RI ESG Briefing, April 2: Japan’s giant government fund to consider ESG factors in equities – report

The round-up of the latest ESG news


Syracuse University has said it would divest its $1.18bn (€1bn) endowment from direct investments in fossil fuel companies – believed to be the largest university to do so. The private research university in New York plans extra investments in clean energy technologies such as solar, biofuels and recycling. “Syracuse has a long record of supporting responsible environmental stewardship and good corporate citizenship, and we want to continue that record,” said Chancellor Kent Syverud. “Formalizing our commitment to not invest directly in fossil fuels is one more way we do that.” Link

The extension of the fossil fuel divestment campaign to include banks and project finance has created “a number of challenges and dilemmas” for Australian banks – which could result in less project finance being available to support these large investments. That’s the opinion of the Australian arm of consulting firm EY (Ernst & Young) in its new ‘Let’s talk: sustainability’ newsletter. Banks have historically relied mainly on regulatory approvals, norms such as the Equator Principles, and their own ESG risk and credit due diligence processes to assess such projects, it notes. But it adds: “However, this new operating environment is more complex and nuanced.”

The World Bank’s IFC has teamed up with the Shell Foundation to invest in a new investment fund dedicated to providing financing to manufacturers and distributors of modern off-grid energy solutions, primarily in Africa and Asia. Launched by Switzerland-based responsAbility Investments, the fund will be complemented by a technical assistance facility supported by the Swiss State Secretariat for Economic Affairs (SECO). The fund has capital commitments of nearly $30m and plans to raise additional capital “in the medium term”.

The Diocese of Birmingham in central England last month passed a motion calling on the Church of England to disinvest from tar sands, coal, oil and gas companies, and to seek alternative investment in renewable energy and low-carbon technology. It follows a similar motion passed by the Diocese of Oxford in November 2014 – set for debate at General Synod in July.


Oxfam International and other NGOs have claimed that the World Bank’s International Finance Corporation (IFC) arm’s now $36bn investment portfolio in financial intermediaries means it has “little accountability for billions of dollars’ worth of investments into banks, hedge funds and other financial intermediaries, resulting in projects that are causing human rights abuses around the world”. “The Suffering of Others” report says that the IFC is failing to perform due diligence and to identify or effectively manage risk in many of its investments in third-party lenders. Reuters quoted
the IFC as saying it takes Oxfam’s findings “very seriously” and was already working to address the cases raised – many of which happened before it revised social and environmental standards in 2012.h6. Governance

Japan’s JPY137trn (€1trn) Government Pension Investment Fund (GPIF) has said that it may consider environmental, social and governance (ESG) issues alongside investment returns when making equity investments according to reports quoting the fund, the world’s largest. In a mid-term plan announced today (April 2), Reuters said the GPIF would consider ESG factors, without being more specific. It quoted a spokesman as saying the GPIF’s Investment Committee will discuss the issue. It follows the GPIF’s decision last October to award contracts to three firms to undertake research into ESG and stewardship. The awards went to QUICK, MSCI ESG Research and Ernst & Young and came amid the wider ‘Abenomics’ reforms of Prime Minister Shinzo Abe. Meanwhile, the fund has also named three transition managers to assist with transferring assets to new investments. They included Nomura Asset Management, BlackRock and Russell Investments.

GRESB, the investor-backed Global Real Estate Sustainability Benchmark, has opened its 2015 Survey. The GRESB data is used by almost 50 institutional investors, representing $6trn in assets under management. GRESB is “an important part of our investment process and helps us compare and contrast the companies we own and that we plan to own” said Patrick Kanters, Managing Director Global Real Estate & Infrastructure of APG Asset Management. The 2015 GRESB Survey is open from April 1 until July 1, 2015, with results due to be released on September 2.

The Guardians of New Zealand Superannuation, the manager of the NZ$29bn (€20bn) New Zealand Superannuation Fund, has suspended the fund’s mandate with Milford Asset Management until the completion of a Financial Markets Authority investigation into what reports say is alleged market manipulation. In the interim, the funds will be managed internally. Milford was appointed to a NZ$281m New Zealand active equity mandate in 2009.

California’s State Treasurer John Chiang has reportedly written to the California State Teachers’ Retirement System demanding that its asset manager Cerberus Capital Management exit assault weapon maker Freedom Group, which made the gun used in the 2012 Sandy Hook massacre. Reuters said he has summoned CalSTRS to a meeting on Friday “to explain why the Freedom Group remains in its portfolio”. CalSTRS issued a statement saying it “shares the frustration and concern” of those who want firearms divestment – but said “contractual obligations and legal constraints” severely limit its options. But it said: “We want to make it clear that all potential options are being fully considered and have been for some time.”

The Advisory Committee on Socially Responsible Investing of Columbia University has overwhelmingly resolved to recommend to the Trustees that the Ivy League college should divest its direct holdings in private prison operators. It follows a campaign by student group Columbia Prison Divest. The Committee said it was “particularly concerned” that the business model creates incentives for increasing the level of incarceration in the US. And, it added, “shareholder engagement is not an effective alternative to divestment”.