RI ESG Briefing, April 5: Norway, PepsiCo, CDP, UN Guiding Principles, CalPERS

The round-up of the latest ESG developments

Environmental

The Norwegian government has said today (April 5) that it won’t permit the giant Pension Fund Global to invest in unlisted renewable energy infrastructure in response to enquiries from its Parliament. The Ministry of Finance says it will cap investments in unlisted real estate at 7% and that it is not prepared to permit it to invest in unlisted equity. Minister of Finance Siv Jensen said: “The GPFG has a financial target, and is not an instrument for promoting state investment in developing countries or renewable energy. There is no financial rationale for permitting infrastructure investments only in these sub-markets. There are already many public schemes to promote investment in developing countries and renewable energy. Moreover, the Storting [Parliament] has asked the government to prepare the establishment of a limited company mandated to invest in companies that develop and use green technologies, in partnership with the private sector. The Government will return to this question in its revised budget for 2016.”

Australia’s Financial Services Council (FSC) has reportedly called on the government to introduce mandatory carbon risk disclosure for all ASX-listed companies. It is in one of the 26 submissions received by the Carbon Risk Disclosure senate inquiry, provoked by the Green party. The Business Council of Australia rejected mandatory reporting requirements.

A new CDP report analyzing 15 of the world’s largest automakers with combined market capitalization of US$846bn, has found that tightening regulations on emissions are having a significant business impact in the wake of the Volkswagen scandal. The report says GM, Ford, FCA, Hyundai, Honda, BMW and Daimler potentially face up to $4.8bn in penalties for non-compliance on their fleet emissions.

Social

Coca-Cola, Nike, Monsanto and Louis Vuitton are among the first companies on the new UN Guiding Principles Reporting Database. It collates what companies say about how they are implementing the UN Guiding Principles on Business and Human Rights (the ‘Ruggie Principles’), based on their public disclosure. The database has been developed by Shift, the consulting firm chaired by Harvard’s John Ruggie and accountancy firm Mazars with support from asset manager Hermes. Link

CalPERS, the $291.2bn (€255bn) US pension giant, is considering re-investing in the tobacco firms after a report from its investment consultant showed the scheme missed out on $3bn in gains by excluding the sector, Pensions & Investments (P&I) reports. CalPERS excluded tobacco 15 years ago and Wilshire Associates says the move sacrificed a total of $3.037bn between 2001-2014. As a result, P&I says CalPERS’ investment committee will on April 18 discuss possible re-investment in tobacco, firearms and companies that do business in Iran or the Sudan.h6. Governance

The Sustainability Group of Loring, Wolcott & Coolidge and Trillium Asset Management have written to fellow PepsiCo shareholders asking them to vote for a proposal they have filed with Green Century Funds around pesticides. It calls for a board report on the food and beverage giant’s “options to minimize impacts on pollinators of neonics in its supply chain”. PepsiCo, headed by Indra Nooyi, says it believes this proposal is unnecessary in light of its current policies and programs promoting sustainable agriculture, including the responsible use of agrochemicals. It says a similar proposal in 2015 received support from less than 8% of votes cast. The company, which holds its AGM on May 4, is also facing a shareholder proposal on renewable energy targets from Zevin Asset Management.

Safra Group, the Sao Paulo-based owner of Swiss sustainable bank Sarasin, has firmly denied corruption charges stemming from its business in Brazil. The denial comes after prosecutors in Brasília, the nation’s capital, filed corruption charges against Joseph Safra, founder and CEO of Safra Group, as well as five other group employees. Safra Group called the charges “completely baseless.”

US truckmaker Navistar has paid $7.5m to settle charges from the Securities and Exchange Commission (SEC) that it misled investors about whether a diesel truck engine adhered to US clean air standards, Reuters reports. In 2010, Navistar failed to get approval from the Environmental Protection Agency (EPA) for the engine due to emissions of nitrous oxide (NOx) that were above legal levels. But instead of informing investors about the issue, the SEC said former Navistar CEO Daniel Ustian misled them, insisting that EPA approval was “right around the corner.” The SEC has filed a separate lawsuit against Ustian. Ustian, who denies all wrongdoing, left Navistar in July 2012. Link

Two members of the US Senate have proposed legislation aimed at strengthening disclosure requirements for hedge funds that acquire significant holdings in US companies. Under the Brokaw Act from Senators Tammy Baldwin and Jeff Merkley, investors acquiring a stake of more than 5% must disclose the shareholding within two days, against 10 now. Baldwin and Merkley say the change is necessary to discourage hedge funds from colluding with other investors to take an even bigger stake in the company. Such collusion, the Senators say, could lead to the hedge funds undermining the company in order to bet against it.

Caroline Flint, a senior UK MP and a member of the influential Public Accounts Committee, has tabled a bill around tax transparency of multinationals. The UK government is legislating to require multinationals to report their tax, revenues, profits and assets to the tax authorities, as part of an international effort by G20 and OECD countries to stop profit shifting. Flint is seeking to go a step further and ensure this information is published. Her Ten Minute Rule Bill has backing from aid organisations including Oxfam, ActionAid, CAFOD and Christian Aid.