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RI ESG Briefing, Aug. 16: Australia’s Christian Super backs impact investor TriLinc

The round-up of the latest ESG developments.

Environmental

Blackrock has completed its first investment in the Australian renewables sector with the acquisition of a majority interest in a portfolio of two large scale solar projects in Queensland. The project financing was provided by Commonwealth Bank of Australia, Natixis, and Clean Energy Finance Corporation. Both projects, the 150MW Daydream project and the 50MW Hayman, are scheduled for completion in 2018.

German development bank KfW is one of a group of multilateral and commercial banks to provide $410m in financing over 18 years to two Chilean wind farms, Sarco and Aurora. KfW is joined by the Inter-American Development Bank and its member affiliate Inter-American Investment Corporation (IADBIIC), Mitsubishi UFJ Financial Group, Sumitomo Mitsui Banking Corporation, Korean Development Bank, and Caixa – with Banco Santander as VAT lender. The wind farms, with a combined capacity of 299MW, are owned by Aela Energía – a joint venture between private equity firm Actis (60%) and Mainstream Renewable Power (40%).

Divest-Invest Philanthropy has called upon New York’s City and State Comptrollers Scott Stringer and Tom DiNapoli to divest their pension funds from fossil fuels. The US campaign group claims that despite more than 600 institutions and individuals representing over $3.4tn in assets committing to some level of divestment, the New York funds have yet to act.

Social

Christian Super, the A$1.3bn Australian superannuation fund, has selected US impact investment specialist TriLinc Global as part of it new impact investing strategy. Through the TriLinc Global Impact Fund (TGIF) the Australian super fund will invest in small and medium enterprises in developing economies where access to affordable capital is significantly limited. To date, the TGIF – which seeks to utilise capital markets to solve some of the world’s pressing socioeconomic and environmental challenges – has invested over $692m in private debt globally.

Half (47%) of UK workers believe that ESG is no barrier to profitability, according to research by Better Society. The report also found that there is relative agreement (48% and 52% respectively) between men and women on the importance of gender equality. Only 12% of British workers believe profits should be sacrificed if necessary to incorporate good ESG factors into a business.

US private equity giant Kohlberg Kravis Roberts (KKR) has released its seventh annual ESG and citizenship report detailing its commitment to responsible investment. The firm cites its recently introduced ‘Eco-Innovation Award’ for the most innovatively sustainable companies in its portfolios as top amongst achievements in 2016.h6. Governance

The Federal Reserve’s proposed supervisory guidance on corporate governance at banks has been called a “breath of fresh air”. Law firm Davis Polk said it should encourage banking boards to focus on their core responsibilities and avoid blurring the distinctions between executive and non-executive duties. It was also a signal, the firm said, that supervisors intended to move away from a “check-the-box” approach to corporate governance.

UK fund management trade body the Investment Association has released new analysis of the 2017 AGM season that it says shows investors are effectively holding FTSE100 and FTSE250 companies and their individual directors to account on executive remuneration. “Executive pay amongst the UK’s largest companies is starting to decline to a level more in line with shareholder expectations,” said IA CEO Chris Cummings. “There is still some way to go, but a strong signal has been sent to boardrooms around the country that investors won’t tolerate rewards that are out of line with company performance and have concerns about executives’ spiralling pay.”

A campaign has been launched calling on the California Public Employees’ Retirement System and the New York State Common Retirement Fund to reconsider their investments in the CIM Fund III, which owns the Trump SoHo Hotel and Condominium in New York City and pays a Trump company to run it, according to reports. The campaign argues the money used for the investment come from mandatory deductions of the paychecks of public employees and they are being “forced to indirectly subsidise the President beyond the Constitution’s mandate of a fixed salary”. Separately, it has been reported that President Trump’s border wall will potentially environmentally damage a national wildlife refuge. Some organisations have pledge to divest companies involved in building the wall. California Democrats have proposed a bill that would require the California Public Employees Retirement System and the California State Teachers Retirement System to identify and liquidate any holdings in companies working on President Trump’s Mexican wall within a year.

Norway’s Ministry of Finance has reportedly commissioned two consultancy reports – to be compiled by McKinsey and Matthew Kiernan’s firm Inflection Point Capital Management – on the management costs and responsible management activities of some of the country’s large funds as part of its wider review into how its NOK7.7trn (€823bn) sovereign wealth fund invests.

Standard Life Aberdeen, the newly-merged UK-listed investment group, has pledged to drive up boardroom standards and to hold boards and senior management to account, reports the FT. Keith Skeoch Standard Life’s former Chief Executive, is quoted saying asset managers “have a big responsibility to hold boards and senior management to account for delivering sustainable business success”. The recent merger between Standard Life and Aberdeen created one of Europe’s largest listed asset management groups with a market value of more than £11bn and assets under administration of £670bn.