RI ESG Briefing, April 27: AES, Rana Plaza, Securities and Exchange Commission, Trillium, Global Compact

The round-up of the latest ESG developments

Environmental

A coalition of global investors sent a “clear message” to fossil fuel companies: the time to adapt for the energy transition is now, according to not-for-profit group Ceres regarding the annual meeting of utility AES. It said shareholders had their first chance to vote on a resolution asking a U.S. based company to stress test its investments against the low carbon future that the Paris agreement will help bring about. The resolution received support from 42% of investors, the highest vote ever for a 2 degree stress testing resolution in the U.S. “Investors recognize that the Paris Agreement marked a turning point,” said Pat Zerega of Mercy Investment Services, the filer of the resolution.

De Nederlandsche Bank (DNB), the Dutch central bank and financial regulator, has reportedly warned that domestic pension funds would suffer if the country shifted too quickly towards a carbon-neutral economy. IPE reported that it estimates that local funds have invested nearly 5.5% of overall assets in coal, oil and gas companies. It quoted Finance Minister Jeroen Dijsselbloem as emphasising the importance of a gradual carbon-neutral transition.

Danish pension investor PKA has made its second infrastructure investment with private equity firm I Squared Capital, committing DKK350m (€47m) for a portfolio of gas-fired power plants and onshore wind parks in Ireland. In a statement, PKA said the energy assets, based both in Northern Ireland and the Irish Republic, supplied enough power for 600,000 households. PKA’s first investment with I Squared Capital was made last year, when it allocated DKK330m for the construction of a US gas-fired plant. PKA oversees DKK235bn for three Danish pensions schemes. Link

Social

A group of global investors that has advocated for commitments from apparel brands and retailers sourcing from Bangladesh to address workplace health and safety failures that led to 1,100 deaths at the Rana Plaza factory in 2013, have voiced concern over delays in the implementation of remediation plans. The investor group, the Bangladesh Investor Initiative, represents 139 institutional investors from North America and Europe with collective assets valued at over $3trn. The group is concerned over the pace of progress being made to fix the issues identified by inspections conducted by both the Accord on Fire and Building Safety and the Alliance for Worker Safety.

Stanford University, which has a $22.2bn endowment, has rejected calls from a student group to divest from the fossil fuel sector; its Board of Trustees said it was following a recommendation from an advisory panel which said the university should remain invested in fossil fuels as the “social benefit” caused by the sector outweighed the “social injury.”

The UK has reportedly fallen from sixth to eighth in a ranking of female board representation in 12 European countries according to new research cited by the Financial Times. It quoted a report from European Women on Boards as saying the country had below-average female representation compared with the rest of Europe, as only 23% of directors at its 187 largest quoted firms companies were women. Norway was ranked highest with 39% of board seats held by women, while Switzerland was last with 16%.h6. Governance

The Securities and Exchange Commission (SEC) is considering whether to require listed US companies to provide specific environmental and social policy disclosure in their reporting. The move is part of a 341-page review of current US corporate disclosure rules that the SEC published on April 13. The regulator is now seeking public comments to the proposal. According to corporate governance experts at Davis Polk, the SEC is aware that “many US companies believe that sustainability or policy-driven disclosure requirements have the goal of altering corporate behaviour rather than providing useful disclosure.”

Trillium Asset Management has withdrawn a shareholder proposal at Panera after the US bread and sandwich chain agreed to review its employee pay and benefits. The proposal, co-filed by Calvert Investments and Dominican Sisters of Houston, asked Panera to address the national debate about minimum wage reform. Trillium said Panera had agreed to let NGOs and academics advise it on its pay and benefit policies for employees. It would publish any policy changes in 2017.

The Canada Pension Plan Investment Board (CPPIB) and the Ontario Teachers’ Pension Plan (OTTP) will support a shareholder proposal at plane and train maker Bombardier Inc. calling for more transparency at the firm, Reuters reports. The proposal would have Bombardier disclose the voting results for both its share classes – a move opposed by the company. Reuters also said CPPIB and OTPP had concerns about the Bombardier’s executive pay plans for 2015, although CPPIB has pledged to support them at the company’s AGM in Quebec on Friday (April 29).

The Governance & Accountability Institute, the US for-profit company, has teamed up with data giant Bloomberg to rank companies listed on the S&P 500 index in terms of ESG disclosure. The rankings were on a scale of 0 to 100, with 0 being the worst and 100 the best. S&P 500 companies that reported on the ‘E’ got a score of 23 compared with just 5 for non-reporters. Link

The United Nations Global Compact, the corporate sustainability initiative, has called for companies to set an internal price on carbon at a minimum of $100 per metric ton over time. “Investors are also calling for a price on carbon,” said Executive Director Lise Kingo. “The UN-backed Principles for Responsible Investment, a substantial group of investors holding $59 trillion in assets under management, have pledged to invest based on sustainability criteria, consistent with producing shareholder return. A subset of these investors has specifically called on companies to apply an economically meaningful price on carbon, including some investors decarbonizing their portfolios.”

US proxy firm Glass Lewis is reportedly recommending that Credit Suisse’s shareholders reject the pay for the bank’s management and board at an annual general meeting on April 29. Citing an analysis from Glass Lewis, the Neue Zürcher Zeitung (NZZ) said the analyst was unhappy with the transparency of the executive pay report for 2015. Credit Suisse proposes giving its management a CHF34.6m (€31.5m) bonus despite a loss of almost CHF3bn for last year. Swiss proxy firm Ethos has called the bonus “completely unacceptable” and is also urging shareholders to reject the compensation report.

About a third of shareholder votes at Citigroup’s AGM on April 26 went against the bank’s pay plan for top executives, according to the Wall Street Journal. It said around 64% of shareholders voted in favor of the bank’s pay package – down from last year’s 84% support. A proposal asking the bank to consider breaking itself apart got 3.5% support.