Soapbox Snippets August 2024
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Article Type
Sustainability Soapbox
Topics
Responsible Investing, Opinion
Published
September 12, 2024
Read time
4 mins
Author
Aegon AM Responsible Investment Specialists
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SD-aRe we ready?!

The FCA’s sustainable fund labels are now live, but most UK asset managers are yet to adopt a badge. Just a few funds have been approved to date, mostly single thematic funds in the impact investment space.

The slow uptake from managers is thought to be due to the high hurdles set by the regulator for applying badges to their products. Initially proposed as a principles-based disclosure regime, the Sustainable Disclosure Regime (SDR) has evolved to be far more prescriptive in the implementation stage, which is causing delays.

However, sustainable regulation is an increasing trend globally, helping to maintain transparency and trust across the investment sector. SDR ensures that the UK remains a global hub for sustainable investing, which we welcome given our long and rich history in Responsible Investment products at Aegon Asset Management.


TikTok ditches ‘addictive’ tool in Europe

TikTok will not roll out a feature which the EU Commission describes as having “addictive effects that put the well-being of users at risk”, especially children. The EU opened an investigation into TikTok under the new Digital Services Act, which aims to create a safe and accountable online environment through the regulation of large digital platforms.

The case focuses on TikTok Lite - a low bandwidth version of the app in Spain and France that allows users to earn points for actions such as following creators, liking content, or inviting friends. The points can be exchanged for Amazon vouchers.

The EU’s investigation looks in to concerns that the company has not assessed the addictive effects of this feature, especially for children, as required by the Digital Services Act. There is also a suspected lack of effective age verification mechanisms on TikTok. In a recent statement, European Internal Market Commissioner Thierry Breton stated, "The available brain time of young Europeans is not a currency for social media, and it never will be,".

There is still an outstanding probe into TikTok focusing on the protection of minors, advertising transparency, data access for researchers, and mitigation of risks from harmful content.

Financial risks in the supply chain are being grossly overlooked 

A recent report from the Boston Consulting Group and Carbon Disclosure Project found that most investors and companies are not yet targeting and reporting reductions in Scope 3 emissions, despite these emissions being, on average, 26 times higher than Scope 1 and Scope 2 operational emissions combined.

The report discusses a dichotomy in how risk is priced by corporates and investors, leading to significant supply chain risks that can adversely impact business performance. It shows that the disclosed upstream emissions from the manufacturing, retail and materials sectors in 2023 alone imply a carbon liability of over $335 billion, yet currently only half of corporates recognise the financial risks posed from upstream emissions.

It's important that investors push for higher standards in Scope 3 reporting, which should no longer be seen as a “nice to have” but a key aspect of financial risk management. Particularly as Scope 3 is increasingly required under incoming mandatory reporting frameworks.

Climate oversight and knowledge at board level, and effective supplier engagement are just two strategies investors can adopt to drive positive change in Scope 3 emissions measurement and reporting. 

I wish I were a rich man….

FTSE 100 chief executive pay increased this year by £560,000 bringing the average to £5 million. We haven’t seen pay at these levels since 2017. Whilst there have been comments that UK Executive pay is not competitive globally, this recent increase is largely the result of better market conditions in the outcomes of pay packets rather than changes to individual company policies.

There have been companies that have won a hard battle to increase pay i.e. LSE and AstraZeneca, but these are not included in these numbers as the pay was not made until after this data was collected. However, the absolute numbers show the results of better market conditions in the outcomes of the pay packets of the executives this year which may weaken the anti-competitive rhetoric.

Median total pay for a FTSE 100 CEO now is £4.19 million which is 120 times the median pay for full time UK workers. The highest paid CEO was at AstraZeneca, who took home £16.9 million. This will be an interesting space to watch with the new Labour government.

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Aegon AM Responsible Investment Specialists
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