RI ESG Briefing, April 19: ClientEarth/ShareAction, Iberdrola, HESTA, Bridges Ventures, Candriam

The round-up of the latest ESG developments

Environmental

Twelve UK-based pension funds, including the London Pension Fund Authority and the Shell Contributory Pension Fund, are facing questions from their scheme members on portfolio risk linked to climate change. Supported by ClientEarth and ShareAction, more than 50 pension fund members have written to their funds to ask how they are managing climate risk and what climate risk policies are in place. The letters request several documents and give a two-month deadline for a response.

Investors operating according to socially responsible mandates have reportedly piled into a €1bn green bond issued by Spanish utility firm Iberdrola to refinance its European onshore wind portfolio in the UK, Spain and Portugal. The 10-year bond, which was validated by Vigeo Eiris, was four times oversubscribed. In related news, Latvenergo, Latvia’s state-owned utility firm, has issued a €25m green bond.

Australian superfund Hesta has developed four portfolio decarbonisation strategies with Russell Investments. The customised strategy has an objective to remain at or below 50% of benchmark carbon dioxide emissions and carbon reserves in a risk-constrained manner, and excludes all exposure to tobacco, according to Super Review. Link

A Fossil Fuel Divestment Bill targeting the $184.5bn New York Common State Retirement fund has successfully passed through New York’s State Senate Civil Service and Pensions Committee and will now go to the Senate Finance Committee. The bipartisan bill, sponsored by Democratic state senator Liz Krueger and Democratic assistant speaker Felix W. Ortiz, would require New York State Comptroller Tom DiNapoli to divest New York State Common Retirement Fund from all fossil fuels by 2020.

National Australia Bank has arranged Australia’s first asset backed green bond issued by capital markets issuer FlexiGroup. It marks the country’s first Australian-dollar dominated, asset backed green bond, and the world’s first Climate Bond certified ABS (asset-backed security) transaction. The bond is seeking to raise $260m, and will fund solar PV systems.

Social

Australia’s New South Wales (NSW) reportedly plans to launch social impact bonds to improve preschool attendance and help children under-five in care find a permanent home through adoption. NSW Treasurer Gladys Berejiklian has made a call for proposals to develop the social impact bonds. An A$7m social impact bond issued by NSW in 2013 to help families in crisis delivered an 8.9% return to investors last year.

Bridges Ventures, the UK social investor, has announced the sale of Babington, an apprenticeship and traineeship provider whose revenues have grown to more than £15m under its ownership. Bridges originally invested in Babington in 2009 through the Bridges Sustainable Growth Fund II in an attempt to address the skills gap in the UK. The sale was to private equity firm RJD Partners for £22m.h6. Governance

Candriam Investors Group, the pan-European asset manager with €94bn under management and owned by New York Life Investment Management (NYLIM), has published its 2015 Engagement Report and Proxy Voting Report. It says that Candriam – the former Dexia Asset Management – entered into a proactive dialogue program with 64 companies on environmental, social and governance (ESG) issues. It doubled the number of meetings it attended to 258 (up from 123 in 2014) and voted on 4,072 resolutions (up from 2,224 in 2014). For the first time, proxy voting was also extended to Emerging Market companies (108 meetings).

Canada’s Shareholder Association for Research & Education (SHARE) is hosting an educational webinar on April 22 to present an update on the human rights situation in Western Sahara and the shareholder proposal at Potash Corporation being presented at the firm’s upcoming Annual General Meeting. The shareholder proposal, filed by OceanRock Investments and the Mercy Sisters of Newfoundland, asks the company to conduct and publish a human rights assessment of its sourcing of phosphate from the non-self-governing territory of Western Sahara.

The Houston Municipal Employees Pension System has reportedly sued Internet banking company BofI Holding for securities fraud. Reuters reported that the suit, filed in U.S. District Court Southern District of California, alleges that in one instance, the Nasdaq-listed bank refinanced a loan to a borrower that participated in a gambling ring operated by a Salvadoran gang. The news agency said both BofI and the fund were not immediately available for comment.

Deminor, the Belgium-based shareholder advisory firm, has launched another attack on wind turbine maker Vestas, according to reports. Wind Power Monthly said Deminor is claiming the Denmark-based firm engaged in improper practices regarding a series of deals in the late 2000s. The report added it was the second time Deminor has challenged the company; three years ago, it forced a vote on the appointment of an independent scrutineer to vet the company. A Vestas spokesperson was quoted saying that Deminor’s questions were “taken out of context”. Link

US pension fund adviser CtW Investment Group’s executive director Dieter Waizenegger has encouraged investors via a letter to withhold votes for board members Patrick Flynn and Darlene Frideman at Chipotle Mexican Grill’s annual shareholder meeting on May 2011. For Waizenegger, Chipotle’s board needs more independent oversight and more diversity in race and gender, especially after last year food-borne illness outbreaks that erased $6 billion in market value.

A new ISO [International Standards Organisation] standard designed to help organizations fight bribery has received an overwhelming 91% vote of confidence from ISO members. The ISO 37001, Anti-Bribery Management Systems, will help organizations implement measures to prevent and address bribery while instilling more transparency. This standard will additionally bring reassurance to investors.