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RI ESG Briefing, July 17: La Caisse de dépôt et placement du Québec, NY Common, US treasurers, CPEG

The round-up of the latest ESG news

Environmental

La Caisse de dépôt et placement du Québec (CPDQ), one of Canada’s biggest pension funds, has announced a CA$150 million (€100 million) investment to support the acquisition of concentrated solar power (CSP) assets in Spain. The portfolio consists of five CSP assets in the south-west region of Spain which will be purchased by ContourGlobal, a power generator which more than triples its solar capacity with this purchase.

The Republic of Ireland is expected to become the first country in the world to divest from fossil fuels, after its lower house of parliament passed the Fossil Fuel Divestment Bill with cross-party support. Once it becomes law, the €8bn Ireland Strategic Investment Fund (ISIF), the state’s sovereign wealth fund, will be compelled to sell off investments in companies which derives more than 20% of profit from coal, oil, gas and peat “as soon as is practicable”. The fund has been reported to hold more than €300m in fossil fuel investments in 150 companies. The bill is not expected to face any resistance in Ireland’s upper house and could become law by the end of the year.

CPEG, the CHF12.8bn (€10.9bn) pension fund for Geneva, has reportedly divested from coal-related companies as part of its push to reduce portfolio exposure to carbon. This may also involve additional exclusions or best-in-class approaches, according to Grégoire Haenni, its Chief Investment Officer. CPEG recently measured its portfolio’s carbon footprint, the first time it has completed such an exercise.

The Malaysian Rating Corporation Berhad (MARC) has published new guidelines for the assessment of green bonds, social bonds, sukuk or sustainability bonds issued in the country. The finalised Impact Bond Assessments (IBA) framework evaluates three elements: the environmental and social benefits of the underlying project, international compliance, and the issuer’s sustainability strategy and performance. Bonds will be rated Gold, Silver or Bronze. According to Kan Wai Sum, MARC’s CEO, the framework integrates both social and environmental dimensions as “there is room for impact bonds to grow beyond green issuances given the scale and scope of sustainability investments” needed to deliver the SDGs.

Social

Dutch impact investor Oikocredit has again outperformed its sector in outreach to female microfinance clients, according to its 2017 social and environmental performance report. Nearly 90% of clients reached by the microfinance organisations invested in by Oikocredit were women, compared to a sector average of 70%. The firm has surpassed the sector average in outreach to female clients yearly since 2014, it said.

The Investment Association (IA), the UK fund management body, has published its first report on the LGBT+ experience in asset management and it proposes twelve steps to create a more inclusive and welcoming workplace. These include demonstrating LGBT+ friendly environment during the recruitment and induction process, encouraging heterosexual and cisgender colleagues to participate in LGBT+ networks and ensuring the safety of LGBT+ employees globally, particularly where it is considered illegal. The report is generally positive, finding that 8 in 10 LGBT+ people in asset management feel able to “be themselves at work”. Link. Governance

The $206.9bn (€176.8bn) New York State Common Retirement Fund has exited its holdings in listed prison companies, according to a Pensions & Investments report citing a spokesperson for Comptroller Thomas DiNapoli. P&I said the fund’s holdings amounted to $9.6m via stakes in CoreCivic and the Geo Group.

A group of US state treasurers have written to the SEC to oppose forced arbitration and class action waivers in shareholder agreements, which they argue could help to keep corporate misconduct and financial fraud secret. They add that bans on shareholder class actions prevent investors from banding together to seek redress for widespread investor harms, “leaving over-stretched regulators to try to fill this role on their own.”

Oil major Exxon Mobil has said it wouldn’t renew its membership in the conservative American Legislative Exchange Council (ALEC). Tim Smith of Walden Asset Management hailed it as a win for investor engagement, saying: “There are many investors who have chosen to avoid ownership of energy or oil company stocks like Exxon. Others have chosen to use their shares to put pressure on companies on climate change.” There had been 10 years lobbying disclosure resolutions including to Exxon, Chevron and dozens of other companies, he said, and each of them had focused on associations such as the U.S. Chamber of Commerce and ALEC. “Walden and other investors also wrote and talked to Exxon about the reputational harm of being part of ALEC as well as the fact that their funding and reputation contributed to ALEC’s destructive work on climate and many other issues.”

The PRI and Ceres, the sustainability non-profit, have expanded their initiative on tropical deforestation to include engagement with companies exposed to deforestation risks linked to soy production in South America. Julie Nash, Director of Food Programs at Ceres, characterised soy cultivation as a “leading driver of deforestation in Brazil” which poses “reputational and market risks” to investors. The threat of deforestation is seen as particularly acute in the Brazilian Cerrado where 47% of soy is grown. This region is not covered by the 2006 Soy Moratorium, which guarantees market access for soy that is not involved in deforestation, slave labor or threats to indigenous lands

California Attorney General Xavier Becerra said last month he plans to file a lawsuit against student loan firm Navient Corporation and its subsidiaries, Pioneer and General Revenue Corporation, for “misconduct” in the servicing and collection of federal student loans. Navient responded, saying the allegations are unfounded – calling the suit “another attempt to blame a single servicer for the failures of the higher education system and the federal student loan program to deliver desired outcomes”. The student loan system in the US has started to appear on the radar screens of some investors such as Rhode Island Treasurer Seth Magaziner.

The Securities and Exchange Commission (SEC) has dropped a proposal to allow the use of universal proxy cards in contested board elections, according to media reports. Many investors say a universal proxy rule (allowing shareholders voting remotely to choose from a full list of all management and dissident director nominees) would give them more freedom to vote their preferred candidates to corporate boards.