The week in investor relations: LGIM’s climate divestments, Wise’s direct listing and watching the dots at the Fed
– Legal & General Investment Management (LGIM) said it will divest from four new companies over their approach to climate change, reported Investment Week. The UK asset manager said Industrial and Commercial Bank of China, AIG, PPL Corporation and China Mengniu Dairy have breached red lines around environment issues and/or not responded sufficiently to engagement, according to the article. Under LGIM’s climate policy, nine companies will remain on an exclusion list while Kroger, the US food retailer, will be reinstated to funds following improvements in environmental policies and disclosure.
– Money transfer company Wise has opted to list in London using a direct listing, noted CNBC. The article describes the decision as a ‘big win for Britain’ as the country is trying to attract more technology companies to the London Stock Exchange (LSE). Wise plans to list with dual-class shares, where the higher voting shares will expire after five years. Companies with dual-class shares are not currently allowed to list on the LSE’s premium segment. A government sponsored review, however, has recommended changing the rules to allow this as long as certain safeguards are in place, such as a five-year sunset clause on the additional voting rights.
– The US Federal Reserve jolted markets this week after central bank officials brought forward their predictions for a rise in interest rates, reported the Financial Times (paywall). The Fed’s dot plot graph, which shows interest-rate forecasts by each official, indicated that rates are expected to rise in 2023, a year earlier than previous forecasts. In response, US stocks slipped slightly while bond yields rose. Adding to the hawkish tone, Fed chairman Jerome Powell also said the central bank is now ‘talking about’ reducing its asset-buying program.
– Robeco Institutional Asset Management plans to start pressuring Australia over its reliance on natural resources, including coal, reported Bloomberg (paywall). While institutional investors are putting significant pressure on listed companies to align their business models with a low-carbon future, governments have come under less pressure, noted the article. Australia has a ‘particularly high-risk profile’ in terms of climate management, said Peter van der Werf, Robeco’s senior manager of engagement and active ownership, in the article.
– ‘Meme stocks’ – companies heavily discussed by retail investors on platforms like Reddit – may have ‘distorted’ prices due to the amount of trading that happens off-exchange, said Stacey Cunningham, president of the NYSE, according to Reuters. The majority of retail trading is sent to wholesale brokers who attempt to match the orders internally, a process known as payment for order flow. Speaking at a CNBC conference, Cunningham described this as ‘problematic’. ‘That price formation is not really reflective of what supply and demand is,’ she said.
– Large US companies have taken strides to increase the number of black and Latino directors on their boards, reported the Wall Street Journal (paywall). ‘S&P 500 companies tripled the share of new directors who are black and more than doubled the share who are Latino,’ reported the article, citing a study by executive search firm Spencer Stuart. ‘The shift leaves nearly 80 percent of the companies’ board seats occupied by white directors and about 70 percent by men.’