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Jul 31, 2020

The week in investor relations: Racial diversity, short-selling and Spac listings

This week’s other IR-related stories that we didn’t cover on

– Short-selling can act as an important tool for ESG-focused investors, according to a new study by the Alternative Investment Management Association and Simmons & Simmons, reported hedgeweek. Shorting, which some view as against the spirit of responsible investment, can be used to mitigate ESG risks and put pressure on companies to change behavior, argued the study.

– Passive investment has a key role to play in the move to a low-carbon economy, said Lionel Paquin, CEO of Lyxor Asset Management, in an opinion piece in the Financial Times (paywall). In the article, he argues that new indexes will help point investor flows to companies embracing a low-carbon future, and says placing a portfolio on a low-carbon trajectory requires a quantitative approach, which is best suited to passive investing.

– For the first time, Moody’s linked a company’s approach to racial diversity with its credit rating, noted the FT. ‘Moody’s has described Lloyds Banking Group’s program to promote more black employees to senior roles as ‘credit positive’, explained the article. The bank announced a plan of action on racial diversity in response to the protests that followed the killing of George Floyd. 

– International investors remain significantly underweight Chinese companies, according to a report from HSBC Global Research. Chinese companies listed on the mainland make up 2.7 percent of international fund allocations, but 9 percent of global equity valuations. Chinese companies have become more available to international funds and there are now more than 700 A-shares listed in MSCI global indexes, noted the research.

– The UK’s largest pension fund said it will start to divest from fossil fuel companies, reported the Guardian. Nest ‘will ban investments in any companies involved in coal mining, oil from tar sands and arctic drilling,’ noted the article. The pension fund will also reduce holdings in carbon-intensive industries and focus investments on renewable energy providers. 

– Another special purpose acquisition company (Spac) announced plans to list this week in what is already a record year for such transactions, noted Reuters. RedBall Acquisition – which is co-chaired by Billy Beane, the baseball executive who appears in Michael Lewis’ book Moneyball – said it plans to raise $500 mn. So far in 2020, Spacs have raised more than $19 bn, said Reuters, citing data provider SPAC Research.

– The European Central Bank (ECB) has extended its advice for lenders to avoid conducting buybacks or paying dividends from October to January 2021, reported the Wall Street Journal (paywall). The ECB suggested a worsening of the eurozone economy could put banks under pressure. It also encouraged banks to ‘moderate the payment of bonuses and consider alternatives to cash payments, such as shares,’ noted the article.

– Forty UK business leaders signed a letter pledging to improve the representation of people of color in businesses and support their development, according to the BBC. The letter includes a number of steps that businesses will take, such as setting targets to recruit a certain number of people of color, ensuring hiring processes have diverse candidates and educating staff on the experiences of people of color within organizations. 

And to recap, here are IR Magazine’s stories posted this week:

Equality in IR Forum: ‘Some dynamics remain really stubborn’
Hermes talks Covid-19, UN SDGs and impactful companies
ESG Integration Forum – Summer 2020: Social media highlights
Is ESG all about the ‘G’? That depends on your time horizon
Wednesday Winner: Inside Hays’ interactive IR video
Europe proposes rollback of Mifid II research rules for smaller companies
Battling uncertainty in the cannabis sector: Ticker 118