ESG Briefing, May 17: Facebook divestment, mining indices, yieldcos and more

Environmental

UK yieldcos have outperformed their US counterparts, says research from Imperial College Business Centre. Yieldcos – listed firms that only own operational assets, thereby avoiding construction risk – took the renewables market by storm in 2013/14, but have seen mixed success so far. The research finds that over three years, UK versions generated risk-adjusted returns “superior to the broad equity market and a range of sectoral indices”. US equivalents, however, have been plagued with problems, which the report blames in part on an over-reliance on sponsor/parent companies to provide assets. “I find the disparity between the US and UK fascinating,” said author Dr Charles Donovan. “Both markets embarked down this green infrastructure path at the exact same time with the exact same idea. But here’s the rub, the US blew it. There has just been too aggressive an approach to structuring in the US and performance has suffered as a result.”
Investors at US energy infrastructure firm Kinder Morgan have voted in favour of a resolution asking the company to stress test their business against a 2°C scenario, and another asking it to publish annual ESG reports. Kinder Morgan specialises in oil and gas pipelines and terminals. The former resolution was filed by Zevin Asset Management, while the latter was backed by the New York State Common Retirement Fund.
UN human rights experts have flagged a new safety and security law passed by Poland in anticipation of this year’s climate talks. COP24 will be held in Katowice in December, and environmentalists say the new legislation could affect their rights to privacy, peaceful assembly and participation. The UN has raised this issue with Polish government officials, saying it is critical that the right balance is struck between “safety concerns” and “fundamental freedoms”.
California, the world’s fifth biggest economy, has become the first US state to require solar installation on all new homes, after the California Energy Commission voted last week to adopt the 2019 Building Energy Efficiency Standards. The standards also tackle insulation, pollution and lighting efficiency.h6. Social

Calvert Research and Management has divested Facebook over its recent data leak. The $14bn asset manager, which was recently bought by Eaton Vance Corp, exited the stock after the Cambridge Analytica scandal. According to reports, CEO John Streur said the incident was “a tipping point”, as Calvert was considering remaining invested and taking the shareholder engagement approach. Instead, it sold its 500,000 shares in the corporation last month.
The Kames Ethical Corporate Bond Fund is marking its 18th birthday by launching a competition asking participants to write an essay on what the next 18 years of ethical investing could look like. Kames Capital will donate £1,000 to a charity of the winning author’s choice. Click here for information about how to apply.
Yes Bank has become the first Indian bank to be awarded ‘prime’ status by sustainability research house Oekom, putting it among the top 12% of 249 financial global institutions assessed on ESG performance. The bank is also the first in the country to endorse the TCFD’s recommendations and to be included in the Dow Jones Sustainability Index (DJSI) – Emerging Markets.

Governance

The African Private Equity and Venture Capital Association (AVCA) has published its third annual sustainability study, focused on corporate governance. It looks at how investors in Africa have promoted the adoption of related frameworks within their portfolio companies, surveying 277 private equity-backed companies to establish how value can be created through corporate governance systems. 85% of respondents reported improved value creation caused by implementing corporate governance initiatives.
The Responsible Mining Foundation last month launched its first Responsible Mining Index, RMI 2018. The index assesses 30 companies operating more than 700 sites on a range of ESG issues, driven by the principle that minerals and metals mining should benefit economies, people’s lives, the environment and mining companies.