September, 2020 Archive
“The data and models to be developed will be available to mining companies seeking to assess, manage and mitigate a broad range of environmentally induced financial risks,” it added.“Other users include investors, mining companies, government regulators, non-governmental organisations and academics.”Yngve Slyngstad, chief executive at NBIM, last year called for more rationality in the sustainable investment debate, with the need for more data to underpin all decisions.NBIM has long advocated greater transparency over water management and in 2011 called for a universal approach to reporting.The manager last year sponsored a report by CDP that highlighted the risk of water shortages to a range of sectors, including mining.The report found that the impact of water shortages would be felt keenly in emerging markets including Brazil, China and India.For more from Yngve Slyngstad, chief executive of Norges Bank Investment Management, see the current issue of IPE Norges Bank Investment Management (NBIM) is to fund a US university’s work on sustainability in the mining sector, with the resulting work meant to assist the sector in assessing financial risk.NBIM, the manager in charge of Norway’s NOK6trn (€699bn) Government Pension Fund Global, said the work by Columbia University in New York would be funded by a three-year grant.It added that the project would study how a range of factors related to sustainability would influence the profitability of the mining industry.The work, conducted jointly by Columbia Water Center, the university’s department of industrial engineering and operations research and the Columbia Center on Sustainable Development, will aim to develop models to quantitatively assess mining-related water and environmental risks, according to an NBIM statement.
The Dutch pension system’s regulatory framework should be based on open norms and the prudent-person principle instead of the new financial assessment framework’s (nFTK) “strict” rules, according to Dick Sluimers, chief executive at €424bn asset manager APG. Speaking at the International Capital Market Association congress in Amsterdam, Sluimers warned that current nFTK rules forced many Dutch schemes to maintain interest hedge positions that will incur large losses if interest rates were raised.Sluimers said a sudden 1-percentage-point rate increase, assuming an average 50% interest hedge, could trigger €140bn in margin calls for pension funds.He noted one such instance between 20 April and 14 May, when the 30-year swap rate increased by 70 basis points. “The nFTK sees maintaining an interest hedge as risk reduction, yet, given the currently low interest rates, it could also be considered sensible to reduce interest cover at this very moment,” he said.Sluimers acknowledged that, for the regulator, a more open regulatory standard could be “more complicated” at the “micro level”, but he argued that it would also increase stability at the macro-economic level.“Strict rules could cause institutions worldwide to take up similar positions, which could unintentionally lead to a new source of instability,” he said.In others news, the €373bn civil service pension fund ABP is looking to give participants investment choices, including a ‘green’ option.Corien Wortmann-Kool, ABP’s chair, who mentioned the initiative in an interview with Dutch daily Trouw, said the pension fund would first need to address a legal ban on ring-fencing.It will also require the approval of the social partners, as well as more clarity on implementation risks, such as costs, care duty and the balance between individual and collective risk sharing.A recent ABP survey suggests 42% of its participants are interested in sustainable investment.
“Lars Ellehave-Andersen said he had come to the conclusion he didn’t want to be part of the future PFA,” Polack said.“It is regrettable, but, of course, I accept it.”Polack will take responsibility for the sales and customer business previously handled by Ellehave-Andersen.PFA’s group leadership now consists of the remaining three directors – Polack, Anders Damgaard and Jon Johnsen.Danica Pension declined to comment on a report in the Danish media that Ellehave-Andersen was to move to a new job at Danica Pension in Norway.PFA had no further comment on his departure.PFA has lost the two managing directors of its asset management arm Poul Kobberup and Jesper Langmack to Danica Pension, with the men due to start at the Danske-Bank subsidiary in November.Danica has attracted several top pensions professionals in Denmark recently as CFO Jacob Aarup-Andersen hires specialists to build an in-house team to implement a new strategy taking on more direct investments.ATP’s former co-CIO Anders Svennesen started at Danica Pension as CIO in December.Meanwhile, PFA is in a process of change after Polack started as its new chief executive in April, having come to the company from Nordea Asset Management. PFA, Denmark’s largest commercial pension provider, is losing one of its four directors, as group chief commercial officer Lars Ellehave-Andersen resigns from the DKK552bn (€74bn) company.Ellehave-Andersen, who came to PFA from labour-market pension fund PensionDanmark, is responsible for corporate customers and partners, advisory services, subsidiary PFA Bank and Greenlandic business PFA Soraarneq.PFA’s group chief executive Allan Polack said: “I have had discussions with Lars Ellehave-Andersen since the early part of the summer about his future role in PFA.”He said the talks came at time when PFA was in the process of adapting its strategy, governance and value basis for the future.
A spokeswoman for EIOPA confirmed that Carlos Montalvo Rebuelta would not be seeking a second term as executive director.Montalvo has been EIOPA’s executive director since 2011.Prior to that, he was secretary general of its predecessor, the Committee of Insurance and Occupational Pensions Supervisors (CEIOPS).The supervisor has now launched a recruitment process to find a replacement.Bernardino also began his European career at CEIOPS, being elected its chairman in 2009.He was shortlisted as a candidate to be the new supervisor’s chairman and was confirmed in the role by ECON in February 2011, taking up the position three months after the European Supervisory Authorities of EIOPA, ESMA and the European Banking Authority were formally established.Prior to taking on the role of chairman at CEIOPS, Bernardino was director general for development and institutional relations at the Instituto de Seguros de Portugal (ISP), which he joined in 1989.Bernardino, as the public face of EIOPA, has often been criticised for the supervisor’s work on the holistic balance sheet (HBS) and, more recently, conducting stress tests of the pensions sector.In an interview with IPE last year, he emphasised that EIOPA was not rigid in its views, and that the then-ongoing HBS consultation – considering six potential approaches – was a means of gathering industry feedback.“You need to have an idea, but the one I have is not a choice between framework one or framework six – it is to listen,” he said at the time.“We are trying to include all the [pensions] mechanisms we have in the different countries. No country will have it all, but the tool can provide added value.” Gabriel Bernardino’s term as chairman of the European Insurance and Occupational Pensions Authority (EIOPA) has been extended until 2021.In a statement, EIOPA said the decision to offer Bernardino a second five-year term was due to his successes since the supervisor was launched in 2011.The decision by the board of supervisors is still subject to approval by the European Parliament’s economic and monetary affairs committee (ECON), which has the power to reject the appointment.In contrast to last week’s decision by the European Securities and Markets Authority (ESMA) to extend the terms of its executive director and chairman by a further five years, EIOPA has only asked Bernardino to stay until 2021.
The Charities (Protection and Social Investment) Act in the UK has now received Royal Assent, giving foundations and charities in England and Wales the statutory power to make social investments from their endowment funds.Historically, the legal position was that charities had a limited ability to invest where their investment decisions were based on considerations other than the expected financial return.However, several years ago, the Charity Commission introduced into its guidance on investing the idea of mixed-motive investing by charities.This means funding an acquisition or project to make a financial return, while helping the charity’s mission at the same time (but where the investment could not be justified on the basis of its financial return or its charitable impact alone). But Elizabeth Jones, senior associate on the charity team at Farrer & Co, said: “This created some uncertainty because the existing law appeared to be stricter. While the Charity Commission’s guidance gave some support for social investment, there was also no confirmation from HM Revenue and Customs as to how this investment would be treated for tax purposes and whether it would be treated as a qualifying investment eligible for tax relief on income and capital gains.”Jones added: “The new Act now gives trustees a statutory power to make social investments – within the parameters of the Act – where an investment works to achieve the charity’s objects. However, it is hoped HM Revenue and Customs will clarify its approach to social investments in the near future.”The Act defines social investment as one made to directly further the charity’s purposes and achieve a financial return for the charity.This can either be done by investing in assets or by taking on a commitment in relation to a liability of a third party that puts the charity’s funds or other property at risk of being applied or used.Jones said: “In this context, ‘financial return’ does not mean getting back the original investment, plus an added amount. It means getting back anything at all, full stop.”But she warned: “If the return is only going to be a small percentage of what was invested, the trustees need to be satisfied the investment can be justified as being in the best interests of the charity, with reference to the charitable impact of the investment and any other relevant considerations.”The new law requires trustees to consider if they need advice before making a social investment.If so, they must obtain appropriate advice and, if they decide to go ahead, satisfy themselves that this is in the charity’s interests.However, the charity cannot use its permanent endowment unless its trustees expect this will not contravene any restriction on expending the endowment.It may also not make social investments if this is prohibited by its trust deed, or if the charity itself is established by Royal Charter or by legislation.The trustees must also periodically review the charity’s social investments.The Act also gives the Charity Commission, as the sector regulator, new powers to issue a warning to a charity or trustee it considers has committed a breach of trust or other misconduct or mismanagement, to disqualify a trustee, and to remove from office a trustee or officer who has been disqualified.It extends the list of criminal offences for which conviction means automatic disqualification from being a charity trustee to include terrorism, money-laundering and bribery.The timetable for specific sections of the Act to take effect will be published shortly. Meanwhile, Rob Wilson, the minister for civil society, has hinted at government plans to make social investing easier for pension savers.Speaking in London, Wilson said he was contemplating requiring pension providers to offer products to scheme members where a specified percentage of their money went to social investments.“It is something we already see working successfully in the French pension system, where billions of euros have been channelled to social impact investments,” he said.
The two buy-ins were arranged with Pension Insurance Corporation (PIC) and totalled £350m, covering around £250m of pensioner liabilities in the Scottish Hydro-Electric Pension Scheme (SHEPS) and some £100m of liabilities in the Scotia Gas Networks Pension Scheme (SGNPS). The longevity insurance, via Legal & General, covered a further £800m of pensioner longevity risk in the SHEPS.The insurance deal is the first to use L&G’s UK-based “pass-through” structure to transfer longevity risk to the end reinsurer, Hymans Robertson said.Graham Laughland, chair of trustees for the SHEPS, said the scheme had been able to save money at each stage of the process through Hymans Robertson’s and legal adviser CMS’ efficiency and tailored approach.“Club Vita’s market leading longevity analytics gave the trustees great confidence in assessing both the value of the transactions and the amount of longevity risk that has been successfully removed from the scheme,” he said.Meanwhile, Tony Fettiplace, chair of trustees for the SGNPS, said PIC had been “flexible and innovative” in helping the scheme follow the collaborative approach and achieve its aims.In a report published yesterday, Hymans Robertson claimed demand for buy-in transactions – in which part of a scheme’s liabilities are transferred to an insurer – was set to quadruple in the next 15 years. The consultancy estimated that as much as £700bn of liabilities and assets could be offloaded by UK pension schemes by 2032, equivalent to £50bn a year. The figure was based on a growing demand from schemes, with a significant proportion reaching self-sufficiency in the next 15 years.James Mullins, head of risk transfer buyout solutions at Hymans Robertson, said: “Pension schemes should be proactive and gradually chip away at the problem through a series of well-timed buy-ins, to take advantage of the high insurer appetite and optimal pricing we’re seeing in the market today.”He added that insurer appetite to take on DB pension risks would likely increase this year as they sought to meet their targets. However, he warned this would not necessarily last.“As more and more schemes consider insuring their risk, insurers will be increasingly less able to keep up with demand,” Mullins said. “When this happens they will be more likely to give priority for their best pricing to pension schemes that have already completed a buy-in. This is because those pension schemes have demonstrated they have the knowledge, experience, governance and general readiness to carry out these transactions. So pension schemes who take proactive steps to chip away at the problem by capturing opportunities to complete a series of buy-ins will be in a strong position in years to come.” UK energy company SSE has hedged £1.2bn (€1.3bn) of longevity risk via a combination of buy-ins and longevity insurance.The deals relate to two of the defined benefit (DB) pension schemes it sponsors. According to the company’s latest annual report, its DB schemes had £4.4bn in assets between them.Hymans Robertson, which acted as project and lead adviser on all the transactions, said this was the first time a scheme had combined insurance buy-ins and longevity swaps.The consultancy said: “It creates a blueprint which we expect others will follow, tailoring transactions to pension schemes’ individual circumstances.”
They must have at least $1bn already in the asset class and at least $7.5bn in firm-wide assets under management. They must have a minimum track record of three years.According to the investor, the manager should have a “top-down thematic and bottom-up valuation” method.It also stated: “Stock selection may include fundamental research and dynamic quantitative factors.”The IPE news team is unable to answer any further questions about IPE Quest, Discovery, or Innovation tender notices to protect the interests of clients conducting the search. To obtain information directly from IPE Quest, please contact Jayna Vishram on +44 (0) 20 3465 9330 or email [email protected] An Asian institutional investor is seeking a manager for a $100m (€81.8m) global developed market equity mandate via IPE Quest.According to search QN-2401, the investor wants an active, thematic strategy focusing on large or all-cap equities.The benchmark can be either the MSCI All Countries World index or the FTSE All World index. The maximum expected tracking error is 4.5%.Managers submitting bids are requested to state performance to 31 December 2017 net of fees.
Solar power is one of 42 commodity types included in the mandateAmong the 42 sub-classes listed in the mandate’s universe are both ‘hard’ and ‘soft’ commodities, from oil, natural gas, and solar and wind energy, to livestock, sugar, cotton and water, as well as 21 types of industrial and precious metals.Adam De Chiara, co-founder of CoreCommodity Management, described the mandate as a “customised real asset strategy that has been thoughtfully designed to provide portfolio diversification and inflation protection to NEST’s members in an ESG-compliant format”.The mandate does not have a set end date, as Fawcett said NEST wanted to forge long-term partnerships with its fund managers.Fawcett said NEST expected to double its assets under management next year as the rollout of the UK’s auto-enrolment project takes hold. Minimum contributions rose in April and will do so again in April next year. NEST – one of the leading providers of auto-enrolment pensions in the UK – has taken its first step into commodities with a mandate to be run by US firm CoreCommodity Management.The defined contribution master trust is to invest roughly £200m (€226m) in a segregated mandate. It is the first time NEST has invested in a bespoke vehicle rather than a pooled fund.Chief investment officer Mark Fawcett said NEST would invest roughly 5% of its growth fund in the mandate, with an upper limit of 10%.He said the asset class’ recent five-year “slump” meant it was “a good time to be investing in commodities”. “While markets have been benign since auto-enrolment kicked off six years ago, we’ve had a turbulent start to 2018 and volatility looks set to rise,” Fawcett added. Mark Fawcett, CIO, NEST“It’s our responsibility to help members weather all sorts of markets to achieve decent, consistent returns on their pots.“Commodities offer good value protection as inflationary pressures rise around the world and are supported by strong global trends.”What the mandate looks likeThe commodities allocation consists of 80% long-only futures with 20% in commodity-related equities.CoreCommodity will only invest in the top 20 most liquid futures markets, said co-founder Adam De Chiara. The mandate will aim to outperform the Bloomberg Commodities Index.The asset manager has also implemented NEST’s environmental, social and corporate governance (ESG) risk overlay, resulting in several commodities being excluded from the fund’s universe.Energy providers with high climate risk exposure are excluded, as are companies focused on thermal coal, palm oil, uranium, and tobacco.NEST has also banned investments in cobalt miners operating in the Democratic Republic of Congo, after a recent CBS investigation uncovered evidence of child labour in cobalt mines.“There will be some equities we decide are unacceptable,” Fawcett said. “For others there will be engagement – but this is more of a quant-driven systematic portfolio.”He added: “We want to manage the ESG risk but don’t want to disrupt management too much.”Companies that systemically breach the UN Global Compact have also been excluded, the CIO said. However, he maintained that the ESG policy would not have a significant impact on the portfolio’s volatility or return.
Clearer rules about good practice and suitability would also make the new fund marketplace safer for savers, he said.“If we judge that trust in a fund has gone, then it should not remain,” Fransson said. Erik Fransson, head of the Swedish Pensions Agency’s fund marketplace departmentOther requirements being made by the Pensions Agency are that fund managers must follow good practice in the premium pension area and have at least three years of business history.The agency will charge managers fees to cover the cost of processing applications and auditing.Fund managers will be specifically required to act in the best interests of pensioners, and must live up to minimum requirements regarding sustainability.As the agency said back in July when outlining the likely new rules, in future a fund agreement will be required per fund instead of broader cooperation agreements being made with firms managing several funds.The new agreement will take effect on 1 November, with current and prospective providers having until 28 December at 4pm local time to lodge new applications.Funds which do not make a new application or which do not fulfil the new conditions will be deregistered from the system next year, the agency said.Fransson said the sustainability demands now being introduced are a minimum level which the agency will continue to work on.The new rules for the PPM fund marketplace is the first of a two-stage overhaul, with the second stage scheduled to be completed in 2020.This second stage of the reform will see the fund marketplace being transformed into a procured system, where investment options for savers are the result of an official tender process.The PPM is the defined contribution part of the Swedish state pension, in which people can allocate a proportion of contributions to private investment providers using the funds marketplace.But it has been beset with problems in recent years, mainly because of scandals involving dubious or fraudulent behaviour of fund management firms.The funds marketplace has more than SEK1.2trn of managed capital, and accounts for 35% of all new savings in investment funds in Sweden, according to the pensions agency. The Swedish Pensions Agency has unveiled details of the new set of conditions for pension providers operating in the Premium Pension System’s (PPM) fund marketplace, laying the next stepping stone in the reform of the first-pillar system.The new demands are the result of a parliamentary decision involving several legal changes aimed at creating a safe and sustainable premium pension system, the authority said.Key changes in the new agreement include a stipulation that companies listing their funds on the fund marketplace (fondtorget) must have at least SEK500m (€47.7m) in capital outside the PPM, and that no commission can be charged on the pension products.Erik Fransson, head of the Swedish Pensions Agency’s (Pensionsmyndigheten) fund marketplace department, said: “The quality is being improved for pension savers by us making higher demands of fund managers.”
The world’s biggest pension fund, Japan’s JPY158.6trn (€1.2trn) Government Pension Investment Fund (GPIF), has chosen Standard & Poor’s (S&P) to provide ESG indices for its growing equity portfolio.For Japanese equities, the fund will use the S&P/JPX Carbon Efficient index, and for non-Japanese equities the fund will use the S&P Global Ex-Japan LargeMid Carbon Efficient index. JPY1.2trn of the fund’s portfolio will track the indices, GPIF said.“GPIF hopes that the selected global environmental stock indices will provide an opportunity for companies to work on carbon efficiency and disclosure,” Norihiro Takahashi, president of the pension fund, said in a press release.According to S&P, the indices “are designed to reduce exposure to high-carbon companies in a systematic way, while maintaining a risk/return profile similar to that of their benchmarks”. Takahashi said GPIF had selected the S&P indices because they were not based on divestment and included smaller companies not covered by other ESG indices.The S&P indices are part of the GPIF’s “themed indices” strategy, which also includes the MSCI Japan Empowering Women index. For the rest of its domestic equity exposure it uses “integrated ESG indices”, including the MSCI Japan ESG Select Leaders index and the FTSE Blossom Japan index.The S&P Global Ex-Japan LargeMid Carbon Efficient index is the first to be applied to non-domestic equities.In October last year the pension fund amended its investment principles adding that “ESG factors should be taken into consideration in stewardship activities”. According to its annual report, the fund has also joined “a research program to incorporate ESG factors in fixed income investment”.iShares launches inclusion and diversity ETF BlackRock’s London officeBlackRock and Thomson Reuters have joined forces to offer an exchange-traded fund (ETF) focusing on inclusion and diversity.The iShares Thomson Reuters Inclusion & Diversity UCITS ETF is based on an index assessing more than 2,000 publicly-traded companies worldwide.From those, the top 100 are selected according to 24 metrics assessing companies’ diversity, inclusion and development qualities. The assessment also takes into account news and controversies.“The increasing availability of corporate sustainability data, as well as advancement in technology, has made it possible to better measure and understand metrics, such as inclusion and diversity, from an investment perspective,” said Brian Deese, head of sustainable investing at BlackRock.Investment professionals introduce ESG guideIn Germany, the association of investment professionals DVFA has issued a glossary on terms and strategies around ESG investing.The definitions and explanations should be seen “as contribution to the discussion surrounding the work of the EU Commission’s technical expert group on sustainable finance”, the DVFA said.The association said it wanted to make it easier for German investors to identify suitable ESG investment products and “help avoid greenwashing”.However, it did not want to judge the quality of funds or their suitability for certain investors.“The quality of sustainability factors cannot suitably be standardised given the very different needs of investors,” the DVFA said.The glossary and guidelines explain many aspects of ESG, from exclusion to divestment, best-in-class and critical viewpoints.They also list possible ESG-related investments for each asset class, accompanied with critical notes.The guidelines (available here in German) were compiled by Dirk Söhnholz, managing director of strategic advisory firm Diversifikator, and Ralf Frank, managing director of the DVFA.