RI round-up: G8 to publish social investment recommendations next week

RI’s news-in-brief coverage of the other major stories this week.

The G8 Social Impact Investment Task Force will release its first report on Monday 15th September where it will make eight recommendations aimed at boosting the market in impact investment. Sir Ronald Cohen, chair of the Task Force, told the Thomson Reuters Foundation this month that governments must do more to grow impact investment, including looking at fiduciary duty. “Government restrictions on where foundations and pension funds, among the largest investors in the world, can put their money is one of the things hindering the growth on the impact investing market,” he said.
We Mean Business: With less than two weeks before the United Nations’ Climate Week event in New York, several NGOs advocating climate protection and sustainable development – among them the CDP, Ceres, The Climate Group and the Prince of Wales’ Corporate Leaders Group – have formed a coalition called “We Mean Business.” According to the NGOs, the coalition aims to “amplify a unified business voice in the climate debate and highlight the fast-growing opportunities offered by switching to a low carbon economy.” The coalition plans to present an action plan at an event on September 22.
The number of signatories to Japan’s Stewardship Code has now reached 160 following rapid take up by Japanese investors. The number is a further rise from figures compiled by Japan’s Financial Services Agency in June when 127 investors such as asset managers, trust banks, insurers and pension funds, had committed. The guidelines require investors to disclose how they vote at company AGMs and engage with company management. In June, the $1.3 trillion Japanese Government Pension Investment Fund (GPIF), gave a huge boost to the development of investor/corporate governance in the country by signing the code.
A lawsuit filed in New York alleges that Vanguard, the US index fund manager has been using its mutual ownership structure, whereby its funds own the parent management company, to reduce profit and avoid tax, reports the FT. The lawsuit, filed by David Danon, a tax lawyer fired by Vanguard last year, claims Vanguard has avoided $1bn in tax over 40 years as a result of the structure. Vanguard denies the allegations.
Portfolios that exclude companies with poor ESG (environmental, social and governance) ratings perform better than those that do not, according to a study by New Amsterdam Partners (NAP), a New York-based investment boutique. Drawing on a universe of around 5000 listed companies with ESG ratings, NAP constructed two portfolios – one containing firms selected randomly and another that excluded those with poor ESG ratings. According to NAP, there was a positive correlation between good ESG ratings and risk-adjusted returns in recent years. “It strengthens further by excluding the worst ESG stocks,” it said. NAP also said the study shows that “asset managers can actively use ESG information to enhance their stock-picking and portfolio creation ability.”
Link to NAP presentation
Swedish buffer fund AP1 and three American pension schemes have joined a lawsuit filed by the city of Providence, Rhode Island, against the US’ three major stock exchanges, charging that the exchanges improperly favoured high frequency traders at their expense. According to the New York Times, the pension funds and Providence claim the exchanges ran afoul of their legal duties by providing certain advantages to high frequency traders: “diverting billions of dollars annually from buyers and sellers of securities and generating billions more in ill­gotten kickback payments.” They are seeking an unspecified amount of damages. The defendants cited in the lawsuit include the New York Stock Exchange, Nasdaq and BATS Global Markets as well as the investment bank Barclays, which operates a private stock trading venue known as a dark pool.
Link to NYT article*Institutional investors representing over half a trillion dollars* have called on four major palm oil producers to adopt an immediate moratorium on deforestation and join the growing effort in the industry to establish traceable, deforestation-free palm oil supply chains. Green Century Capital Management has coordinated the letter to Sime Darby Plantation, Kuala Lumpur Kepong Berhad, IOI Corporation Berhad and Asian Agri. Investor signatories to the letter include Danske Capital, Universities Superannuation Scheme and the Local Authority Pension Fund forum.
Link to letter
A US appeal court has ruled that a lawsuit against chocolate manufacturers Nestle, ADM and Cargill for aiding and abetting child slavery in the Ivory Coast can proceed. The court said that Alien Tort Statute – a US law that allows foreign citizens to seek remedies in US courts for human-rights violations – applied to corporations as well as states. Hershey is also facing a US lawsuit for alleged complicity in child labour in West Africa in a case launched by Hershey shareholder Louisiana Municipal Police Employees’ Retirement System in May.
Offshore wind capacity in the UK is expected to almost quadruple by the end of the decade, rising from 3.7GW installed at the end of 2013 to 11GW in 2020, according to Global Data, a research and consulting firm. Given such significant growth over the next seven years, the research firm said the UK would be the world’s leading market for offshore wind power in 2020, boasting a 36.4% share. Global Data also projects annual investment in UK offshore wind projects to total $7.5bn (€5.8bn) in 2020 compared with $3.3bn in 2013.
Link to report
Lloyds Banking Group of the UK has been ejected from the Global Challenges Index (GCX), a German sustainable equity index, for its involvement in the Libor scandal. The bank was fined $370m in late July for its part in the affair. Lloyds’ replacement in the GCX is Japanese camera and technology firm Konica Minolta. The Hanover Bourse, which runs the index jointly with German ESG (environmental, social and governance) research firm oekom, praised Konica Minolta’s governance of its supply chain to ensure that high social standards were met as well as the Japanese firm’s efforts to improve energy efficiency.
RepRisk, the Zurich-based firm that specialises in identifying ESG risks among listed companies, says it has won a mandate to provide its services for the Dow Jones Sustainability Index (DJSI). RepRisk said its data and analysis would complement the industry-specific questionnaire that companies provide as part of their candidacy for the DJSI. Launched 15 years ago, the DJSI is run jointly by S&P Dow Jones Indices and RobecoSAM, the Swiss sustainable asset manager.
Social impact measurement organisations the SROI Network and Social impact Analysts Association (SIAA) have merged to become Social Value International. The new body will be member-led and offer training and support on impact measurement. It has 900 members, across 49 companies.
Eighteen per cent of directors on S&P 500 boards are female and 15% are ethnic minorities, finds the PwC 2014 Annual Corporate Directors Survey. Directors quizzed as part of the survey blamed a lack of awareness of qualified diverse candidates, disinterest in changing the current board composition and board leadership not invested in recruiting diverse candidates as impediments to increasing gender diversity on boards.
The University of California (UC) has rejected calls by its students to divest from fossil fuel companies, saying that it doesn’t believe getting out of the companies is effective in dealing with climate change. The university has almost 11% of its $91bn (€70bn) in investable assets in fossil fuel companies. Instead of divesting from the companies, UC said it would allocate $1bn to companies that promote sustainable development.
A group of shareholders of the Commonwealth Bank of Australia have called on it to disclose the risk to its lending and investment portfolios from climate change. A resolution has been filed by the Australasian Centre for Corporate Responsibility and a group of CBA shareholders supported by the Asset Owner Disclosure Project (AODP) and 350.org Australia. AODP chair Dr John Hewson said it would be a test for the super industry which “has a chance to support the resolution or be accused of hypocrisy of disclosure requests”.