RI ESG Briefing, August 14: Investors express “grave concerns” over international accounting standards

The round-up of environmental, social and governance newas


The World Bank’s IFC arm has issued a green bond denominated in Peruvian soles, raising PEN42m (or approximately $15m/€11.2m) for climate-friendly investments in emerging markets. It’s the first green bond issued by a multilateral institution in the Peruvian market and the sole investor in the 20-year bond is RIMAC Seguros, Peru’s leading insurance company, the first insurance company in Latin America to invest in green bonds. The lead manager for the transaction was JPMorgan. Announcement

Sustainalytics, the environmental, social and governance (ESG) research house, has developed a range of services geared towards helping bond issuers bring their sustainable bonds to market – in response to what it says is “the rapidly growing and evolving, green bond market”. In consultation with the issuers, Sustainalytics helps them develop a framework that aligns with the Green Bond Principles and provides assurance that the bond proceeds are allocated, managed and reported in a transparent manner. The firm has already worked with Lloyds Bank to help it and its clients develop the frameworks for their ESG bond and green loans. Email.

Citigroup has released a report called Energy 2020: The Revolution Will Not Be Televised as Disruptors Multiply which argues for a bright future for solar energy worldwide, according to reports. “We believe global solar growth will be driven by economics, fuel diversity and emerging financing vehicles as well as some country specific legislative overlay,” the investment bank’s analysts were quoted saying by Renew Economy. Link


New research by Russell Investments, the asset management firm with $279.7bn (€209bn) under management, has found that institutional active managers tend to have a systematic tilt toward certain ESG factors. It has found “an implicit endorsement of the consistency between ESG factors and value creation.” The firm says the finding is significant because it is not based on the subset of managers with an explicit ESG agenda, but on the broad universe of active managers, a group whose only concern is to create the best possible performance record. “So there are many unanswered questions that arise from this work,” writes Bob Collie, Chief Research Strategist for Russell’s Americas Institutional business. “But we do now have hard evidence that ESG factors matter outside the context of traditional ESG mandates, and that is a notable finding.” Link

Investment bank Morgan Stanley has issued a report which aims to identify global stocks that offer investors exposure to at least one of seven sustainability themes and an attractive risk-reward on a 12-month time horizon. It outlines seven long-term sustainability themes. They are: 1) Climate Change; 2) Water Scarcity; 3) Waste Management; 4) Food Availability; 5) Health & Wellness; 6) Improving Lives; and 
7) Ageing Population. It said: “This report specifically aims to identify how these themes may enable companies to drive growth and returns.”h6. Governance

A group of long-term UK investors and the UK Shareholders Association have expressed their “grave concerns” over what they say are continuing fault-lines embedded in the international accounting standards used by listed companies in the UK. The group, which has been urging the government to clarify the consistency between IFRS and EU Company Law since 2012, believes that a recently released paper by the Financial Reporting Council watchdog fails to respond to the problems they identified – and which were validated by a senior lawyer in a legal opinion in 2013. Signatories to the letter include representatives from Sarasin & Partners, the London Pensions Fund Authority, the Local Authority Pension Fund Forum, USS Investment Management, RPMI Railpen, the Environment Agency Pension Fund, Threadneedle Investments, Royal London Asset Management, GO Investment Partners and the UK Shareholders’ Association.

The Investment Management Association, the UK trade body whose members manage more than £5trn of assets, is to launch a consultation on portfolio turnover rates and costs disclosure, according to a report in Professional Pensions citing IMA Chief Executive Daniel Godfrey. The report said the initiative, which could start as early as next month, would look at developing an industry standard for calculating turnover rates.

Corporate governance in Taiwan will be improved as the result of a new agreement between Broadridge Financial Solutions and the Taiwanese central depository, Taiwan Depository & Clearing Corporation (TDCC), the pair say. Under the deal, proxy voting ‘plumbing’ firm Broadridge will link with TDCC’s new electronic voting system for Taiwanese shareholder meetings, StockVote. The move would “significantly enhance” straight-through processing (STP) and reduce current manual processes. TDCC President Sherman Lin said: “We have listened to the concerns of investors about shareholder voting in Taiwan, and have worked with our regulators to update local regulations to enable improvements to the process.”

The Fonds de solidarité FTQ, the C$10.1bn (€6.9bn) labour-sponsored Quebec development capital body, says it has decided to emulate the disclosures made by public companies – specifically financial institutions – and disclose the compensation received by its five most compensated officers. “I wanted to see the Fonds take another step in its adoption of best governance and disclosure practices by showing total transparency regarding the compensation of its five highest paid officers,” said Fonds Chairman Robert Parizeau.

All sovereign wealth funds (SWFs) “can and should” develop a stated policy on corporate governance issues, even if they will generally support management, according to Paul Rose, Director, Law, Finance & Governance at Ohio State. His paper is called Sovereign Shareholder Activism: How SWFs can engage in corporate governance. “Because SWFs are often large but passive blockholders, they can exert significant influence simply through the exercise of their voting rights,” Rose says.