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Billions Pulled From Europe's Controversial ESG Investing Fund Category – Financial Post

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Asset managers love them, while clients seem increasingly wary of them: Article 8 funds.

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(Bloomberg) — Asset managers love them, while clients seem increasingly wary of them: Article 8 funds.

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It’s a category within Europe’s ESG investing rulebook that saw huge growth last quarter, as the asset-management industry slapped an Article 8 — also known as “light green” — tag on well over 600 funds that previously weren’t classified as sustainable, according to data provided by Morningstar Inc. At the same time, clients withdrew more than $30 billion from such products. A stricter environmental, social and governance classification — Article 9 — saw $6 billion of inflows.

When an asset manager sells a fund as Article 8, they’re promising clients that their money will go toward “promoting” sustainability. It’s a concept that was enshrined in the EU’s Sustainable Finance Disclosure Regulation, which started being enforced in March 2021 as the world’s boldest anti-greenwash rulebook to date. But 16 months on, there’s hardly any agreement within the fund industry as to what “promoting” sustainability means. What’s more, even regulators in the EU don’t really see eye to eye.

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For investment clients trying to decide where to get the most bang for their ESG buck, it’s now “impossible” to do a meaningful comparison across products, according to Morningstar. 

Meanwhile, there continue to be questions around the ESG-ness of Article 8. A Morningstar data analysis found that roughly two-thirds of Article 8 funds target between zero and 10% minimum exposure to sustainable investments.

A new regulatory framework is taking effect that will require financial advisers to make sure they’re taking ESG retail clients’ expectations into account, and explaining the characteristics of financial products in a way that doesn’t lead to misunderstandings. It’s an amendment to the revised Markets in Financial Instruments Directive that law firm Simmons & Simmons, which advises asset managers, has already suggested will add a new layer of risk to the asset-management industry. 

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“Because of patchy data and a lack of direct comparability between products, financial advisers will struggle to fulfill their new obligations,” according to Morningstar.

NEWS ROUNDUP

Social Taxonomy Shelved | The next milestone in Europe’s efforts to create a global benchmark for ESG investing has been shelved indefinitely as officials balk at devoting resources to a process that’s already marred by deep political division. 

Meta Reacts to Data Pact | Meta Platforms Inc. reiterated its threat to pull its popular Facebook and Instagram services from the European Union if a new transatlantic data transfer pact doesn’t materialize. Its latest warning comes amid an imminent data flow ban it already faces from Ireland’s data-protection watchdog, which oversees the tech giants based in the country.

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Fashion Probe | The UK’s competition watchdog started a probe into potentially misleading environmental claims made by fashion brands Asos Plc, Boohoo Group Plc and George at Asda, over greenwashing concerns.

ISSB Faces Criticism | The organization aiming to set worldwide climate reporting requirements for decades to come is under fire for putting corporate interests ahead of the planet’s.

Pimco Downgrades ESG Funds | Pacific Investment Management Co. and NN Investment Partners have cut the ESG status of a number of their funds after European authorities clarified rules guiding such classifications.

No Tax Break | In Luxembourg, the world’s biggest hub for ESG asset managers, firms have been unable to take advantage of a tax break intended to reward their efforts to do more sustainable investing.

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Banks Fall Short | The world’s biggest banks are coming up short in their efforts to rein in global warming, according to an investor group representing more than $50 trillion of assets.

EU Climate Benchmarks | Investment funds tracking EU-regulated climate benchmarks jumped 25% last quarter, as asset managers look for ways to combat greenwashing.

EU Deal to Cut Gas Use | European Union countries reached a political agreement to cut their gas use by 15% through next winter as the prospect of a full cutoff from Russian supplies grows increasingly likely.

Gas and Nuclear | EU lawmakers voted to allow natural gas and nuclear energy to be labeled as green investments, removing the last major barrier to potentially billions of euros of funding from environmental investors.

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US Climate Deal | In a breakthrough that surprised much of Washington, Senate Majority Leader Chuck Schumer and Senator Joe Manchin announced that they agreed on a plan that includes a record $370 billion in spending to fight climate change.

US States Target Banks | West Virginia will restrict BlackRock Inc., Goldman Sachs Group Inc., JPMorgan Chase & Co., Morgan Stanley and Wells Fargo & Co. from state banking contracts after the Republican state treasurer found that the companies engage in a so-called boycott of the fossil-fuels industry.

FSB Warns Banks | Financial institutions should brace for greater scrutiny as the world moves toward a low-carbon economy, the Financial Stability Board said in a report. 

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EU Targets Insurers | The EU’s top insurance regulator wants national authorities to tighten supervision amid evidence companies are using artificial intelligence to drive up prices unrelated to the risk or cost of service.

BLOOMBERG RESEARCH 

Guarding Against Greenwashing | As ESG has increasingly affected investment decisions in Europe, the need for transparent and comparable data has become pivotal. Public-company disclosures can differ drastically, as reporting standards are new and often changing. Bloomberg and MSCI were the most frequently named as the No. 1 or No. 2 source of ESG data among European funds that were surveyed.

Most traders named multiple providers, suggesting they value various data inputs, and there’s room for competition. Almost a quarter of traders surveyed believe greenwashing accounts for more than 50% of ESG. Small funds were surprisingly more pessimistic, as they showed more support for ESG throughout the study.

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What percentage of ESG is greenwashing?

US Climate Bill’s Impact | Vestas Wind Systems AS, First Solar Inc., SolarEdge Technologies Inc. and other clean-energy equipment suppliers may see elevated US demand for wind and solar energy in 2023-2025 — with potential upgrades to consensus sales expectations — if the Inflation Reduction Act becomes law.

Carbon Border Tax | This will be a “make or break” year for launching a carbon tariff on imported goods, according to BloombergNEF. The European Commission has proposed levying a tariff on iron and steel, aluminum, fertilizers and cement. In addition, the European Parliament wants to include organic basic chemicals, plastics and hydrogen. With introduction planned for next year, “consensus on devilish questions around coverage, timeline and exports is lacking,” analyst Antoine Vagneur-Jones wrote in a July 27 report.

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OFF THE SHELF

ESG Meets Real World | ESG has become a punching bag for the far right, disgruntled corporate executives and even industry insiders.

Taxonomies | Floods, droughts and food shortages are just some of the effects of climate change, while exploitation and corruption drive social injustice around the world. Governments tackling these issues are realizing that to solve them, they need first to define and measure them. Some are turning to so-called taxonomies that establish which economic practices and products are harmful to the planet and which aren’t. The idea is that the price of goods and services must reflect the human and environmental cost of both production and disposal, which in turn would spur much-needed change. But designing a code is fiendishly difficult. 

OTHER ESG-F0CUSED FIXTURES

Run NSUB ESG to subscribe to the ESG newsletters listed below:

  • For the ESG Daily newsletter, click here
  • For the daily “Green Insight” newsletter, click here
  • For the weekly wrap of ESG bond sales, click here
  • For the weekly ESG Investing digest, click here
  • For the weekly wrap of Equality news, click here

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Investment regulator imposed $14M in enforcement penalties in latest fiscal year

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TORONTO — Canada’s investment product regulator says it imposed more than $14 million in fines and other financial enforcements in its last fiscal year.

The Canadian Investment Regulatory Organization (CIRO) says the total also includes imposed costs and the forced return of ill-gotten profits.

The regulator says it also ordered suspensions and permanent prohibitions in a significant proportion of proceedings against individuals.

Enforcement efforts included a $2 million fine against Fortrade Canada for recommending a high-risk product to unsophisticated retail clients, and a $1.7 million fine and permanent ban on securities-related business against Paul Walker for a range of misconduct including soliciting more than $1.5 million in investments for an outside business activity.

CIRO was created at the start of 2023 through a combination of the Investment Industry Regulatory Organization of Canada and the Mutual Fund Dealers Association of Canada.

The new self-regulatory organization says it is focused on harmonizing its regulatory approach to create more consistency and timeliness with enforcement action.

This report by The Canadian Press was first published July 16, 2024.

The Canadian Press

 

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Conditions on Simandou investment now satisfied

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LONDON, July 15, 2024–(BUSINESS WIRE)–All conditions have now been satisfied for Rio Tinto’s investment to develop the Simandou high-grade iron ore deposit in Guinea, including the completion of necessary Guinean and Chinese regulatory approvals. The transaction is expected to complete during the week of 15 July 2024.

Along with the recent approval by the Board of Simfer1, this allows Simfer to invest in and fund its share of co-developed rail and port infrastructure being progressed in partnership with Winning Consortium Simandou2 (WCS), Baowu and the Republic of Guinea.

More than 600 kilometres of new multi-use trans-Guinean railway together with port facilities will allow the export of up to 120 million tonnes per year of mined iron ore by Simfer and WCS from their respective Simandou mining concessions in the southeast of the country3. Together, this will be the largest greenfield integrated mine and infrastructure investment in Africa.

Rio Tinto Executive Committee lead for Guinea and Copper Chief Executive Bold Baatar said: “We thank the Government of Guinea, Chinalco, Baowu and WCS for their partnership in reaching this milestone towards developing the world class Simandou project.

“Simandou will deliver a significant new source of high-grade iron ore that will strengthen Rio Tinto’s portfolio for the decarbonisation of the steel industry, along with trans-Guinean rail and port infrastructure that can make a significant contribution to the country’s economic development.”

Under the terms of the transaction, Simfer will acquire a participation in the WCS project companies constructing rail and port infrastructure, commit to perform a portion of the construction works itself and commit to funding its share of the overall co-developed infrastructure cost, in an aggregate amount of approximately $6.5 billion (Rio Tinto share approximately $3.5 billion)4.

Chalco Iron Ore Holdings Ltd (CIOH) has now paid its share of capital expenditures incurred or required by Simfer to progress critical works up to completion. A first payment of approximately $410 million, for expenditures until the end of 2023, was made on 28 June 2024, and a second payment of approximately $575 million, for 2024 expenditures, was made on 11 July 2024. These amounts settle all expenditures incurred up to date.

The co-developed infrastructure capacity and associated cost will be shared equally between Simfer, which will develop, own and operate a 60 million tonne per year5 mine in blocks 3 and 4 of the Simandou Project, and WCS, which is developing blocks 1 and 2.

Under the co-development arrangement, Simfer and WCS will deliver separate infrastructure scopes to leverage expertise. Simfer will construct the approximately 70 kilometre Simfer spur rail line and a 60 million tonne per year transhipment vessel (TSV) port, while WCS will construct the dual track approximately 536 kilometre main rail line, the approximately 16 kilometre WCS spur rail line and a 60 million tonne per year barge port.

Once complete, all co-developed infrastructure and rolling stock will be transferred to and operated by the Compagnie du Transguinéen (CTG) joint venture, in which Simfer and WCS each hold a 42.5% equity stake and the Guinean State a 15% equity stake6.

First production from the Simfer mine is expected in 2025, ramping up over 30 months to an annualised capacity of 60 million tonnes per year5 (27 million tonnes Rio Tinto share). The mine will initially deliver a single fines product before transitioning to a dual fines product of blast furnace and direct reduction ready ore.

Simfer’s capital funding requirement for the Simandou project as a whole is estimated to be approximately $11.6 billion, of which Rio Tinto’s share is approximately $6.2 billion, broken down as follows.

US dollars in billions (nominal terms) Simfer

capex

  Rio Tinto
share
Mine and TSVs, owned and operated by Simfer
Development of an initial 60Mt/a mine at Simandou South (blocks 3 & 4), to be constructed by Simfer $5.1 $2.7
Co-developed infrastructure, owned and operated by CTG once complete
Simfer scope (funded 100% by Simfer during construction)

Rail: a 70 km rail-spur from Simfer mine to the mainline, including rolling stock
Port: construction of a 60Mt/a TSV port

$3.5 $1.9
WCS scope (funded 34% by Simfer during construction)

Port and rail infrastructure including an approximately 552 km trans-Guinean heavy haul rail system, comprised of a 536 km mainline and a 16 km WCS rail spur

$3.0 $1.6
Total capital expenditure (nominal terms) $11.6 $6.27

Rio Tinto’s share of expected capital investment remaining to be spent from 1 January 2024 is to be $5.7 billion. Rio Tinto’s expected funding requirements for 2024 and 2025 are included in its share of capital investment guidance for this period, with project funding expected to extend beyond this timeframe.

Further details on the Simandou project can be found in the 2023 Investor Seminar presentation at https://www.riotinto.com/en/invest/investor-seminars.

As Chinalco, Baowu, China Rail Construction Corporation and China Harbour Engineering Company are Chinese state-owned entities, and given Chinalco indirectly holds 11.2% of shares in the Rio Tinto Group, they, and WCS, may be considered to be associates of a related party of Rio Tinto for the purpose of the UK Listing Rules. Rio Tinto’s funding commitment pursuant to the infrastructure co-development arrangement (Rio Tinto share $3.5bn) is a smaller related party transaction for the purposes of Listing Rule 11.1.10R and this announcement is, therefore, made in accordance with Listing Rule 11.1.10R(2)(c).

___________________________
1 Approval has been granted by the Board of Simfer Jersey Limited, a joint venture between the Rio Tinto Group (53%) and Chalco Iron Ore Holdings Ltd (CIOH) (47%), a Chinalco-led joint venture of leading Chinese SOEs (Chinalco (75%), Baowu (20%), China Rail Construction Corporation (2.5%) and China Harbour Engineering Company (2.5%)). Simfer Infraco Guinée S.A.U. will deliver Simfer Jersey’s scope of the co-developed rail and port infrastructure, and is, on the date of this notice, a wholly-owned indirect subsidiary of Simfer Jersey Limited, but will be co-owned by the Guinean State (15%) after closing of the co-development arrangements. Simfer S.A. is the holder of the mining concession covering Simandou Blocks 3 & 4, and is owned by the Guinean State (15%) and Simfer Jersey Limited (85%).
2 WCS is the holder of Simandou North Blocks 1 & 2 (with the Government of Guinea holding a 15% interest in the mining vehicle and WCS holding 85%) and associated infrastructure. WCS was originally held by WCS Holdings, a consortium of Singaporean company, Winning International Group (50%) and Weiqiao Aluminium (part of the China Hongqiao Group) (50%). On 19 June 2024, Baowu Resources completed the acquisition of a 49% share of WCS mine and infrastructure projects with WCS Holdings holding the remaining 51%. In the case of the mine, Baowu also has an option to increase to 51% during operations. After Closing, Simfer will hold 34% of the shares in the WCS infrastructure entities during construction with WCS holding the remaining 66%.
3 WCS holds the mining concession for Blocks 1 and 2, while Simfer S.A. holds the mining concession for blocks 3 and 4. Simfer and WCS will independently develop their mines.
4 A true-up mechanism will apply between Simfer and WCS to equalise most of their costs of constructing the co-developed rail and port infrastructure. The figures shown here are pre-equalisation.
5 The estimated annualised capacity of approximately 60 million dry tonnes per annum iron ore for the Simandou life of mine schedule was previously reported in a release to the Australian Securities Exchange dated 6 December 2023 titled “Simandou iron ore project update“. Rio Tinto confirms that all material assumptions underpinning that production target continue to apply and have not materially changed.
6 Ownership of the rail and port infrastructure will transfer from CTG to the Guinean State after a 35 year Operations Period, with Simfer retaining access rights on a non-discriminatory basis and at least equivalent to all Third Party Users.
7 By the end of 2023, Rio Tinto spent $0.5 billion (Rio Tinto share) to progress critical path works. Rio Tinto’s share of expected capital investment remaining to be spent from 1 January 2024 was $5.7 billion.

This announcement is authorised for release to the market by Andy Hodges, Rio Tinto’s Group Company Secretary.

View source version on businesswire.com: https://www.businesswire.com/news/home/20240621382292/en/

Contacts

Please direct all enquiries to media.enquiries@riotinto.com

Media Relations,
United Kingdom
Matthew Klar
M +44 7796 630 637
David Outhwaite
M +44 7787 597 493

Media Relations,
Australia

Matt Chambers
M +61 433 525 739
Jesse Riseborough
M +61 436 653 412
Alyesha Anderson
M +61 434 868 118
Michelle Lee
M +61 458 609 322

Media Relations,
Americas

Simon Letendre
M +1 514 796 4973
Malika Cherry
M +1 418 592 7293
Vanessa Damha
M +1 514 715 2152

Investor Relations,
United Kingdom
David Ovington
M +44 7920 010 978
Laura Brooks
M +44 7826 942 797

Investor Relations,
Australia

Tom Gallop
M +61 439 353 948
Amar Jambaa
M +61 472 865 948

Rio Tinto plc
6 St James’s Square
London SW1Y 4AD
United Kingdom
T +44 20 7781 2000
Registered in England
No. 719885

Rio Tinto Limited
Level 43, 120 Collins Street
Melbourne 3000
Australia
T +61 3 9283 3333
Registered in Australia
ABN 96 004 458 404

riotinto.com

Category: Simandou

 

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BlackRock Pulls Ad Featuring Trump Rally Shooter Thomas Matthew Crooks

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A screengrab of Thomas Crooks from the BlackRock ad that aired in 2022.

Thomas Matthew Crooks, the 20-year-old who shot at former president Donald Trump at a rally in Pennsylvania, had briefly appeared in a 2022 advertisement for BlackRock Inc, the world’s largest money manager.

The ad, filmed at the Bethel Park High School in Pennsylvania, featured Crooks and several other unpaid students in the background, said the investment giant in a statement. Crooks graduated from the school in 2022.

BlackRock said it has pulled the ad but the video will be available to authorities. The ad, however, is being widely shared by social media users.

“The assassination attempt on former President Trump is abhorrent. We’re thankful former President Trump wasn’t seriously injured, and thinking about all the innocent bystanders and victims of this awful act, especially the person who was killed,” the company added in its statement.

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BlackRock, whose earnings figures are expected today, has faced scrutiny after shooting incidents since some of its index funds own shares in gunmakers.

Trump Assassination Attempt

Trump survived an assassination attempt on Saturday after a gunman opened fire at him at a rally in Pennsylvania ahead of the Presidential elections. The attack left him with a bloodied face as the former president said the bullet pierced his “upper part of right ear”.

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A bystander died in the attack while shielding his family and Crooks – a registered Republican – was shot dead by a Secret Service sniper.

Trump, whose Republican candidature will be finalised today, shared a message of unity after the attack and said Americans must not allow “evil to win”. “It was God alone who prevented the unthinkable from happening,” he said on social media.

Biden, too, appealed to the nation to “lower the political temperature” in a rare Oval Office address. “Politics must never be a literal battlefield, God forbid a killing field,” he said.

The US markets are expecting Trump trades to gain momentum after the attack. It has already been pinning hopes for the return of Republicans, especially after Biden’s poor performance in last month’s debate. Those trades are likely to take deeper hold as the attack sparks a wave of sympathy and support for Trump.

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