RI ESG Briefing, April 25: GEPF in South Africa to launch €419m renewable energy fund

Environmental

South Africa’s ZAR1.2 trillion (€101bn) Government Employees Pension Fund (GEPF), the largest in Africa, will officially launch two new investment funds on 23 May. The funds – a ZAR5bn (€419m) renewable energy fund and a Priorities Sectors Fund will be launched jointly by the GEPF and investment management giant, the Public Investment Corporation. The launch of these funds links to the GEPF’s commitment of 5% of its assets – approximately R50bn (€4.2bn) – to pursue crucial areas in its developmental policy.

Investors will tomorrow (April 26) call on AT&T, the telecoms company, to address health and environmental hazards in communities where lead batteries used in its data centres and cell phone towers are manufactured and recycled. A vote will take place at AT&T’s annual general meeting. The investors, including Boston Common Asset Management, Dignity Health, and First Affirmative Financial Network, have filed similar shareholder proposals at Amazon, Google, IBM, and Verizon since November 2012.

South Africa’s Metal Industries Benefit Funds Administrators (Mibfa) – representing pension funds worth a combined ZAR90bn (€7.5bn) in assets – has announced a ZAR1bn (€84m) investment in the renewable energy sector through Mergeance Investment Managers’ Renewable Energy Debt Fund. This is in line with Mibfa’s responsible investment objectives and Regulation 28 of South Africa’s Pensions Fund Act encouraging sustainable investment. Asset manager Mergeance, which is a 100% black-owned investment outfit, is a signatory to both the UN’s Principles of Responsible Investment (UN PRI) and the Code for Responsible Investing in South Africa (CRISA).

Bank of America has announced that it has exceeded its original 10-year, $20bn green business initiative – more than four years ahead of schedule. It says it has delivered more than $21.6bn in lending, equipment and carbon finance, capital markets and advisory activities to clients around the world. Announcement

The Zurich-headquartered engineering giant ABB has agreed to buy American Power-One, a global leader in renewable energy and power solutions, in a deal worth just over US$1bn. The acquisition will see ABB, the world’s largest supplier of industrial motors and power grids, pay Power-One stockholders US$6.35 per share in cash, 57% above its closing price on Friday and amounting to just over US$1bn. This transaction will position ABB as a leading global supplier of solar inverters to a market forecast by the International Energy Agency to grow by more than 10% annually until 2021.

The world’s geothermal energy capacity is set to surge by more than double by 2030 thanks to developing economies, such as Indonesia, Chile and Kenya taking advantage of natural resources. Currently global capacity is 11.4 gigawatts in 25 markets while 2030 could see estimates of 28.3 gigawatts in 62 markets, said a New Energy Finance analyst at the US and International Geothermal Energy Finance Forum in New York. Geothermal energy is increasingly being regarded as an economic tool and economic driver – not just a niche market, said the analyst. Link

Social

Investors in US-based pharmaceutical and nutrition giant Abbot Laboratories will vote on a resolution on Friday (April 26) asking the company to scrap genetically modified organisms (GMOs) such as soy and corn in its nutritional products until long-term testing proves it is safe. Effected products include popular baby formula Similac. The move – opposed by Abbot – was initiated by NGO As You Sow, which promotes CSR through shareholder advocacy.

Mining giant Rio Tinto is set to improve its environmental performance at its Grasberg mine based in Indonesian Papua in breakthrough dialogue with GES and investor clients, including Folksam, KLP, Ilmarinen and First, Second, Third and Fourth Swedish National Pension Funds. Rio Tinto, which is a significant joint venture partner in the Freeport McMoRan operated gold and copper mine, has established a stronger waste management standard and some GES recommendations have been adopted in Freeport’s annual environmental report. Grasberg has been plagued by human rights and environmental controversies, and it has been one of only a few mines worldwide which disposes of its untreated mine waste in a natural river system.The most exposed company to ESG risks in China for 2012 was Foxconn for the second year in a row, according to SynTao, the Chinese sustainability research company. In a new report, called: “Revealing China’s ESG Issues”, which tracks local news sources, Syntao said Chinese manufacturing companies represent the country’s highest reported environmental, social and governance (ESG) risks for investors. Link

ESG research firm Sustainalytics has formed an alliance with German consultant SD-M GmbH in order to source from SD-M streamlined sustainability criteria for stocks and bonds. SD-M brings the copyrighted SD-KPIs from the publication “SD-KPI Standard 2010-2014 developed on behalf of the German Ministry of the Environment into the cooperation, and modelled the SD-KPIs using the existing indicators, research and 42 peer groups of Sustainalytics. The outcome is a new common database/evaluation
for the three most relevant / material SD-KPIs, which is distributed to existing and new clients of Sustainalytics/SD-M. Citing a survey he conducted, SD-M founder Axel Hesse said big European pension believed that the focus on just three KPIs gave better potential for outperformance.

Governance

PGGM and RPMI Railpen have published an article on the Harvard Law School Forum on Corporate Governance and Financial Regulation calling on the independent directors of US companies to develop shareholder engagement strategies. The link to the article is here

Swiss proxy advisor Ethos has recommended that shareholders in banking giants Credit Suisse and UBS reject the proposed pay for their executives at the banks’ upcoming annual meetings on April 26 and May 2, respectively. On the former, Ethos said that while it welcomed the bank’s decision to limit variable compensation for its executives, the figure still too high. Ethos also said it couldn’t back the level of executive pay at UBS considering bank’s CHF2.5bn (€2bn) loss for 2012 and its involvement in the Libor scandal. UBS proposes to pay CEO Sergio Ermotti CHF9m for 2012.

Global gold producer, Barrick Gold Corporation, has come under fire from eight of its institutional investors stewarding a collective US$916bn in assets following its decision to award an US$11.9m bonus on top of a US$17m pay packet to Co-Chairman John Thornton who started in June 2012. The investment group, which represents seven of Canada’s largest institutional investors, has labelled the signing bonus as “unprecedented” in Canada and has highlighted its concerns in a letter to the Board’s Chair. According to the group, the compensation is contrary and disproportionate to the pay-for-performance governance principle and sets “a troubling precedent in Canadian capital markets”.
There was a 17% vote against the directors’ remuneration report at African Barrick Gold on April 19, according to this company filing.

Swiss biotech firm Actelion has become the second listed Swiss firm this month to face a shareholder revolt on executive pay. During its annual meeting on Thursday, more than 60% of Actelion’s shareholders rejected the proposed executive compensation for 2012, which included $5.6m (€4.3m) for chief executive Jean-Paul Clozel. Among the shareholders voting down the package were Ethos, which represents Swiss pension schemes, Actares, which represents retail investors and Institutional Shareholder Services (ISS) from the US. The shareholder vote was consultative. Earlier, shareholders in Swiss bank Julius Bär rejected the 2012 compensation package for executives – the first time ever in the country.

Unigestion, the €10.5 billion Geneva-based boutique asset manager, has signed up to the United Nations Principles for Responsible Investment (UN PRI). According to Unigestion CEO, Fiona Frick, thorough analysis of ESG factors helps identify potential risks early on, increasing the robustness of clients’ portfolios. “Unigestion takes its status as a responsible investor extremely seriously, and I’m delighted that we have become a signatory to this important set of principles,” said Frick.