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Top asset managers shun investor climate proposals

Welcome back. We have written a bit about environmental, social and governance investing losing some of its allure since Russia’s invasion of Ukraine. Investors are flocking towards oil-and-gas opportunities at the expense of clean energy projects.

But there are signs of ESG resilience. Index provider MSCI reported earnings on Tuesday and said its ESG and climate subscriptions hit $369mn in the first quarter, up 46 per cent from the previous year. Even amid surging energy prices and limited growth in the technology sector, ESG and climate considerations remained strong, MSCI said. Clearly, demand for an ESG corporate infrastructure is growing.

Also, growing is the Federal Reserve’s interest in climate change concerns for the economy. Congress on Tuesday confirmed Lael Brainard as vice-chair of the Federal Reserve. Brainard has previously voiced support for the Fed to take a more aggressive approach to identify climate change risks.

For today, I bring you a snap analysis on the fate of climate change shareholder proposals filed at banks this year. Kristen highlights concerns around the fast-fashion model of Chinese company Shein. And Tamami gives us a glimpse inside the #MeToo movement in Japan’s film industry. Please read on. (Patrick Temple-West)

Shareholders shrug off climate proposals at big banks

Citigroup chief Jane Fraser argued against an investor petition asking for the bank to halt new fossil-fuel financing, saying it was ‘not feasible’ © AFP via Getty Images

Investor petitions asking Citigroup, Bank of America and Wells Fargo to halt new fossil-fuel financing won tepid support from shareholders on Tuesday as the big asset managers shied away from the issue.

The proposals called for the banks to stop fossil-fuel financing consistent with the International Energy Agency’s 2050 net zero scenario. Though some US pension funds voted for the proposals, they won less than 13 per cent support from all shareholders. For example, the Norwegian pension fund said it voted against all three climate proposals.

“It’s deeply disappointing that, once again, asset managers like BlackRock and Vanguard have failed to put their money where their mouth is and use their immense power to hold banks accountable to their climate pledges,” said Adele Shariman of the Sierra Club, an environmental group. 

Still, the Sierra Club said the double-digit support for the proposals sent a strong message to the banks to clean up their financing work with heavy carbon emitters.

Citi’s chief executive Jane Fraser argued against the shareholder demand at the meeting. It is “not feasible” to shut down the fossil fuel economy “overnight”, she said. Facing renewed pressure from environmentalists over pipeline projects, Citi also emphasised it had not provided any project-related financing to oil company Enbridge’s line 3 project in Minnesota. 

More votes on shunning fossil fuels are scheduled at Morgan Stanley and Goldman Sachs, which hold shareholder meetings on Thursday. Though the investor support for these proposals is not what environmentalists had hoped for, activists’ persistent attention to the issue is keeping it in the spotlight. (Patrick Temple-West)

Shein seeks to boost shaky green credentials

Shein is facing uncomfortable questions about the environmental impact of its low-cost, fast-fashion strategy, and about the labour conditions behind its extraordinarily low prices © Bloomberg

Scrutiny of the Chinese clothing company Shein has been growing almost as rapidly as its booming revenue. It has taken the low-cost, fast-fashion strategy pioneered by the likes of Zara and brought it to another level, with 600,000 products selling at an average price of just $7.90.

That has added to fears about the environmental impact of fast fashion, with many shoppers wearing an ultra-cheap garment just a few times before throwing it away. But now as the market leader with a reported valuation of $100bn — more than rivals Zara and H&M combined — Shein has become “the unacceptable face of throwaway fast fashion”, according to Dilys Williams, director of the Centre for Sustainable Fashion at London College of Fashion.

The UN has said that the fashion industry is responsible for 8-10 per cent of global carbon emissions — more than double the footprint of international aviation.

But Shein is trying to push back against this reputation. Late last year, it hired Adam Whinston, who previously worked on sustainability for Disney and Hewlett-Packard, as its first global head of ESG. On Earth Day last Friday, Shein followed up with a new green announcement. Along with seven other brands including River Island, AllSaints and Primark, it signed up to the CanopyStyle initiative — led by non-profit group Canopy — which aims to stop the clothing industry contributing to deforestation.

The companies joined nearly 500 existing signatories by pledging to make sure that their supply chain for viscose — a fabric derived from wood pulp — is free of ancient and endangered forests, and to make more use of sustainable materials such as recycled textiles.

The move from Shein contrasts with its earlier sluggishness on the sustainability front — in contrast with fast-fashion rivals such as H&M and Zara, which have been trying to clean up their image for several years. H&M created an entire collection aimed at the environmentally minded consumer. Inditex, Zara’s parent company, began pushing out sustainability reports and mentioning their efforts in investor relations notes.

Shein’s new policy commits it to ending all sourcing from ancient and endangered forests by 2025. Accountability, however, may still be a concern. Although it will hold quarterly meetings with CanopyStyle signatories, Canopy says it will not report publicly on their progress.

“We’re not a rank and spank organisation. We’re not going to reach out to our brand’s investors to let them know or set a media release if brands push back timelines or goals. We will continue to work with them,” Nicole Rycroft, Canopy’s executive director, told Moral Money.

For Shein, the uncomfortable questions about environmental impact — and about the labour conditions behind its extraordinarily low prices — are set to keep on coming. (Kristen Talman)

Japan faces a #MeToo moment

About four years after Hollywood faced a reckoning over its mistreatment of women (and men) by powerful figures, Japan’s film industry is having its own #MeToo moment.

In March, multiple actresses shared with local publishers allegations of sexual misconduct by two directors, Sion Sono and Hideo Sakaki, as well as actor Houka Kinoshita.

Sono apologised in a public statement in early April, admitting to “lack of awareness as a film director and lack of consideration for people around me”. He stopped short of acknowledging guilt, and signalled he would take legal action against Shukan Josei, the magazine that published the allegations.

Sakaki and Kinoshita have both denied the allegations.

This is not the first time that alleged inappropriate sexual behaviour in Japan’s film industry has surfaced. But Tatsuhito Utagawa, representative director at Tokyo-based anti-harassment advocacy group Japanese Film Project, believes that this time is different. The issue is getting daily attention in both traditional media outlets and on social media, as the industry faces pressure to clean up its act.

A group of film directors, including Cannes’ Palme d’Or-winning Hirokazu Kore-eda, have also sent a letter to the Motion Picture Producers Association of Japan demanding an official comment on its stance on harassment, and arguing for the implementation an industry-wide measure to stop inappropriate actions in the workplace. Some well-known actresses, such as Kiko Mizuhara, opened up about their uncomfortable encounters with powerful industry figures including directors and producers.

The situation mirrors how the #MeToo movement unfolded in the US: revelations from famous figures such as Gwyneth Paltrow and Angelina Jolie encouraged more victims to speak out and the public started to listen more carefully.

Out of 156 nations, the World Economic Forum ranks Japan as 120th on gender equality — making it one of the lowest ranked among developed countries. The question remains whether this newly reinvigorated #MeToo moment will improve overall working conditions for women in corporate Japan.

It has been disappointing that big Japanese film companies, such as Toho and Toei, have remained silent on the matter, said Kazuko Ito, human rights lawyer and vice-president at an NGO Human Rights Now. Considering the human rights as part of their duty is new to many Japanese companies, and Ito urged investors to engage with them more on the issue. (Tamami Shimizuishi, Nikkei)

Smart read

  • Disney’s fight over the “Don’t Say Gay” law with Florida’s governor has highlighted the political risks companies face in a fractured US democracy. But corporate America has “created and enabled” those threats, the Center for Political Accountability argues in a new study of how corporate funds have been used to subvert US democratic norms. Companies resuming donations to Republicans who voted to overturn the 2020 election are “practising politics as usual when the whole landscape has changed”, warns CPA president Bruce Freed.

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