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European Edition
25th November 2021
No correlation between company valuations and climate strategies
Analysis by management consultancy Kearney and a study by Credit Suisse found that companies in the most polluting sectors which have invested in climate action often find themselves valued below peers that have been slower to do so. Investors were only found to reward the most emitting companies, such as energy, mining and heavy industry, for taking action on climate change when the cost of doing so was relatively small and government support and regulations were relatively strong. "Investors want climate leadership, they want tangible transition plans, but at the same time they are only willing to reward companies that can do so without sacrificing returns," Betty Jiang, Credit Suisse's head of U.S. ESG research, said. The research suggests European investors value sustainability more than others globally, but Alexis Deladerriere at Goldman Sachs said that in heavy-emitting sectors ESG scores were not reflected in a company's valuation premium. "There is basically no correlation - no valuation premium - for having a high ESG score in general or having a high 'E' score specifically," Deladerriere said. "If you are behaving badly, if you are polluting and you're not doing anything about it, do you get penalised for doing that? Unfortunately, not really in the short term."
Board diversity still not adequate
Writing in City AM, Julia Streets, founder and host of the DiverCity podcast, says too many firms are still falling short when it comes to board diversity. Founder and CEO of Women on Boards UK, Fiona Hathorn, and Margaret Franklin, the president and CEO of the CFA Institute, joined the DiverCity podcast recently to discuss diversity at board level in financial services. Ms Hathorn points out that, while government and regulators have been busy concentrating on the FTSE 350, the FTSE All-Share, containing the 600 largest UK-listed companies, is falling behind. “What we found was quite shocking, because nobody’s been measuring and managing these companies,” she says. In the FTSE 350, 29% of executive teams are women, she adds, while in the FTSE All-Share that falls to just 18% – “which is very, very poor.” Ms Franklin comments: “We have to really go at what are the exclusion habits, processes and systems that exclude others from advancing. Because the higher you go in a decision-making framework, the more necessary diverse voices, experiences and perspectives become.”
FRC rebukes companies over 'boilerplate' statements
The Financial Reporting Council (FRC) has warned that listed companies are failing to offer investors any insight into company governance by issuing “boilerplate” statements that “are seldom substantiated by actions or examples.” Sir Jon Thompson, chief executive of the regulator, said that “in too many cases reporting has not provided insight into the actions and outcomes of governance, which provides investors and wider stakeholders with confidence that company leadership is addressing the material governance issues that the company is facing.” He added that, overall, the regulator had seen “improved reporting,” but that expectations set out by the FRC a year earlier remained “unfulfilled.” Other areas of concern included “very few” companies confirming how remuneration aligned with company purposes and values while reporting on board appointments, and succession planning and diversity also remains “weak,” the regulator said.
LV= sale will cost members £43m
Members of LV= will have to pay an estimated £43m in fees and expenses for the mutual insurer’s £530m takeover by American private equity firm Bain Capital. The sum was disclosed by consultants Milliman, who were hired to evaluate the sale for the mutual’s members. Gareth Thomas, a Labour MP who chairs the all-party parliamentary group for mutuals, said: “It’s another indicator that demutualisation leads to great outcomes for advisers ... and nothing like the same benefits [for] ordinary customers and members.” All members will receive a £100 one-off payment from the sale, while most of its with-profits members will also benefit from modest uplifts to their policy payouts. The £42m in transaction costs equates to about £37 per person.
Distressed debt funds get a makeover
Distressed debt funds are being redefined as distressed situations dry up in the wake of central bank munificence, and are getting an asset-class makeover, reports Bloomberg. Oaktree Capital Management has launched a $16bn credit fund, a record size for the distressed-debt firm, dedicated to “global opportunities,” and Starwood recently closed a record $10bn distressed fund that seeks “opportunistic real estate” investments. Meanwhile, Bloomberg notes that Blackstone downplayed the scale of potential distressed investing in its third quarter 2020 earnings.  “We’re going to try to make people 15%,” Oaktree co-founder Howard Marks said of his company’s new fund. The opportunity funds largely focus on private credit that allows risk-hungry investors to find yields through direct loans to smaller companies without broad market access.
Tide opens up its app to customers of rivals
Tide has said it is ready to open its services to non-account holders in a move some analysts say could be a game-changer for open banking. The fintech firm will allow small and medium sized firms to connect their existing bank accounts to its platform without leaving their current provider. Oliver Prill, Tide CEO, said: “With established businesses generally not switching banking providers or having multiple banking providers, we reached the conclusion that the only material way competition can be introduced for the established businesses is to allow them to virtually switch to use the Tide platform without actually switching bank accounts.”
Jamie Dimon apologises twice after CCP joke
JP Morgan CEO Jamie Dimon has apologised twice after he joked that the Wall Street giant would outlast the Chinese Communist Party (CCP). Speaking at the Boston College Chief Executives Club, a business forum, Mr. Dimon said that JP Morgan hoped to be in China “for a long time” and quipped: “I made a joke the other day that the Communist party is celebrating its hundredth year. So is JP Morgan. I’d make a bet that we last longer.” He added: “I can’t say that in China. They are probably listening anyway.” After issuing an initial statement of regret, Mr. Dimon penned another, more effusive, version acknowledging that he “should never speak lightly or disrespectfully about another country or its leadership.” Separately, the FT looks at how the Chinese operations of JP Morgan, Goldman Sachs and Morgan Stanley are faring.
Slow progress in probe of Norsk Hydro ransomware attack
Norwegian aluminium maker Norsk Hydro has waited more than two years for police to apprehend individuals who are suspected of launching a ransomware attack on the company in March 2019 that halted its operations around the world. The Wall Street Journal says the time taken is indicative of the complexity and often slow pace of international law enforcement investigations, which must adhere to strict legal requirements. The Norsk Hydro investigation involved authorities from Norway, Ukraine, Switzerland, France, the Netherlands, Germany, the UK and the US. Prosecutors in Norway, France, the UK and Ukraine will assess the evidence and decide how to proceed. “International police cooperation is very, very time-consuming,” said Knut Jostein Saetnan, a Norwegian prosecutor involved in the case.
Drinks companies warn of product shortages
The UK’s top wine and spirit businesses have warned that shoppers may struggle to acquire their favourite products this Christmas because of the shortage of lorry drivers and freight disruption. In a letter to Transport Secretary Grant Shapps, the Wine and Spirit Trade Association urged him to take “urgent action” to avoid some drinks “disappearing from supermarket shelves”. They say rising costs and supply chain chaos have held up wine and spirit deliveries, with imports taking up to five times longer than a year ago. The letter, which was co-signed by 49 firms, including Pernod Ricard, Moët Hennessy and the Wine Society, said businesses that had previously been able to fulfil orders in two or three days were now experiencing shipments that took 15 days to process. The letter is urging the Government to extend the temporary visa scheme for HGV drivers from February 28th, 2022 to a minimum of one year to ease the burden on industry and allow for a sufficient increase in domestic drivers.
MPs warned of delays on food imports
Shane Brennan, chief executive of the Cold Chain Federation, has warned MPs that shoppers will have a reduced choice of food this Christmas because of supply problems. He told the Commons' transport select committee that fresh food is taking three days instead of less than 24 hours to reach shops from ports because of driver shortages. Brennan said global supplies were in "an unprecedented period of stress" with a shortage of drivers, border problems and delays in shipping containers. He said that retailers were focusing on what was "achievable" in terms of deliveries. He added: "It's not about shortages, it's about simplifying. Having less range obviously is one of the key decisions you can make in trying to make supply chains more efficient."
Brits disproportionately hit by the supply chain crisis
New data reveal that British consumers are being disproportionately impacted by the supply chain crisis, with nearly two-fifths (39%) claiming they had placed an order that never arrived, compared to just 18% in the US, 22% in France, and 23% in Germany. Research by ParcelLab found UK consumers reported widespread delays with 41% of online consumers saying a package did not arrive when they needed it, compared to 23% of French online consumers and 29% in the US. Meanwhile, 35% of UK online consumers who had a negative experience said it made them unwilling to order from that retailer again, compared to 21% in France, 23% in the US, and 25% in Germany.
EU warned against badging intensive farming as sustainable
The European Commission has been warned not to allow intensive farming to be badged as a sustainable activity in upcoming rules. In a letter from a group of global investors representing more than $3.5trn in assets, the Commission was told that in addition to carbon emissions, intensively reared livestock also had negative impacts on biodiversity, water use, antimicrobial resistance and soil health and "should not be included in the EU Taxonomy as it stands". "It is critical that the EU Taxonomy only defines as green those sectors that are genuinely environmentally sustainable," said Helena Wright, Policy Director at the FAIRR Initiative, an investor group focused on the risks of intensive farming and which coordinated the letter to the Commission. "It is deeply concerning to see a proposal that would count EU agricultural subsidies as green, when we know that many of these subsidies are harmful," she said.
Review calls for Premier League clubs to pay transfer tax
A fan-led review into English football governance has recommended that Premier League clubs should pay a 10% levy on top-flight transfers. The transfer tax would be used to distribute more cash to lower-league clubs and the grassroots of the game. Other recommendations in the report, led by the Conservative MP Tracey Crouch, include a call for an independent regulator to oversee finances and decide whether owners and directors were fit to hold their role.
Regulators to probe if EU banks played down loan-loss provisions
The European Banking Authority is to examine whether lenders downplayed the potential cost of bad loans during the pandemic by failing to use the “collective assessment” method included in accounting standards introduced three years ago.
New measures urged to tackle workplace harassment
The Minister for Women and Equalities, Kemi Badenoch, has said the Government could do more to protect people from bullying and harassment in the wake of the row around University of Sussex professor Kathleen Stock. Professor Stock said she thought scientific facts about biological sex should trump beliefs about gender identity “particularly when it comes to law and policy” but was hounded out of the university by students and staff. Ms Badenoch was responding in the Commons to questions on what support can be offered to others in this position. She said universities should be educating students on core values such as freedom of speech and freedom of belief and that the Higher Education (Freedom of Speech) Bill is designed to strengthen freedom of speech and academic freedom in universities and ensure individuals can seek redress. But she added that she was also “personally looking into what we can look at in terms of workplace harassment and bullying, which I believe a lot of that behaviour fell under.”

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