RI news in brief July 17: new report breaks down global RI assets across countries

RI’s regular bite-sized round-up of the most important news.

Environment

Europe accounts for the lion’s share of the world’s sustainably managed assets, with the US in second place, Canada a distant third and Asia very much last, according to a market study by NKI, a new German sustainable investment consultancy. NKI’s study, which uses existing RI market data from the Global Sustainable Investment Alliance,the global SIF group, shows that at the end of last year, 63.5% of the $21.4trn (€19.3trn) in global assets managed sustainably were in Europe. The US represents 31% of the total. Of the remaining assets, Canada made up 4.5%, followed by Australia/New Zealand (0.8%) and Asia (0.2%). Turning to Europe, NKI’s study showed that with a volume of €1.97trn, the UK was the biggest market for sustainably managed assets last year. It was closely followed by France with €1.73trn and by Switzerland with €1.56trn. Netherlands booked €1.24trn in sustainably managed assets for 2014, followed by Germany (€898bn), Norway (€799bn) and Sweden (€649bn). Rounding out the list were Italy with €552bn and Spain with €93bn. Moreover, of Europe’s near €10trn in sustainably managed assets, 97% came from institutional clients, NKI’s study said.

US renewable energy firm TerraForm says it plans to issue $300m (€274m) worth of green bonds. The bonds pay a coupon, or annual interest rate of 6.125%, and are due in 2025. TerraForm said the proceeds would be used to finance the acquisition of renewable energy projects, including several wind parks that the firm recently bought from Invenergy, a Chicago-based project developer. As reported, TerraForm is paying €2bn to acquire Invenergy-developed wind parks in the US and Canada that have a combined capacity of 930MW.

ASX-listed investment management firm Challenger Limited has acquired sustainability-focused fund manger Dexion Capital Holdings Limited for A$41m (€27.7m) as part of a plan to increase its European footprint. UK-based Dexion Capital has interest in three boutique fund managers : renewable energy specialist Resonance Asset Management Limited; UK social housing investor Horizon Infrastructure Partnership; and Agricultural Asset Management Limited, which is focused on agricultural investments in the UK and UK.

A former director at Swiss convertible bond specialist Fisch Asset Management (Fisch AM) has started a consultancy that will rank listed companies according to preparedness for climate change. The new Zurich-based firm is called Carbon Delta and its Founder and Chief Executive is Oliver Marchand. Before this project, Marchand was Head of IT at Fisch AM, responsible for programming Fisch’s portfolio management and risk analysis software. In a statement, Carbon Delta said its ranking process goes beyond just considering a company’s carbon emissions to include other criteria like the climate of the location the company is based in, regulatory moves and technological advances.

Social

US food packaging company General Mills has improved its policies to protect bees and other pollinators from the impact of pesticides after engagement with investors. General Mills drew up its policy on bee protection with As You Sow, Clean Yield, and Trillium Asset Management, with a follow-up meeting scheduled in six months. As a result, a shareholder resolution filed by investor advocacy group As You Sow and Clean Yield Asset Management on the issue of bee protection was withdrawn.
http://www.asyousow.org/wp-content/uploads/2015/07/release-20150708-as-you-sow-applauds-general-mills-improved-policies-to-protect-bees-from-pesticides.pdf

A US appelate court has upheld Walmart’s right to exclude a shareholder proposal that would have had its board look into whether the sale of guns with high-capacity magazines posed risks to the public and the company’s reputation. The proposal comes from New York City’s Trinity Church. Yet with the blessing of the Securities and Exchange Commission (SEC), Walmart excluded it from the agenda of its annual shareholder meetings. Trinity challenged the legality of the exclusion, and a district court in Delaware ruled in the church investor’s favour late last year. Walmart’s effort to overturn the Delaware court’s decision has now succeeded. According to press reports, the US Court of Appeals, Third Circuit, ruled that Trinity could not force Walmart to infringe on its customers’ Constitutional rights to purchase the guns.

Big Society Capital and Nesta Impact Investments have invested £850,000 into the UK’s first social impact bond to tackle loneliness. The social impact bond programme will be managed by Social Finance, and it aims to tackle loneliness amongst the elderly in the county of Worcestershire. Worcestershire County Council and local National Health Service groups will pay investors £1m if measurable outcomes are delivered. Alongside this, UK government department, the Cabinet Office and UK funder the Big Lottery Fund, will pay investors £1m.

L&T Finance has acquired a 26% stake in social impact focused investment advisory firm Grameen Capital India, according to reports. Grameen has said it is in advanced discussions with two institutional investors to raise additional equity. It has already raised capital from other investors including the Grameen Foundation. “We will use this investment for catalyzing lending to social enterprises,” said Royston Braganza, CEO of Grameen Capital.The Multilateral Development Banks (MDBs) and the International Monetary Fund (IMF) have announced an extension of more than $400bn in financing over the next three years to help meet the UN’s Sustainable Development Goals (SDGs). It is hoped that the investment will catalyse the development of some of the world’s poorest countries by attracting ‘trillions’ of additional dollars in investments.

An agreement has been reached between the six large Multilateral Development Banks and the International Development Finance Club (a network of national, regional and international development banks) to use a common set of principles to track the flow of finance dedicated to promoting climate change adaptation and resilience. It is hoped that the framework dubbed ‘Common Principles for Climate Change Adaptation Finance Tracking’ will provide greater transparency, consistency and accuracy of the finance data.

Governance

The Australian Council of Superannuation Investors (ACSI), an independent body providing ESG related research and advice to member funds, has written to more than 30 ASX 200 companies reiterating its position that all listed companies should achieving a minimum of 30% women representation on boards by 2017. The issue of board homogeneity was highlighted by recent research (March, 2015) which revealed the startling statistic that the percentage of men named ‘Peter’ who occupied either the Chief Executive or Chair position outnumbered the percentage of women on ASX 200 boards.

US pension giant CalPERS has reported a return of 2.4%, or below its target of 7.5%, for the fiscal year ended June 30. Speaking to reporters, CalPERS’ Chief Investment Officer Ted Eliopoulos said the main reason why the scheme missed its target was a poor performance of its equity portfolio. The portfolio, which accounts for 54% of CalPERS’ $301bn (€273bn) in assets, gained just 1% in the fiscal year – or below a target of 1.3%. But Eliopoulos also said the fund had done better than the 7.5% target over the previous three- and five-year periods. “We try not to focus or get too excited about any one year’s given return. We look more meaningfully at longer time horizons,” he told the Los Angeles Times.

The NZ$29bn New Zealand Superannuation Fund has awarded Northern Trust Asset Management a mandate to manage a Barclays Global Aggregate fixed income mandate, incorporating the Fund’s ESG exclusions. The new mandate adds to the four passive global equity mandates awarded by New Zealand Super to Northern Trust in 2013.

A US Chamber of Commerce affiliated charity is backing a new campaign group whose mission is to “oppose the UK government’s introduction of US-style class action lawsuits”, through the new Consumer Rights Act (CRA), reports the UK’s Guardian newspaper. The CRA, which comes into force in October, introduces an opt-out regime, so that claims for redress can be brought on behalf of groups of individuals without the need to identify all the claimants. The Justice not Profit campaign is calling for tighter regulation. “Without adequate safeguards, the new ‘opt-out’ collective litigation system in the UK creates a commercial opportunity for ‘unregulated and predatory’ hedge funds and other investment firms with a specialised interest in litigation finance,” claims the organisation. The campaign is backed by the US Chamber Institute for Legal Reform, a not-for-profit public advocacy organisation affiliated with the US Chamber of Commerce.

The London Pensions Fund Authority Board and the Lancashire County Pension Fund have commenced the process to appoint an Independent Chair and Non-Executive Directors to the Board of their £10bn Asset & Liability Management Partnership. Earlier this month it was announced that the partnership, to be called the Lancashire and London Pensions Partnership (LLPP), would cover all aspects of pension fund management and be a fully-fledged pension service organisation, providing both jointly managed administration and pooled ALM activities through newly created corporate structures. The LLPP is the first collaboration of its kind within the Local Government Pension Scheme (LGPS), initially managing an asset pool of over £10bn.

The California Public Employees’ Retirement System (CalPERS), the largest public-employee pension fund in the US (approx. $350bn in assets), has launched (June, 2015) a year long pilot programme to develop a formal requirement to consider sustainability factors in investment processes across all classes. Anne Simpson, Senior Portfolio Manager for Global Equity and Head of the Corporate Governance Program at CalPERS, said: “We’re shifting from thinking about this as ‘ESG issues,’ and thinking about what is required for our funds to be sustainable over the 70-year liability horizon we’ve got”.

Ernst & Young (EY), the professional services firm, has identified company-investor engagement on governance as a ‘mainstream issue’ and one of the key trends from the proxy season, 2015. Engagement with shareholders on governance topics amongst S&P 500 companies has risen from 6% in 2010 to 56% over the last five years. The primary motivator is executive compensation but EY’s research shows that numerous issues lead to engagement, including; “board and executive leadership, board composition and diversity, sustainability practices, audit committee reporting and other proxy disclosures”.