March 9, 2023 | Editor: Martin Wennerström
Biden and Republicans at loggerheads over ESG rules
The U.S. Congress has passed a resolution repealing a Department of Labor (“DOL”) rule empowering retirement plan managers to consider climate change and ESG factors in their investment decisions. The rule, introduced by the Biden administration, falls under the Employee Retirement Income Security Act (“ERISA”), a federal law which sets protection standards for participants in private pension plans. Biden’s ruling entered into force in January this year, overturning prior Trump-era DOL rules that limited pension fund managers to restrict their investment strategies to “pecuniary factors.” Over the course of its 40-year history, ERISA’s ESG guidelines have been periodically revised under both Republican and Democratic administrations, which according to the DOL has led to confusion among stakeholders. Nevertheless, President Biden has announced his intention to veto the bill, which is unlikely to achieve a veto-proof majority once it is returned to Congress. U.S. Congress
U.S. Congress| DOL (1) | DOL (2) | Whitehouse | CNBC | NYT (1) | NYT (2) | Reuters | WSJ | P&I | ABC |
Japan Post Holdings sells 30% stake in Japan Post Bank
Japan Post Holdings has announced the sale of up to USD 9 billion worth of shares in its subsidiary Japan Post Bank. The deal will reduce the parent’s stake from 89% to about 60%, allowing the bank to meet the 35% free float listing requirement of the TSE’s Prime Market. As part of a privatization process initiated in 2005, Japan Post Holdings intends to further decrease its ownership in the lender to 50% or less by 2026, mirroring the divestment process completed in 2021 at the bank’s sister company, Japan Post Insurance. Japan Post Bank has retired approximately 60 million shares to counter the share price decline that is anticipated to result from the sale.
Nikkei | Reuters | BNN | JPX | JPB (1) | JPB (2) | Japan Times | Market Watch |
Belgium reduces stake in BNP
The Belgian government has completed the sale of nearly 3% of its ownership in French lender BNP Paribas in a deal valued at USD 2.3 billion, decreasing its investment from 7.8% to 5.1%. The government’s holding in BNP Paribas arose after the 2008 financial crisis, when a state-owned investment vehicle bailed out the Belgian Fortis Bank before selling it to BNP Paribas in exchange for an equity stake in the latter. The state had previously expressed a wish to decrease its exposure to the financial sector, and the recent increase in the bank’s valuation, reinforced by rising interest rates, created the favorable circumstances to initiate the divestment.
Yahoo | Reuters | Bloomberg | Market Watch|
HSBC AGM to consider demerger and dividend proposals
A group of Hong Kong retail investors have submitted two proposals to HSBC’s 2023 AGM. The first calls for a restructuring of the bank through the spin-off of its Asian business, the company’s most profitable market segment. The request for a demerger was first introduced in 2022 by Ping An Insurance Group, the bank’s largest investor, as a strategy to boost shareholder returns. A second proposal asks for HSBC’s dividend payouts to be raised to pre-COVID levels. The resolution is expected to gather limited support, as HSBC’s latest quarterly results reported strong revenue growth and a commitment from the company to reintroduce quarterly dividends.
Bloomberg | U.S. News | FN | Reuters|
Governance in Brief – March 16, 2023
Canada introduces climate reporting framework Canadian regulators have issued new guidance for the country's banks and insurance companies to better manage climate-related risks. The framework, which requires disclosure on governance, strategy, risk management, and metrics related to financial institutions’ greenhouse-gas emissions, was first drafted in 2022.
Governance in Brief – March 9, 2023
The U.S. Congress has passed a resolution repealing a Department of Labor (“DOL”) rule empowering retirement plan managers to consider climate change and ESG factors in their investment decisions. The rule, introduced by the Biden administration, falls under the Employee Retirement Income Security Act (“ERISA”), a federal law which sets protection standards for participants in private pension plans. Biden’s ruling entered into force in January this year, overturning prior Trump-era DOL rules that limited pension fund managers to restrict their investment strategies to “pecuniary factors.”
Governance in Brief – March 2, 2023
Indian regulator proposes enhancement to ESG disclosure rules India’s securities and market regulator SEBI has released a new ESG disclosure framework for public consultation. The proposed regulations impact India’s 1,000 largest companies by market capitalization, ESG funds and ESG ratings providers. For the largest companies, the regulator proposes areas of assurance of ESG disclosures and reporting and assurance of ESG footprint of the supply chain. The proposals expand on the 2021 Business Responsibility and Sustainability Report (“BRSR”) guidelines and propose mandatory assurance of certain KPIs under ESG disclosure. The KPIs contain intensity ratios such as GHG emissions, water consumption, and waste generation. For supply chain, SEBI will introduce a comply-or-explain approach for the top 250 companies starting in 2024, and assurance beginning in 2025. For ESG funds, SEBI proposes that at least 65% of AUM be invested in companies reporting on comprehensive BRSR and provide assurance on BRSR core disclosures. Under the proposed rules, ESG rating providers should also provide a “core ESG rating” based on assured information in addition to their own products.
Governance in Brief – February 23, 2023
SEC considers changes to climate disclosure rules The U.S. SEC is reportedly considering easing a set of proposed rules, released in March 2022, which would have required public companies to make disclosures about their greenhouse gas emissions (“GHG”), climate-related financial metrics, and climate-related risks.