RI briefing: P8, BP, new Europe ESG

RI’s regular round-up of responsible investment stories.

The P8 group of institutional investors held its first in a series of regional summits on ‘Financing Low-Carbon Growth’ in Seoul last week. The summit brought together leaders from the asset management, infrastructure finance and development banking fields from Korea, Asia and the rest of the world, to discuss investment opportunities in tackling climate change. The summit was due to be addressed by HRH Prince Charles, Prince of Wales, Yvo de Boer, Executive Secretary of the United Nations Framework Convention on Climate Change and Achim Steiner, Executive Director of the UN Environment Programme.
FairPensions, the NGO lobby group is calling on the new UK pensions minister, Steve Webb, to strengthen the pension regulatory framework to protect scheme members from environmental and social risks. The call came after BP’s confirmation that it was cancelling its latest dividend payments as a result of the costs of the Deepwater oil spill clear-up, which will have a significant impact on UK pension funds, who usually receive 1/8th of their dividend earnings from the company. Duncan Exley, director of campaigns at FairPensions, said: “UK pension funds have had the potential financial consequences of corporate environmental and social issues – from socially-irresponsible lending to poor environmental protection – demonstrated to them. Pension funds need now take action to ensure that future risks, such as those presented by climate change or tar sands investments, are properly managed.”
Polish companies have become among the leaders in ESG reporting in New Europe following the introduction in late 2009 of the first stock index of responsible companies on the Warsaw Stock Exchange. A forthcoming report by GES Investment Services highlighted recently at a conference in Poland, showed that polish companies were leaders together with companies from the Czech Republic, Hungary and Slovenia. Laggards were Bulgarian, Croatian, Romanian and Serbian companies. However, Polish companies tended to perform better on governance issues than environmental and social. The full report will be issued this Autumn.Mercer’s latest investment manager ratings on ESG issues has revealed that of the 3,530 fund manager strategies with assigned ESG ratings, around 60% are in listed equities, 21% fixed income and the remaining 19% or so across alternatives. Private equity has the highest proportion of highly ESG rated strategies, partly due to the higher allocation to renewable energy and cleantech funds within the asset class. Property and infrastructure have the next highest proportion of highly rated ESG ratings. Hedge funds and fixed income prove the most difficult for managers to integrate ESG issues.
BP and Royal Dutch Shell have both been removed from the NASDAQ OMX CRD Global Sustainability 50 Index, in its bi-annual ranking of leaders in sustainability performance reporting. Twelve companies have been added to the index, including Bristol-Myers Squibb and Motorola, and 12 removed.
A survey of investment analysts by Thomson Reuters Extel has revealed that just over 47% believe that executive remuneration is a “very important” corporate governance issue in the way they evaluate companies.
Shareholder rights was also deemed to be very important by 70% of analysts, while the split of Chair and CEO also scored highly as an ‘important’ governance issue.
The US Social Investment Forum (SIF), has written to conferees on the U.S. House-Senate financial services reform bill calling on them to ensure that several key provisions are included in the final bill. The bill is currently going to the House-Senate conference committee. Notably, SIF said it wanted to see board directors held to a majority voting standard and shareholders given access to the proxy to nominate alternative candidates if necessary. It said shareholders should also get an advisory vote on executive compensation and the right to claw back bonuses from executives based on false financial statements. The letter also calls for self-funding of the SEC, on market, transparent trading of the $600 trillion derivatives market, and a clause that brokers should not be able to cast votes for customers who fail to provide voting instructions.