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ESG USA conference report: what’s holding ESG back in the US?
Top level speakers and more than 300 attendees gathered in New York for RI’s annual ESG event.
Thomas DiNapoli
Just what is the state of play on ESG integration into institutional investment in the US, often cited as a global laggard? Top-level speakers and more than 300 attendees at Responsible Investor’s 2011 ESG USA conference on December 13 in New York debated the question during a day of lively panel discussions and Q&A. Tom DiNapoli, Comptroller of the State of New York and sole Trustee of the $150bn New York State Common Retirement Fund in a keynote speech to conference explained why the fund was a firm proponent. He said it looked at ESG issues as a forward-looking lens covering anything that might potentially impact the fund’s financial risk profile. He cited the case of Massey Energy where the fund led a significant coalition of US investors to improve safety and governance problems after the 2010 explosion at Massey’s Upper Big Branch mine in West Virginia, which killed 29 workers and unleashed a barrage of criticism about the company. He noted that the subsequent resignation of Massey CEO Don Blankenship ended up unlocking investor value via a premium on the share price paid for the company when it was sold in January this year to Alpha Natural Resources. He said current ESG focuses for the fund included say-on-pay and climate change issues, but noted that it had been particularly active on the issue of hydraulic fracturing. The Comptroller said the fund would be more active still in the 2012 proxy season putting the issue forward as a major concern with companies in the oil and gas sector during next year’s AGM season.
Michael Garland, Executive Director for Corporate Governance at the New York City Comptroller’s Office, which oversees the $120bn in assets for New York City’s five public sector pension funds, said say-on-pay would also be a big 2012 AGM issue. He added that he expected a number of large US pension funds, including New York, to also step up on proxy access, or the right to nominate directors to a company’s board, which was mooted in the US Dodd Frank regulations and then struck down by a challenge in the US courts from the country’s Chamber of Commerce. He said it was notable that Norges Bank Investment Management (NBIM), the manager of the NOK3.2trn (€413bn) Norwegian Government Pension Fund, had already filed shareholder proposals on the issue at Wells Fargo, Charles Schwab, Western Union, Staples, Pioneer Natural Resources and CME Group as part of its efforts to strengthen shareholder rights. With 2012 being a US election year, Garland said he expected the issue of corporate political contributions to be centre-stage also among investor governance concerns. However, Roger Urwin, global head of investment content for consultancy firm Towers Watson and an advisor to MSCI, said there were still “big and ugly roadblocks” to wider ESG take-up in the US outside of convinced funds such as New York State Common and the New York City funds.
He said Northern Europe was well developed in its ESG beliefs and practice with Australia and the UK following closely behind. In the US, however, the idea that ESG
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