Global Trustee and Fiduciary Services News and Views Issue 50

View from the politicians Paul Tang, the MEP leading the proposed regulation through the European Parliament wants legislation to go even further by forcing firms to include sustainability targets in their criteria for awarding bonuses. 38 The Commission proposal only requires firms to ensure that their remuneration practices are consistent with the integration of sustainability risks. Under Tang’s version of the Commission proposals, investors would have to carry out due diligence in line with recommendations set out under the OECD’s “guidelines for multinational enterprises”. 39 Due diligence processes would then need to be published on investors’ websites. According to recent figures from the London Stock Exchange, May proved to be a record month for new entrants into the ESG area of the ETF market, with eight new launches bringing the overall total to 31. Assets under management within ESG ETFs at the end of May stood at just under GBP4 billion (EUR4.5 billion). 40 Six sovereignwealth funds (SWFs) have also published a climate change framework called the One Planet Sovereign Wealth Fund Framework, designed to promote the integration of climate change analysis into the management of large, long-term and diversified asset pools. 41 Under the framework, SWFs will be asked to encourage companies to provide climate change-related data using standardised methodologies in a consistent format, such as adhering to the recommendations of the FSB’s TCFD. Will the world continue along its green path? Does consideration of ESG factors fit with fiduciary responsibility? The debate will no doubt continue, but rather than fiduciary duty being a barrier to incorporating ESG factors in investing, Industry trends • ESG-related ETF boom • Increase in adoption of sustainability frameworks • Improvements in reporting as a result of the wider adoption of consistent definitions of sustainable taxonomies or “ecolabelling” “LIMITING GLOBAL WARMING TO 1.5°C WOULD REQUIRE RAPID, FAR-REACHING AND UNPRECEDENTED CHANGES, IN ALL ASPECTS OF SOCIETY.” UN IPCC REPORT — 8 OCTOBER 2018