Alliance Notes: Human rights webinar, GMO & Deep Sea Mining recaps, Conference

Monday, November 23, 2020

                           Alliance Events, 11/23/20

Contents

Previews: 

  1. 4th Annual EM ESG Conference  (December 9th & 10th)
  2.  Debt & Fiscal Governance Working Group Call with Bennett Freeman (December 15)

Recaps: 

  1. ESG Initiative call with GMO (November 17th)
  2. Recap: Deep Sea Mining with Dr. Saleem Ali (November 12th)
  3. Recap: E-Waste with StEP Initiative (October 28th) 

Upcoming Events

 

1.4th Annual EM ESG Conference

On December 9 & 10, 2020 join top investors, ESG experts, and emerging market corporates at the longest-running conference dedicated to ESG in emerging markets.  The only conference with emerging market asset management firms with over $30 trillion in AUM and emerging market corporates in one location over two days exclusively focused on ESG. 

New Conference Format for an ESG World

Day 1: Panels and discussions between policy experts, sovereign and corporate issuers, and investors on ESG themes dominating investment decisions today. 

Day 2:  Small group meetings between investors and corporates focused exclusively on ESG issues and fireside chats with experts on the ESG Regulatory Environment & Transparency Data, Climate Risk in Portfolios, and the incorporation of ESG data into Credit Ratings.

Small group meetings are confirmed for: 

AES Gener, Anglogold Ashanti, ANTOFAGASTA PLC, Arcos Dorados, BNDES, Braskem, BRF, Cosan, Enel Chile, Ferreycorp, Geopark, Grupo Bancolombia, Grupo Mexico, Grupo Sura, MHP, Millicom, Minerva, Polymetal International, Rosneft Oil Company, Santander Chile, SQM

...and more to come!

REGISTER HERE   

The conference is hosted by AllianceBernstein and sponsored by JPM Index Research, HSBC GAM, LarrainVial, and Sustainalytics.

 

2. Debt & Fiscal Governance Working Group Call with Bennett Freeman

Our Debt & Fiscal Governance Working Group call will be on Tuesday, December 15th at 10am EST with Bennett Freeman, Former Deputy Assistant Secretary, Democracy, Human Rights and Labor at the U.S. Department of State, and former SVP of Sustainability Research and Policy. He will discuss how the world of responsible investing and the business of human rights have been transformed by the pandemic, by exacerbating inequality, as well as by drawing attention to social injustice.

Please note the revised time and date for this call. Please register here.

Recaps of Recent Events

 

3. ESG Initiative call with GMO

This month’s call featured Hardik Shah, ESG Practice Lead, and Niyati Dangi, ESG Analyst, of GMO. Mr. Shah and Ms. Dangi delved into how ESG is being integrated into its Emerging Domestic Opportunities Fund, a strategy that capitalizes on emerging markets domestic consumption and employs a country/sector as well as a stock selection process. 

Three key learning points were discussed during the presentation:

  • First, country-level ESG risks can be material. Even the most sustainably managed companies are hosts to the ESG risks faced at the country and regional level and hence, these risks can have a significant impact on a company’s fair-value drivers. For example, risks such as rising inequality are slow-boiling in nature and characterized by tipping points as they manifest themselves in large-scale social unrest such as those seen in Chile. To account for this, GMO has integrated and mapped country-level ESG factors into its Long-Term Country Framework. This framework evaluates the long-term attractiveness of emerging market countries based on several macro factors. Country ESG risks such as deteriorating air quality, increasing social unrest, and rising autocracy are reasons to lower expectations of a country’s long-term attractiveness.
  • Second, solely relying on third-party agency ratings is not enough. Third-party ratings, which address a wide variety of client goals, have to be substantiated by an investor’s own proprietary analysis and research. To validate ESG controversies, GMO possesses dedicated analysts that conduct channel checks, extra on-the-ground due-diligence required on topics where it thinks that third party providers might be over or under-penalizing companies. 
  • Third, resolving conflicting perspectives between investment fundamentals and ESG risks is more art than science. Investors have to provide their own value-add when resolving conflicts in perspectives. At GMO, strong company fundamentals contrasted with highly material ESG risks might lead to a decision not to invest until more clarity is obtained over ESG issues. Alternatively, this combination of factors might lead to company engagement, in an effort to ascertain that the companies are devoting resources to manage their ESG risks. 

In addition, Mr. Shah and Ms. Dangi also provided insights into some of GMO’s recent ESG initiatives. On a monthly basis, GMO conducts an ESG risk monitoring and corporate engagement process where it identifies the top few high-risk companies that it aims to engage on ESG issues with. Besides, the ESG team has also begun applying Culture as a signal to its fundamental screen. Items that feed into Culture include an evaluation of the company’s founder for his/her vision and risk-taking behavior as well as the company’s corporate culture, as reflected by employee surveys from resources such as Glassdoor reviews.

The ESG Initiative engages global and local institutional asset managers to discuss their approach to integrating Environmental, Social, and Governance factors into their investment frameworks. Asset managers also discuss how they advocate for particular outcomes or best practices with the governments or companies in which they invest.

The Alliance welcomes our first Sellside Captain, Cristina Ameneiro, to the ESG Initiative. Cristina is an emerging markets equity salesperson at Citi in London. She will be working alongside Fergus McCormick and the other members of the ESGI team to bring you the insightful and meaningful dialogue on ESG implementation and integration in emerging markets. Welcome Cristina! - Jun Hao Goh

 

4. Extractive Industries: Deep Sea Mining webinar

Deep Sea Mining

The Alliance extractive industries program hosted a webinar on Deep Sea Mining (DSM). This is a rapidly evolving area of extractives which promises an alluring new supply of minerals -- including those critical to the low carbon energy transition -- but also brings with it environmental risks that are not yet fully understood. Professor Saleem Ali of University of Delaware spoke about demand projections for critical metals and how DSM can help meet these needs; the environmental and social risks of DSM compared with terrestrial mining; the International Seabed Authority’s regulatory role; cost and liability considerations; and activism around the sector and how responsible investors should respond based on existing science. Matthew Gianni of the Deep Sea Conservation Coalition, an organization that is opposed to deep-sea mining, also joined the call to provide a more cautious perspective on the environmental risks of DSM. 

See a detailed summary of this webinar here. For more background on deep-sea mining, see Dr. Ali's article on this topic as well as the DSCC's backgrounder. -Andrew Howell

 

5. TMT Program: E-Waste webinar with StEP Initiative

Recap of Oct 28 TMT Program, Global ESG, Circular Economy, and E-Waste

On October 28, the Alliance hosted a Tech, Media & Telecom (TMT) program, with a follow-up presentation on electronics waste, the working group’s initial research topic. Elisabeth Smith, Executive Director of the StEP Initiative, and Deepali Sinha Khetriwal, Managing Director of Sofies International gave a presentation entitled Global ESG, Circular Economy, and E-Waste.  The Alliance’s William Woo hosted the presentation and moderated questions which probed further the topic of Extended Producer Responsibility, the myriad of models employed globally, and some specific examples in Africa and Asia which have worked well.

Elisabeth outlined several main models in use:

  • State Fund (China, Ghana) – Producer finance the effort, the state collects/recycles
  • Industry-led Producer Responsibility Organization Model (PRO) - (CH,NL, BE, SE, FR, IT, JP, IE) – Producers pay member fee and separate PRO has responsibility for the system
  • Market-Driven Model (German, Australia) – A clearinghouse assigns collection responsibility to a producer who then arranges and pays for the waste transport and treatment
  • Recycler-driven (Kenya, South Africa) – Producer directly contracts for logistics and recycling

Additionally, there are hybrid versions of the above such as: state-run PRO (Taiwan), Competitive PRO (India), or Hyper-competition (UK).

Deepali outlined several specific developing initiatives in Nigeria, South Africa, Rwanda, Ghana, Namibia, and Kenya in the formal sector to meet the growing compliance demand for Producer Responsibility.  The Asia market is more mature, with a few large global, regional, and national recyclers, but there is still a large informal sector that is “non-compliant”. She also discussed social enterprises such as Closing the Loop, which runs an Information Technology hardware procurement program that charges a fee which then funds waste recycling infrastructure in developing areas – resulting in a waste-neutral impact globally. To help facilitate the transition of the informal sector, there are social enterprises such as E[co]work that provide incubator workspace, equipment, and infrastructure to those e-waste businesses who have no capital or business expertise.

Finally, Elisabeth outlined how the StEP initiative works with its members to design strategies addressing the e-waste problem. - William Woo

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that enables institutional emerging market investors to support good governance, promote sustainable development, and improve investment performance in the governments and companies in which they invest.

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