Investment manager

Super funds question investment manager’s ties to anti-ESG foundation in the US

“The positioning of the State Financial Officers Foundation is concerning and clearly runs counter to the approach taken by Australian pension funds and asset managers to responsible investing.”

EOS at Federated Hermes also engages with global companies on behalf of the $70 billion pension fund Cbus Super. A Cbus spokesperson said they asked about the sponsorship.

“We immediately raised this issue with Federated Hermes EOS when we were alerted to it last week. Like our European counterparts, we continue to seek further details. Future meetings have been put on hold so that these discussions can take place,” said said the spokesperson.

“ESG integration is critical to the long-term results of Cbus members’ retirement. Federated Hermes EOS is an effective and valuable partner in this work, which is why the funds are disappointed with this standout sponsorship.

Aware Super, which manages $150 billion on behalf of more than a million members, said it is partnering with global service providers to engage with businesses on climate change and climate change issues. ‘ESG, and had a long-standing relationship with Federated Hermes.

“We are concerned about the reported sponsorship by Federated Hermes in favor of the US-based State Financial Officers Foundation, and therefore we are currently in discussions to better understand the nature of this relationship,” said a holder. word.

The $68 billion health and community services union HESTA, which partners with Federated Hermes to vote on the shares and undertake corporate engagement on their behalf, declined to comment, as did Hostplus. Colonial First State said it had “constructive discussions with all of our vendors, including EOS at Federated Hermes, and [engages] with them regularly on any issues that may arise.

Federated Hermes declined to comment beyond a statement posted weeks ago on its website, in which it says it participates in various global organizations, including the State Financial Officers Foundation, and listening to different viewpoints was essential. to their engagement process.

“We don’t set the agendas of these organizations; rather, they operate according to their unique charters and the opinions of their members and elected leaders. Our participation does not serve as an endorsement of any particular organization’s perspective on an issue,” they said.

“We work with a range of clients who have different views on ESG. Some embrace ESG integration and some don’t. We are committed to everyone, listening to their points of view and highlighting our abilities to meet needs that are consistent with their convictions.

A New York Times investigation this month found that the Foundation of State Financial Officers was at the center of a push by Republican politicians to thwart climate action, in part by using taxpayer money they control to punish companies that promise to reduce greenhouse gas emissions.

ACSI chief executive Louise Davidson said she has serious concerns about Federated Hermes’ sponsorship of the State Financial Officers Foundation.Credit:wayne taylor

Last week, Texas Comptroller Glenn Hegar – a financial officer for the foundation – published a list financial firms that the state says boycott fossil fuel companies, including the world’s largest asset manager, BlackRock. Under anti-ESG laws introduced last year, these companies will now face barriers or a ban on doing business with state entities.

The State Financial Officers Foundation has also lobbied against U.S. regulators’ proposals to create new corporate climate risk disclosure standards, declare the proposal “indulges in irrational climate exceptionalism, elevating climate issues to prominence in the disclosures they don’t deserve.”

“Not all Americans agree … that the climate is poised to inflict increasingly severe losses on issuers and force changes to their business operations.”

Derek Kreifels, the foundation’s chief executive, said in a statement that they did not discuss information about their donors and sponsors.

“State fiscal officers in the United States have an obligation to do what is in the best interests of their state and its people,” he said. “It means pushing back against political activists who use ESG to advance their agenda through economic coercion, especially when they are unable to do so through democratic processes.”

Brynn O’Brien, executive director of the Australian Center for Corporate Accountability, said it was important for Australian climate-sensitive funds and institutions to look at the relationships they have with their advisers and the political influence of their chain. valuable.

“One of the biggest things holding us back from accelerating decarbonisation around the world and in Australia is the political influence wielded by those who stand to benefit from the delay,” she said.

“Eliminating this negative political influence from your value chain and suppliers, or at least being mindful of it, is absolutely in the interest of everyone who stands to gain from acceleration.

“That’s what Federated Hermes is asked to do, and that’s what climate-conscious investors who use Hermes as an advisor are asked to do.”

Simon O’Connor, the head of the Responsible Investment Association Australasia, said it’s no surprise super funds that have partnerships with Federated Hermes are demanding an explanation.

“I think it is entirely appropriate that they be asked to answer why they have a relationship of this particular nature and how this is consistent with the strong position they present in the field of responsible investment”, did he declare.

O’Connor said it would be interesting to see how Federated Hermes responded.

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“Being a sponsor is different from owning a business. But clearly questions have been raised about whether this is compatible with the role that EOS Federated Hermes plays in supporting pension fund investors. for the transition to a net zero future.

“I think it’s really important that we set the same standards to apply to our own activities as an industry. So it is true that we ask ourselves questions. And it is true that there is an expected response from the fund manager. It will be interesting to see how this plays out. »

Federated Investors acquired a majority stake in ESG investment pioneer Hermes Fund Managers Limited in 2018, before changing its name to Federated Hermes in February 2020. It released an updated corporate identity focused on a commitment to favor of responsible investment.

In 2021, Federated Hermes said it wanted crack the australian superannuation market using its responsible investing credentials, saying the ESG market in Australia was second only to the EU.