RI Briefing, August 10: Lothian pension fund awards ESG-themed mandates

RI’s regular round-up of responsible investing news

The £3.9bn (€4.4bn) Lothian Pension Fund has awarded 10-year environmental, social and governance (ESG)-themed pan-Asia Pacific equities mandates to Baillie Gifford, BlackRock and Invesco for a combined asset value of £300m. By the terms of the contract, the fund firms are “expected to take into account financially material environmental, social and governance (ESG) issues when making investment decisions, consistent with the Fund’s commitment to be a responsible long-term shareholder”.

CalPERS, the largest pension fund in the US, says incorporating sustainability can lead to better performance. “As a global investor, we’re mindful of ESG-related risks and opportunities around the world,” said the $220bn fund’s CEO Anne Stausboll. “We want to incorporate sustainability-related factors into our investment decision-making because we believe it can lead to better investment performance and maximize our risk-adjusted returns for our members.” She was speaking ahead of a workshop exploring how to integrate ESG factors into its investment process scheduled for August 15.

Danish pension fund Sampension has become a client of environmental, social and governance (ESG) research house EIRIS. Other new business for EIRIS includes the Netherlands’ ASN Bank, private equity firm Primary Europe and Danish funds firm CPH Capital. EIRIS is also providing research to Catholic Relief Services, the official international humanitarian agency of the Catholic community in the United States.

EIRIS has also completed its annual update of its sovereign bond sustainability ratings. It said Sweden, Switzerland and Austria come out as the best overall ESG performers, showing particular improvements in the areas of CO2 emissions reduction, political rights, equality and civil liberties. The US came in 34th while Pakistan, China and India are amongst the worst performers.

The Danish Insurance Association, Forskring & Pension, says that virtually the entire pension fund sector (99.1%) have established their own socially responsible investment (SRI) guidelines. And more than half of the domestic pensions industry now uses active share ownership methods to engage with companies. Link (Danish)*TIAA-CREF, the $400bn US pension* investor, is reportedly cutting jobs in some of its operations in North Carolina. The Charlotte Business Journal cited sources saying less than 100 employees have been let go. It quoted a TIAACREF spokesperson as saying: “We’re always looking for ways to best align our staff with the evolving needs of our clients.”

The International Standards Organisation’s new draft financial services industry standard – ISO 17442 9 (Legal Entity Identifier, LEI) – has won the support of the Global Financial Management Association. LEIs can be assigned to all financial intermediaries, banks and finance companies, all entities listed on an exchange, all entities that trade stock or debt, partnerships and pension funds. Link

The £30bn (€33.9bn) Universities Superannuation Scheme is to form a new investment subsidiary. In its annual accounts it said it was “undertaking a project which … would see the transfer of the company’s investment management operations to a wholly owned subsidiary”. Financial News reported that USS Investment Management has received board approval and should launch in 2012; it quoted CIO Roger Gray as stressing USS would not be setting up a Hermes-style third party fund business.

A new survey by German asset management firm Union Investment had found that of 218 large institutional investors almost two-thirds (64%) said that they use sustainable criteria in their investment decisions. The combined assets under management of all the groups surveyed come to over €1trn. Link

Corporate responsibility group AccountAbility has teamed up with healthcare industry intelligence outfit MedTera to outline a roadmap “to combat drivers of poor healthcare outcomes, while driving revenue and corporate social responsibility” in the pharmaceutical industry. They have published a 16-page paper called Taking Strategic Leadership: An Approach for Pharmaceuticals to Invest in Coordinated Patient Adherence and Access Strategies.