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Jul 28, 2023

The week in IR: NatWest faces shareholder revolt, global bonds fall as Japan loosens grip on yields and regulator accuses Vanguard Australia of greenwashing

Our pick of stories from around the web that you might have missed this week

- UK bank NatWest is struggling to contain the fallout from the closure of former Ukip leader Nigel Farage’s bank account on Wednesday night, as regulators announced investigations and shareholders lashed out at the board, according to the Financial Times. (paywall).

The bank’s chair Sir Howard Davies was the target of investor frustration after his failed attempt to keep CEO Dame Alison Rose in place even after she admitted discussing Farage’s finances with a BBC journalist. ‘He’s clearly not in charge,’ a top-20 investor said. ‘Banking is about trust and confidence. That’s sacrosanct and starts with the tone from the top.’

- Bonds around the world fell as the Bank of Japan, the only major central bank not to have begun reversing ultra-easy monetary policy, surprised investors by loosening its control of market rates, cited Bloomberg (paywall).

Having previously capped bond yields at 0.5 percent in a bid to stoke borrowing and its economy, the central bank said it now regarded that level as a reference point rather than a rigid limit.

The move sent Japan’s 10-year yield to the highest level since 2014, amid speculation it marked the first step towards the end of extraordinary stimulus after the recent surge in inflation. It also triggered big swings in the yen, sending it as much as one percent higher at one point against the dollar.

- The Bank of England looks likely to raise rates by a quarter-point to 5.25 percent on August 3, though economists and markets see a risk of a repeat of June's surprise half-point hike as inflation remains hotter than in other big economies, according to Reuters.

Both the US Federal Reserve and the European Central Bank increased interest rates by a quarter of a percentage point this week, but unlike the BoE, markets think they are at or near the end of their rate-tightening cycle.

- The Australian Securities and Investments Commission (ASIC) has lodged civil penalty proceedings in the Federal Court against Vanguard Investments Australia, alleging misleading conduct in relation to claims about certain ESG exclusionary screens applied to investments in a Vanguard fund, The Asset (paywall) reported.

ASIC alleges Vanguard made false and misleading statements and engaged in conduct liable to mislead the public in representing that all securities in the Vanguard Ethically Conscious Global Aggregate Bond Index Fund were screened against certain ESG criteria. The fund was marketed to investors seeking, among other things, securities with an ethically conscious screen.

In a separate statement, Vanguard said the issue was ‘self-identified and self-reported to ASIC, and as soon as the disclosure weakness was identified, Vanguard acted swiftly to inform investors and enhance the disclosure. We have fully cooperated with ASIC’s queries on the matter since it was first self-reported.’

- ESG investing is on a downward spiral, according to a CNN opinion piece. Mentions of ESG in company statements and earnings calls have declined significantly since their 2021 peak and BlackRock CEO Larry Fink, an early leader in the adoption of ESG standards, decided to banish the term from his vocabulary, saying it has become too political.

The numbers speak for themselves. The cumulative flow of investments into US ESG funds has been flat to slightly negative since the first quarter of 2022, according to data shared exclusively with CNN by Lipper, a financial data provider.

- Clearwater Analytics is set to launch a new generative artificial intelligence (AI) solution aimed at improving the way institutional clients analyze investment data and respond to changing market dynamics, The Trade News reported.

Named Clearwater-GPT, the solution claims to be the first AI generative tool for the investment management industry and will be available to select clients throughout the second half of this year. The solution applies to all asset classes and its use cases will vary depending on varying client types, Clearwater confirmed. Participating clients will be able to gain insights and performance comparisons throughout the investment lifecycle.

Staff Writers

The staff writers on IR magazine are from our team of highly experienced journalists.