible investing, or SRI, strategies, based on information from the Global Sustainable Investment Alliance.

“Crucially,” added the IFC, “our analysis accounts for the fact that investors hold financial assets in three broad asset classes, which vary substantially in their liquidity.”

It discounted investments in cash, as these did not generate impact, and also discounted investor appetite for impact investment in the public markets “to account for additional uncertainty about how and whether one may have impact by investing in public markets”.

Out of debt securities, only corporate bonds were included. For public equities, the IFC only counted 9% of their value, corresponding to the value of assets “managed under corporate engagement and shareholder action strategies”.

Overall, this led to the IFC estimating appetite for impact investment in private markets as $5.1trn, and in public markets as $21.4trn.

The IFC said the report was “the most comprehensive assessment so far of the potential global market for impact investing”.

According to the Global Impact Investing Network (GIIN), the size of the impact investing market was an estimated $502bn, based on data self-reported by organisations identified by the GIIN, plus an additional $84bn on the basis of extrapolation. 

Campaign group drops Shell resolution

Campaign group Follow This has decided to withdraw its climate resolution for Royal Dutch Shell’s annual general meeting after “intensive discussions” with Dutch investors.

The investors – including Actiam, Aegon, Blue Sky Group, MN, NN and Van Lanschot Kempen – have supported climate resolutions filed by the campaign group at Shell in recent years.

However, Mark van Baal, of Follow This, told IPE that the parties had decided that the chances of Shell aligning its targets with the Paris climate accord would be higher if it dropped the resolution and gave the company “one year breathing space”.

In a statement, the campaign group said shareholders could now focus on those companies that had not advanced as much as Shell, saying it expected many investors to support climate resolutions filed at Equinor, BP and Chevron.

Speaking for all the investors in the group, Adrie Heinsbroek, head of responsible investing at NN Investment Partners, said: “We appreciate Shell’s positive steps to align its climate ambitions with the Paris Agreement and encourage them to continue the transition. We are giving Shell this year to align its climate ambitions. We will continue to monitor closely and actively engage with Shell in the coming months and years.

“At the same time, together with numerous investors, we will strengthen our commitment in recent years to also encourage other oil and gas companies to follow the Paris Agreement and request concrete plans on how to achieve these goals.”

The investor group is due to set out its expectations for the entire oil and gas sector soon.