Investor Relations Week: ESG investments in demand, Elon Musk’s costly Twitter setbacks and the Bank of England ends its market stabilization bid
– Demand for ESG investments has exceeded supply, reported the FinancialTimes (paywall) citing a PwC study, contrary to reports of a growing backlash against ESG investing. The study found that nearly nine in 10 institutional investors believed asset managers should be more proactive in developing new ESG products, but less than half of asset managers (45%) planned to launch new ones. new ESG funds.
Enthusiasm for ESG, according to PwC, is high in all regions of the world. For example, 81% of institutional investors in the US plan to increase their allocations to ESG products over the next two years, almost on par with the global leader in ESG investing in Europe, where 84% said they planned to do so.
– After a few years of trying to catch up on global ESG practices, Japanese companies are still not where they should be, according to Energy monitor. 2022 has seen broader and bolder moves by investors and NGOs and 2023 will most likely bring another stronger wave of shareholder climate activism to Japan.
Japanese financial regulations could further facilitate such initiatives, thanks to two important changes introduced this year. First, climate risk disclosure is now mandatory for all 4,000 companies listed on the Prime Market of the Tokyo Stock Exchange. Second, the same 4,000 companies now have to publish their investor reports in English, which until now has only been done by the Japanese companies with the most exposure to international markets.
– As the COP27 summit in Egypt approaches next month, BlackRock CEOs will not be present, Bloomberg (paywall) reported. BlackRock CEO Larry Fink will not attend the COP27 summit, instead joining a meeting of the company’s board of directors, according to people familiar with his plans. Citigroup CEO Jane Fraser will also stay on the sidelines, as will Standard Chartered’s Bill Winters, bank spokespeople said. Bloomberg noted that all three are keen to attend in 2021.
They top a long list of senior executives giving lower priority to this year’s summit, according to responses gathered by Bloomberg News based on current plans. BlackRock and others will instead send delegations made up of lower-level representatives, according to company spokespersons. Standard Chartered will send its sustainability director, Marisa Drew. Citi will send a team that includes Jay Collins, vice president of the firm’s banking, capital markets and advisory division, as well as Julie Monaco, head of the global public sector group within its investment banking division.
– According pionline.com, The SEC approved investment advisers using diversity, equity and inclusion factors when selecting or recommending other investment advisers in staff guidance released this week. An investment adviser, as part of their fiduciary duty, may consider diversity, equity and inclusion factors, “provided that the use of these factors is consistent with the client’s objectives, scope of the relationship and information provided by the advisor,” the guidelines state. “Furthermore, the fiduciary duty of the adviser does not require restricting such recommendation or selection to investment advisers with certain specified characteristics, such as a minimum amount of assets under management or a minimum length of investment history. performance.”
– The relationship with investors is the cornerstone of the funds, Delano reported. RI professionals are no longer “second class citizens” and this could be a good thing for the Luxembourg private market fund sector. The comments came during the LPEA Insights 2022 conference this week. Gilles DusemonLPEA board member and partner at law firm Arendt & Medernach, said the IR function has traditionally been undervalued, but has taken on greater importance globally since the crisis financial situation of 2007/2008 and in particular in Luxembourg since the Brexit vote in 2016.
– Elon Musk’s Twitter takeover gambit is getting costlier by the day, reported Bloomberg. If Musk is successful in its acquisition, the social media giant will face an annual interest charge of nearly over $1 billion on its debt. About half of the $13 billion in debt Musk is charging on Twitter is floating rate, which means interest costs will rise as the Federal Reserve continues to raise rates. The Fed should raise prices again next month, possibly as much as 75 basis points, in a struggle to control inflation. Twitter now faces an annual interest charge of nearly $1.2 billion, down from about $900 million in May, said Jordan Chalfin, senior analyst at credit research firm CreditSights.
– Turmoil has hit the UK bond market again, noted The New York Times (pay wall). Although the Bank of England launched a bond-buying program last month to stabilize financial markets, its intention to end the program this Friday only makes investors more nervous.
UK financial markets plunged into turmoil this week following mixed messages over whether the Bank of England would continue to support pension funds and other investors, introduced after a failed policy announcement by the new government last month that shocked investors.
– Reuters (paywall) reported that activist investor group Macellum Advisors, according to a letter from the hedge fund firm, is pushing again for board seats at department store chain Kohl’s Corp and the removal of its President. Macellum wants its nominees to replace some longtime directors, including members of the executive committee. Earlier this year, the hedge fund firm had pushed to replace 10 directors when the retailer first tried to sell itself, but the move was rejected by investors in May. Kohl’s decided not to sell and opted to remain independent in July.
Kohl’s said he was disappointed that Macellum launched another “disruptive public campaign” five months after shareholders rejected his nominees. The company said interactions with Macellum over the past two years have been “unproductive and a distraction from running the business.”
– The Wall Street Journal (paywall) reported that many companies are delaying acquisitions because a combination of economic factors such as high inflation, rising interest rates and market volatility is weakening buyer and seller confidence. In the first nine months of 2022, the value of global M&A deals announced by companies fell 34% to $2.81 billion, according to Refinitiv. It’s the biggest year-on-year decline since 2009, when mergers and acquisitions fell 42% amid the global financial crisis from 2008 levels, Refinitiv said.
Many companies and their chief financial officers are putting expansion plans on hold, taking a wait-and-see approach until they have a better idea of where the economy is headed, advisers and executives said. This is despite falling valuations and the strength of the dollar against most major currencies, giving US buyers more buying power abroad. “All signs point to this reset stage, where companies have paused on what their M&A playbook might look like,” said Matt Toole, director of deal intelligence at Refinitiv.
– The manager of a $184 billion pension fund for Texas public education workers is cutting its target allocation to Chinese stocks in half, potentially slashing billions of dollars from those holdings over the months, Bloomberg reported. The Texas Teachers’ Retirement System (TRS) is switching to a new bespoke emerging-markets equity benchmark to reduce China’s ‘outsized weight’ in the MSCI emerging-markets index on which it was based in the old days. This is according to a previously unpublished proposal approved at a meeting in mid-September, Bloomberg said.
The move will essentially see China’s long-term target weighting in the TRS portfolio reduced to around 1.5%, similar to Taiwan’s weighting. The new benchmark, which took effect Sept. 19, is an equal mix of MSCI emerging market indices with and without China, according to a document submitted to the meeting.