RI ESG Briefing, April 12: Hermes calls for greater climate disclosure from Rio Tinto

The round-up of the latest ESG developments


Hermes Investment Management, which is coordinating the Institutional Investors Group on Climate Change’s engagement with Rio Tinto, has called for “significantly greater information and disclosure” from the mining firm, which holds its AGM this week. “We welcome the company’s reporting of the low carbon scenarios it considers. However, investors are seeking more tangible disclosure of financial risk, including the company’s estimate of value-at-risk under these scenarios and its strategic response. Further disclosure is needed in order to meet the draft recommendations of the Financial Stability Board’s Taskforce on climate-related financial disclosures,” Hermes said.

The Susi Energy Storage Fund has attracted €80m of investment from insurance companies, pension funds and a family office, it has said. The fund, which is advised by Swiss investment manager SUSI Partners, has reached first close at €66m, with a further €14m already committed ahead of its second close later this year. Susi did not name investors, but said there was a combination of new and existing backers. The fund plans to raise up to €250m to invest in energy storage. Susi Partners specializes in renewable energy, energy efficiency and storage solutions.

Pictet is the European asset management firm with the greatest amount of green funds under management, according to research done by French research group Novethic. The Swiss investment giant has more than €4.5bn in its three listed green funds. BNP Paribas has a much higher number of funds, with eight listed, but only comes in second with €2.54bn invested. Others in the top ten include Blackrock, Pioneer, RobecoSAM and ASN Bank. Novethic says 165 green funds are open for investment in Europe with a combined value of €22bn. For the full report, see here


AustralianSuper, the largest super fund in the country, has hired an impact investment consultancy to review the effect its asset allocations have. Investment Magazine reports that AustralianSuper declined to name the consultancy but a report will be due by the middle of 2017 and AustralianSuper is waiting for the findings before taking any action. Link

Morgan Stanley’s Institute for Sustainable Investing has announced that a project aiming to foster education access and retention in India has won its annual Kellogg-Morgan Stanley Sustainable Investing Challenge. The project, EduIndia, focuses on creating a private growth debt fund fostering education access and retention across India. This year’s runner-up was Carbon Offset Investment, whose idea focuses on the monetization of the carbon offset value of forestry companies.

Tufts University, the US academic institution with an endowment of $1.6bn, has reportedly passed a resolution to divest its investment in companies operating in occupied territories in Palestine. The motion which was passed 17:6 called for divestment in companies such as Elbit Systems, G4S, Northrop Grumman, and Hewlett Packard Enterprise, along with the screening of all investments for human rights compliance.h6. Governance

BP’s response to a shareholder revolt on pay has been hailed as a “milestone”. Commenting on BP’s new remuneration report, Ashley Hamilton Claxton, Corporate Governance Manager at Royal London Asset Management, said: 
“The 2017 pay policy looks set to significantly reduce the total pay that [CEO Bob] Dudley will be awarded going forward. It is rare for a company to consult with us on proposals for reducing pay, setting an example for other companies holding binding votes this year.” She added: “We applaud the BP remuneration committee for being proactive in responding to the shareholder revolt last year and see this as a milestone in the engagement between companies and shareholders.”

A group of investors has reportedly called for stronger boardroom controls at electric car giant (now with a larger market capitalization than Ford and General Motors) Tesla to limit the influence of CEO Elon Musk. The Financial Times reported the changes should include the appointment of two new directors independent of Musk. The FT said the investors behind the letter included the California State Teachers’ Retirement Fund and Hermes Equity Ownership Services.

Corporations listed on the Australian and New Zealand Securities Exchanges will soon have a detailed blueprint outlining how they can best manage environmental, social and governance (ESG) issues that increasingly are championed by powerful shareholders and used to challenge boards and management. The Australasian Investor Relations Association (AIRA) has issued a draft of its recommended practices for widespread comment before a final blueprint is issued. “ESG issues are now part of the mainstream, and set to expand in importance,” said CEO Ian Matheson.

Investor pressure is the least cited reason for stock exchanges to implement ESG initiatives, according to the latest survey from the World Federation of Exchanges. Its annual report on sustainability shows that, of the 54 exchanges that responded, 48 have “Some sort of sustainability initiative in place”. More than 80% said the primary motivator was “sustainability concerns”, replacing “reputation and public relations” which came out on top the previous year. For the second year running “investor pressure” was the least frequently cited reason for pushing forward on ESG. And six exchanges that did cite investor pressure in last year’s survey, no longer saw it as a reason for engagement in the latest report.

US mortgage firm Novastar and banking groups RBS, Wells Fargo, and Deutsche Bank face a $165m compensation bill after settling with US pension funds over a nine –year subprime securities related class action lawsuit. Link

Scandal-hit US bank Wells Fargo is facing a shareholder proposal calling on the bank to produce a comprehensive report “on the root causes of the fraudulent activity” and the steps the bank has taken to address the problems.

The UK Government has published its second Extractive Industry Transparency Initiative report, providing a detailed breakdown of the £904m the Government received in payments and receipts in 2015 from UK-based oil, gas, and mining firms. 90% of eligible companies contributed to the voluntary initiative.

Under-pressure US food chain Chipotle Mexican Grill Inc. has announced that a third of directors will not seek re-election on the 25 May 2017. Shareholders have reportedly been frustrated by the length of directors’ tenure at the firm and their ties to management.