On June 26, 2020, HESTA (a $52-billion Australian superannuation fund for the health and community services industries) announced the development of a Climate Change Transition Plan under which it will seek a 30% reduction of carbon emissions in its investment portfolio by 2030, with the aim of achieving net zero emissions by 2050. 188 We expect investors, having regard to a wide range of ESG metrics and factors, to make these demands on an increasingly larger scale as they continue to shift the composition of their portfolios toward more sustainable companies. And in the long term, issuers will need to shift their practices and disclosures, for practical (if not legal) reasons, to better align them with evolving ESG expectations if they are to promote their long-term viability, including their ability to raise capital in the public and private markets. NORGES BANK INVESTMENT MANAGEMENT AND DEUTSCHE BANK STEP BACK FROM CANADIAN OIL SANDS Norway’s Norges Bank Investment Management (NBIM) is one of the world’s largest investment funds, managing revenues from Norway’s oil and gas resources. It has investments in more than 9,000 companies worldwide. In May 2020, NBIM announced its divestment from four Canadian oil sands companies – Suncor Energy Inc., Canadian Natural Resources Ltd., Imperial Oil Ltd. and Cenovus Energy Inc. – citing concerns over unacceptable GHG emissions as the rationale for its decision. 189 That decision marked the first time that NBIM had used GHG emissions as the reason for excluding companies from its portfolio on ethical grounds. NBIM also withdrew its investments from Swiss-based Glencore Plc., U.K.-based Anglo American Plc, Germany’s RWE AG, South Africa’s petrochemicals firm Sasol and Dutch company AGL Energy. Egypt’s Elsewedy Electric Co. and Brazilian companies Vale SA and Eletrobras were also excluded from NBIM’s portfolio, for causing environmental damage. 190 Similarly, in July 2020 Deutsche Bank announced that it had committed not to back any further oil sands projects, and that by 2025 it would no longer participate in any financing or capital market transactions involving coal mining. 191
In the long term, issuers will need to shift their practices and disclosures, for practical (if not legal) reasons, to better align them with evolving ESG expectations if they are to promote their long-term viability, including their ability to raise capital in the public and private markets.
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Governance Insights 2020
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