RI News in Brief, April 19: Rio Tinto, Danone, Blended Finance Taskforce, Trucost, S&P Global Ratings, UBS

The bite-sized round up of the latest ESG news you need to know.

Environmental

Rio Tinto’s affiliation to lobby groups against climate change action provoked a shareholder revolt at the April 11 AGM of the company’s London subsidiary. The Church of England Pensions Board and South Yorkshire Pension Fund both voted down the miner’s company accounts because of its stated policy on combating climate change while it remains a member of trade bodies that actively campaign against the same goal. The Church of England Pensions Board, along with Australian Local Government Super ACCR and Sweden’s AP7 of Sweden, filed two resolutions with the miner’s Australian arm in February, urging it to publish what it spends on membership to coal lobbying groups. In a move denounced by NGOs ShareAction, ClientEarth and InfluenceMap, UK shareholders were blocked from voting on the resolution. Adam Matthews, Head of Engagement for the Church of England Pensions Board, said at the AGM: “As a result of your decision not to treat shareholders equally in relation to this resolution, the Church of England Pensions Board have today voted against Rio’s Report and Accounts.”

Clean energy investment was subdued in 1Q 2018, down 10% from the corresponding period last year and the lowest for any quarter since 3Q 2016, although analysts believe that more solar will be installed this year than last year’s record breaking 98GW. Bloomberg New Energy Finance (BNEF) reported that wind, geothermal and biofuels showed increases in investments, while solar, biomass, small hydro-electric projects, energy-smart tech (smart meters, energy storage, electric cars) posted declines. Globally, China continues to dominate with investments of $26bn, although this represented a 27% decline y-o-y, while Vietnam broke quarterly records with an investment tally of $1.1bn due to investments in wind.

The Bolsa de Comercio de Santiago, Chile’s Stock Exchange and a member of the UN Sustainable Stock Exchange Initiative, announced it will offer green and social bonds listings from Monday 16 April, following a consultation that closed on 2 April. The issuance should be in line with the International Capital Market Association’s Green and Social Bonds Principles, as well as verified by a second opinion provider. The Bolsa lists among those Vigeo Eiris, which has an office in Chile, and the Big Four accountancy firms Deloitte, EY, KPMG and PwC.

Trucost, part of S&P Dow Jones Indices, has expanded its environmental analysis of Japan’s listed companies to more than 1,500 companies. Richard Mattison, Trucost CEO, said that the assessment revealed “a disparity in disclosure of environmental performance information between S&P/TOPIX 150 and S&P Japan BMI listed companies”. According to the analysis, disclosure rates are higher in large-cap companies with 87% of the 150 companies listed on the S&P/TOPIX 150 index disclosing operational carbon emissions, versus 21% of the 1,669 companies listed on the S&P Japan BMI.

Two major reports have been released by S&P Global Ratings looking at the wind and solar sectors worldwide.The first reports that solar projects are generally outperforming against in-house benchmarks due to benign operational risks and low costs, with expectations of the trend continuing. In 2016, China installed 47% of the 75 gigawatts (GW) which entered the grid worldwide. The second reveals that wind projects are performing in line with S&P expectations, however the sector faces significant hurdles due to wind resource availability and high operational costs.

The first African conference of the UN Environment’s Principles for Sustainable Insurance Initiative (PSI) will be held this month in Johannesburg. Running from 16 to 17 April, the conference will focus on shaping the sustainable insurance agenda in Africa and strengthening the industry’s ability to contribute to sustainable development across the continent.

Seven Glasgow MPs are reportedly leading calls for the Parliamentary Pension Fund to divest from fossil fuel companies in line with the UK’s commitments under the Paris Agreement to keep global warming well below 2C. The 2017 Annual Report for the Parliamentary Pension Fund revealed millions of pounds of MPs’ pensions into fossil fuel companies, with five of the fund’s top 20 investments in fossil fuel companies including BP, Shell and Total SA. The latest intervention comes as residents petition their MPs on this issue through the “Divest Parliament” campaign.

The Blended Finance Taskforce has released an eight-step action plan advising governments and global business leaders on how to promote mainstream private investment for the SDGs. The programme is intended to action the recommendations for unlocking largescale capital originally laid out in the taskforce’s report “Better Finance, Better World” earlier this year. Launched at the 2018 World Bank / IMF Spring Meetings, the 12 month coordinated action plan has been championed by leaders from across the investment and development finance community including HSBC, Credit Suisse, Aviva, Investec, Allianz, the IFC and EBRD. The eight initiatives included in the report include: forming an “investor club” of high ambition institutional investors and asset managers willing to commit to sustainable infrastructure targets; supporting the launch of astandardised development guarantee and accelerating amendment to financial regulations which currently disincentivise investment in emerging markets and infrastructure; and creating a network of blended finance funds and initiatives to share knowledge and build capacity to drive sustainable growth and deliver the Paris Agreement and the SDGs in developing countries.

Danone, the massive yogurt company with eyes on becoming the first B-Corp multinational, has reportedly announced that its US and Canada arms have received formal B-Corp environmental certification two years ahead of target. Danone North America (formerly DanoneWave) becomes the largest Certified B Corporation® in the world, while Danone Canada becomes the largest consumer-facing Certified B Corporation® in Canada. A total of eight Danone entities – approximately 30% of Danone’s global business – is now covered by B CorpTM certification. In February, Danone introduced environmental and social criteria to its €2bn syndicated credit facility, and in March launched its inaugural €300m seven-year social bond. Danone Chairman and CEO Emmanuel Faber commented: “As a company with annual revenue of approximately €25 billion and more than 100,000 employees across 120 countries, our progress towards global B Corp certification proves that profitable and sustainable business is possible, no matter how large your business is.”

The Canadian Imperial Bank of Commerce (CIBC) has reportedly announced its support of the Financial Stability Board (FSB) Task Force on Climate-related Financial Disclosures (TCFD). CIBC says its support of the TCFD further demonstrates its commitment to ESG disclosure and being transparent with stakeholders about climate change risk. The bank is also involved in the CDP https://www.cdp.net/en – a global carbon disclosure system.

Social

S&P Global Ratings have released reports assessing the role of social risks and opportunities in corporate credit ratings, concluding that these have the most influence on ratings compared to other social factors. According to the report, social risks and opportunities relate to human capital management (ensuring a productive workforce), safety management, demography, consumer-related factors, and social cohesion. Between mid-2015 and mid-2017, social risks were a crucial factor in 346 corporate ratings. In 42 of these cases, social risks were pivotal to a rating action being taken, as in the case of Time Inc.’s downgrade in 2016.

As part of the biggest remodelling of the UK’s £13.9bn aid budget in years, development spending is to be used to push British pension funds and exporters to invest in poorer parts of Africa and Asia, the Financial Times has reported. The new approach will see aid money used to assist African companies in raising debt in local currencies through the City of London, and to encourage British companies to invest in less familiar markets. The overhaul is intended to promote pension funds’ investment in developing countries by smoothing regulations and making companies creditworthy. The changes come as the UK looks at other reforms, with proposals including a development bank that would lend to countries, and increasing the amount of money directed to CDC — the government’s private sector development arm — whose private equity investments have faced criticism for not focusing on poverty reduction.

VentureEU, the European Commission’s recently launched venture capital funding programme, has been lauded as a “great step forward for investment in innovation” by trade association Invest Europe. The programme, part of the European Commission’s Capital Markets Union action plan announced in 2015, will see the European Commission and the European Investment Fund (EIF) launch six funds-of-funds, which will contribute capital to a selection of VC funds, focused on at least four European countries each. These VC funds will in turn invest in a range of innovative European start-ups and SMEs. Backed by €410m in EU funding, VentureEU aims to attract larger private institutional investors who currently find European venture capital funds too small.

Swiss banking giant UBS’s impact investments grew 28% from 2016 – 2017, from CHF2.5bn (€2.1bn) to CHF3.2bn (€2.7bn), according to its 2017 annual report. Its total sustainable investments rose by 13% over the same period, from CHF975.8bn (€820bn) to CHF1,103.9bn (€927bn). The increases are related to the commitment made in early 2017 by UBS’s private banking division committed to invest at least $5bn of private client assets to SDG-related impact investing over five years, in a strategy that includes partnering with the Rise Fund – a $2bn social impact fund.

Governance

Metro Bank chairman Vernon Hill is reportedly facing the prospect of an embarrassing shareholder rebellion after an investor hit out at more than £21m (€24.3m) of payments from the lender to his wife’s architecture firm. Royal London Asset Management has warned it will vote against a raft of resolutions at Metro Bank’s annual general meeting (AGM) on April 24, including the re-election of founder and chairman Mr Hill and the lender’s remuneration report.