RI ESG Briefing, April 27: Engagement pioneer GES celebrates its 25th anniversary

Environmental

France-based AXA Investment Managers has announced that it will divest its holdings in companies that derive more than 50% of their revenues from coal-related activities – effective 30 June 2017. As a result AXA, which manages approx. €717bn in assets, will divest €165m of fixed income portfolios and €12m of equities portfolios.

Dutch banking giant ING, as part of a syndicate of 16 banks, has agreed a €1bn loan with health technology company Philips in which the interest rate is ‘coupled’ to the company’s sustainability performance and rating. ESG ratings provider Sustainalytics will provide the benchmark and ratings for the deal.

Colin Butterfield, Head of Natural Resources at Harvard Management Company, manager of the US university’s £35.7bn endowment, has reportedly announced
that Harvard’s natural resources portfolio is ‘pausing’ its investments in ‘minerals and oil and gas’, and that it is not likely to invest in the fossil fuel industry in the future as a result of poor financial performance. In 2016 the value of Harvard’s natural resources assets fell by 10%, and the University’s endowment fell by almost $2bn.

US Montgomery County Council President Roger Berliner has reportedly proposed new legislation that will ‘encourage’ the Maryland based council’s $4bn pension fund to stop investing in fossil fuels – currently the fund holds $70m in fossil fuel company holdings. The proposed legislation, due to be introduced to the council on the 2 May 2017, is a watered-down version of a previous proposal calling for a complete divestment of the fund’s fossil fuel holdings.

US based RI specialist asset manager Calvert ($10bn AUM) in collaboration with World Wildlife Fund (WWF), Ceres, and CDP has released
a report showing that clean energy investments have saved Fortune 500 companies over $3.7bn a year and prevented the equivalent pollution of 45 coal-fired power stations. The report, ‘Power Forward 3.0: How the largest U.S. companies are capturing business value while addressing climate change’ analyses trends in renewable energy, energy efficiency savings, and greenhouse gas targets. The report also found that 48% of Fortune 500 companies have set a climate or clean energy goal – up 5% from 2014.

Social

Model for Impact is the title of JP Morgan Chase’s new corporate responsibility report. The 48-page document showcases the bank’s impact investment activities in Detroit, which it says “can be instructive for others”. “The model JPMorgan Chase put into practice in Detroit is making a real impact, but as we learn more about what’s most effective, we continue to refine
 it,” says Peter Scher, Head of Corporate Responsibility and Chairman of the Greater Washington Region at the bank.

Grupo Financiero Banorte has joined PRI, becoming the first financial institution in Mexico to commit to the principles. Chairman Carlos Hank González reportedly said: “We are not going to allocate a single peso in investment projects that can damage the environment or endanger the Mexican people’s social wealth.” Banorte features in the category of asset owners, according to the PRI database. Previously, two investment managers joined the PRI, Discovery Americas in November 2016 and Ainda, Energía & Infraestructura in January 2016. Banorte’s shares trade in the Mexican Stock Exchange and the Madrid Stock Exchange. The Monterrey-based bank is already part of sustainable indexes such as the FTSE4Good Emerging and the STOXX Global Climate Change Leaders.

The Global Impact Investing Network (GIIN), the US based non-profit impact investing association, has published a report ‘Scaling the Use of Guarantees in U.S. Community Investing’ exploring how impact investors are utilising guarantees as a credit-enhancement tool to stimulate increased private-sector investment in solutions to social and environmental issues.

More than 30 major institutional investors, representing over $2tn in assets under management, have signed a statement calling for the introduction of modern slavery legislation in Australia, IPE has reported. The statement, organised by the Principles for Responsible Investment (PRI), was sent as Australian lawmakers conduct an inquiry into the issue. Signatories to the statement, include: AustralianSuper, Hesta, Church of Sweden, UK’s Church Investors Group, and asset managers such as Aviva, Hermes, and PGGM, the provider for the €182bn Dutch healthcare pension scheme PFZW.h6. Governance

Congratulations to GES, the Sweden-based engagement specialist which is this week celebrating its 25-year anniversary, saying “we want to thank all our clients for 25 fantastic years together on the path to responsible investing and ESG integration”. GES was founded in 1992 by Magnus Furugård with Susanne Nyman in Stockholm under the previous name Caring Capitalism. GES said: “Today we have more than 60 employees based in five countries, servicing more than 100 clients worldwide, including the recent addition of our first ever Japanese client, with total assets under management in excess of €1.5 trillion.” “Engagement grew partly out of investor frustrations of having bi-annual exclusion lists,” says Furugård. “Exclusions didn’t work for them as it meant investors couldn’t keep to benchmarks but would have to continuously re-compose portfolios.” The company – now led by CEO Hanna Roberts – has also presented research from Oldfield Partners, which used GES data to analyse the impact of ESG violations on share prices. It concludes: “Governance violations are very damaging, far more so than Environmental or Social violations. Stocks that fall sharply (>-10%) in the first month should be avoided as they go on to underperform hugely.” Link

Fund manager Schroders was reportedly facing a shareholder revolt today (April 26) over pay. The Financial Times said proxy firms had advised clients that CEO Peter Harrison’s pay was “excessive”. It cited Glass Lewis and PIRC as recommending that investors reject the asset manager’s pay proposals, due to concerns about bonuses and severance payments. The FT quoted a company spokesperson as saying its pay policy was “clearly aligned to the performance of the group and the value delivered for our clients and shareholders”.

The Investor Responsibility Research Center Institute (IRRCi) and Sustainalytics have published a new report entitled How Investors Integrate ESG: A Typology of Approaches. The report examines how investors integrate ESG factors into their portfolios, finding that investors are leveraging a diverse set of integration strategies. Based on an analysis of the investment practices of 70 institutional investors with total assets under management of $19.9 trillion, the report presents what’s claimed to be the first-ever typology for classifying the approaches investors are taking to integrate ESG factors into their investment processes. IRRCi will also host webinars on May 8 and May 9 to discuss the findings.

CI Investments Inc., the Canadian based asset manager with $160bn under management, has announced that it has joined the RIA, the Canadian industry association promoting the integration of ESG into the selection and management of investments. CI Investments, a subsidiary of CI Financial Corp., recently became a member of the UN-supported Principles for Responsible Investment (PRI).

SRI firm Green Century Capital Management is seeking support for a shareholder proposal it has filed with Dr Pepper Snapple Group requesting that the US beverage firm improve its disclosure and transparency regarding the use of pesticides use in its supply chain. The proposal, which identifies pesticides as a potential threat to both public health and the environment, will be discussed at the company’s annual general meeting on May 18.

State Street Global Advisors, the Boston based investment arm of State Street Corporation, has released a report showing that 68% of the 475 global asset owners polled say that the integration of an ESG strategy has significantly improved returns. The survey also found that despite these improved returns overall ESG exposure remains low — on average only a third of adopters’ investments incorporate ESG criteria.