RI global news round up

The RI news you may have missed this week.

The US Supreme Court will this week begin its hearing into StoneRidge vs Scientific Atlanta, an important test case for institutional investors. StoneRidge Investment Partners, the US equity and fixed income fund manager, alleges that between 2000 and 2001, Motorola and Scientific Atlanta, now part of Cisco Systems, participated in a “scheme to defraud” investors through a series of improper advertising transactions with cable TV company Charter Communications that inflated the latter’s revenues. Motorola and Scientific Atlanta allegedly used the extra revenues as credit for advertisement. StoneRidge is petitioning the court for the right to sue for investment losses that occurred at Charter Communications when the inflated revenues were revealed. Charter’s market value plunged by $7bn (€5bn).
Jacob Zamansky, a principal in the firm Zamansky & Associates, said the eventual decision would have a significant impact on whether investors in companies that commit securities fraud should be able to sue investment banks, accountants, lawyers and others who were direct “participants” in a deception. He said current shareholders’ rights for going after third parties that aid or abet corporate fraud were not clearly defined in US law.

Alain Grisay, chief executive of F&C Asset Management, has told the US Congressional Committee on Energy Independence and Global Warming in Washington DC that business and investors can only play their part in tackling climate change if government takes leading action. Grisay was invited to testify because of F&C’s involvement in the Corporate Leaders Group on Climate Change. Grisay said: “The costs of moving forward today, in a planned and deliberate way, are modest and will even yield profitable business opportunities for many innovative companies along the way. These costs are dwarfed by the costs of inaction, when one considers the human, natural and economic consequences of a business-as-usual approach. In short, we simply cannot put our head in the sand.” Grisay said business could play a vital role in marshalling the capital to finance the innovative technologies required to tackle climate change but that it needed government to set clear long-term environmental standards. Grisay said F&C supports binding global targets on reductions in carbon emissions and the development of national and international policy frameworks for the next 30 years or more, as well as the emergence of a US cap-and-trade system consistent with the EU Emissions Trading Scheme.

Fortis Investments has signed the UN Principles for Responsible Investment. The principles commit fund managers and institutional investors to incorporate responsible investment practice into investment analysis and decision-making processes.

Colin Melvin, former chairman of the UN PRI and chief executive officer of Hermes Equity Ownership Services, has reportedly said the initiative needs a “moment of reflection” to ensure that its success in attracting signatories does not become unwieldy, according to Thomson Investment Management News. Melvin reportedly said: “One of the difficulties is that there are different levels of experience and understanding of what engagement involves. And it will be a barrier if members of UN PRI put forward engagement ideas that are poorly understood by those that seek to participate in them.”

FTSE, the global index group has taken over the Impax Environmental Technology (ET50) Index. From December 2007, FTSE will calculate and manage the index, which will be rebranded as the FTSE ET50 Index and sold to investors as the basis for structured products, exchange traded funds and index funds.

The US government is to encourage investment in clean energy by agreeing to repay a portion of the commercial loans that fund alternative-energy projects, in the event of default in the financing, reports Reuters. The loan guarantees could cover financing for refineries producing ethanol made from farm waste, electric generating plants that capture greenhouse gas emissions and other clean-energy projects. The US Energy Department last week issued final regulations for up to $4bn in loan guarantees.

US companies are facing pressure from the Securities & Exchange Commission (SEC) to curb excessive executive pay following research that shows chief executives are paid up to 10 times more than other senior managers, reports the Financial Times. The paper reported that the SEC is understood to have asked a number of companies to explain the reason for large pay gaps between top executives, as part of a review of corporate pay. The US Council of Institutional Investors, which represents more than $3,000bn in institutional assets, has also voiced concern at large disparities in executive pay.

European internal markets commissioner Charlie McCreevy has scrapped proposals to reform differential share voting rights in Europe favour of “one-share, one vote”. McCreevy said research on the topic showed no economic evidence of a link between preference shares and the economic performance of companies. He said that as a result there was no need for further action by the EU.

New Zealand Prime Minister Helen Clark has reportedly demanded a briefing about investments by the $13.1bn New Zealand Super Fund in oil companies operating in Myanmar after press reports revealed the fund had invested heavily in firms operating in the military-led country where protesters were recently shot by government forces. The Fund’s investment guidelines say it should specifically avoid prejudice to New Zealand’s reputation as a “responsible member of the world community.” The New Zealand government plans to allocate around $2bn a year to the Fund over the next 20 years and the fund is expected to grow to around $109bn by 2025, making it one of the largest funds in Australasia.