RI ESG Briefing, April 7: Massey Energy, London Stock Exchange, SunEdison, Carbon Tracker, UNEP

Environmental

The London Stock Exchange Group has become the first stock exchange partner of the Climate Bonds Initiative, the body that promotes green bonds. The exchange said it is a committed supporter of green finance and in July 2015 launched a full range of dedicated fixed income segments specifically designed for green bond issuance. Today there are 27 green bonds listed on London’s markets in six different currencies. Link

US solar ‘yieldco’ SunEdison has seen its legal troubles worsen due to a lawsuit from its own subsidiary, TerraForm Global. In a filing with the Securities and Exchange Commission (SEC), TerraForm accuses SunEdison of misappropriating $231m of the unit’s funds. Instead of, as promised, using the money for renewable energy projects in India, TerraForm says SunEdison used it for debt repayment. Last week, it emerged that SunEdison was under investigation by the SEC and the US Department of Justice for misleading investors about its finances.

The Carbon Tracker Initiative has launched a new report on the state of the US shale industry and the ramifications for investors. The study warns of the risk of putting cash into a “homogenous group of companies” in anticipation of higher prices, after heavy losses in value for equity and bond investors last year.

Global Trends in Renewable Energy Investment 2016, the UN Environment Programme’s annual report, says the annual global investment in new renewables capacity, at $266bn, was more than double the estimated $130bn invested in the coal and gas power stations in 2015. UNEP Executive Director Achim Steiner said, “Renewable are becoming every more central to our low-carbon lifestyles, and the record-setting investments in 2015 are further proof of this trend. Importantly, for the first time in 2015, renewables in investments were higher in developing countries than developed.”

Social

CalPERS should not take up the tobacco habit again – that’s the view of the Editorial Board of its hometown newspaper the Sacramento Bee. “California, an anti-smoking leader, should not allow pension money to be used to prop up cigarette makers,” the paper says. It says analysis documenting the price that the fund has paid for its 15 years of refusing to invest in tobacco shows the “sober reality of aligning institutional money with morality”. It goes on to say the fund’s board should crush the idea of reinvesting in tobacco “like a smoldering butt”.

The Desmond & Leah Tutu Foundation has reportedly said it wants the Anglican Church of Southern Africa to lead a lobby for fossil fuel divestment and investment in renewable energy. The foundation says this should be done through the creation of “a new breed of ethical investment vehicle devoid of fossil fuel‚ mining‚ tobacco and alcohol components”.h6. Governance

Don Blankenship, the former CEO of US coal firm Massey Energy has been sentenced to a year in prison over the Upper Big Branch mine explosion in 2010. CNN reported he was also ordered to pay a $250,000 fine having been found guilty late last year of conspiracy to willfully violate mine health and safety standards. The disaster, which claimed 29 lives, was one of the worst mine disasters in the US. The disaster led to a class action case with lead plaintiff being the Commonwealth of Massachusetts Pension Reserves Investment Trust (PRIT).

The Ethical Council of the Swedish AP Funds says it conducted dialogues with some 178 companies around the world, involving various aspects of sustainability during 2015, according to its new annual report. During the year, it recommended that the funds exclude two companies, Motorola Solutions and Larsen & Toubro, consequent to their contravention of conventions to which Sweden is a signatory. Over the nine years in which the Ethical Council has been active, it has recommended that the AP Funds exclude a total of 19 companies.

Union Investment, the Frankfurt-based asset manager with €261bn in assets, has voted against Manfred Bischoff’s re-election as Chairman of German auto giant Daimler AG. Speaking at Daimler’s annual general meeting (AGM), Union Proxy Head Ingo Speich said that while the asset manager was pleased with Bischoff’s service, it could not vote for him due to his age. Bischoff turns 74 this month and will be over the age limit of 75 that Union has set in its proxy voting guidelines. Bischoff was re-elected at yesterday’s (April 6) AGM with 93% of the shareholder vote.

Index and ESG firm MSCI has published new research on company pay gaps that finds companies that pay top executives far more than they pay their rank-and-file workers tend to be less profitable over the long term than those that have narrow gaps between worker and executive pay. The report suggests that a ‘tragedy of horizons’ is in effect in which companies respond to immediate performance, like maintaining dividends, share buybacks, and quarterly earnings.

Some fund managers in the UK are failing to inform clients they have been following a benchmark instead of actively managing their assets, according to the Financial Conduct Authority regulator. The FCA looked at 19 active managers and 23 funds. “Firms are generally managing funds as they say they will,” said Megan Butler, director of investment supervision at the watchdog. “However, the industry needs to consider how it communicates when funds are linked to financial benchmarks.”

The owner of three US Volkswagen dealerships has reportedly filed a lawsuit against the car giant over the diesel emissions scandal. Reuters reported that the lawsuit, filed in federal court in Illinois, is the first brought by a VW franchise dealer.