RI ESG Briefing, August 20: As You Sow launches Executive Compensation Initiative

Environmental

The UK government is to raise £48m (€60.1m) from the bond market as part of financing for a 87.4 GWh green energy project that will provide steam for the world famous Macallan whisky distillery in Scotland. The £74m Speyside green energy project will also power more than 20,000 homes. Infrastructure firm John Laing and the UK Green Investment Bank will invest £26m, alongside the debt to be raised from the bond market, guaranteed by the Treasury department, which will be issued by the project company and listed on the London Stock Exchange. Announcement

New Jersey Governor Chris Christie last month took steps to set up the state’s Energy Resilience Bank (ERB), the first of its kind in the nation to focus on energy resilience. Utilizing $200m through New Jersey’s second Community Development Block Grant-Disaster Recovery allocation, the ERB will support the development of distributed energy resources at critical facilities throughout the state. Announcement

Activists from campaign group Greenpeace have reportedly targeted the University of Sydney over its stake in Whitehaven Coal, the firm behind the controversial Maules Creek mine. The Australian cited them as saying the A$1m investment runs counter to its new ethical investment policy and commitment to indigenous Australia. The paper quoted a university spokesperson as saying its portfolio was “under constant review” to make sure its social, environmental and governance responsibilities were balanced with its responsibilities to students, staff and donors.

Singapore-based private equity outfit Armstrong Asset Management has agreed to fund a portfolio of small hydropower projects in Indonesia, according to reports. Its South East Asia Clean Energy Fund will invest $22.5m in the plants which are being built by an arm of PT Nusa Konstruksi Enjiniring.

Social

The Australian National University has agreed to take advice on ESG ratings and reports on companies within its portfolio from CAER, the ESG research house. The Canberra-based university operates a professionally staffed Investment Office (IO) which runs its assets. “ANU is a leading university in Australia, so it is great to see them taking a leadership role in terms of responsible investment – we hope to see more institutions follow their lead,” said CAER’s Chief Executive Duncan Paterson.

Nearly half of pension fund participants – and particularly women – would accept slightly lower returns as long as the investments are socially responsible, according to a study by TIAS/Tilburg University Professor Rachel Pownall and researcher Arian Borgers. They asked more than 1,000 Dutch households about their preferences in terms of investments by their pension funds. They found the Dutch are particularly averse to investing in arms companies and companies that systematically violate human rights. Companies in the alcohol, tobacco and gambling industries are considered less objectionable, even though they are regarded as equally harmful by investors. Companies that treat their employees and other people well, and put people’s welfare first, are ranked as the best. Whether these companies donate to charities was less important.h6. Governance

US shareholder advocacy group As You Sow has now launched its new ‘Executive Compensation Initiative’, saying the US “leads the world in excessive executive compensation, to the detriment of shareholders”. The program will encourage shareholders to use the ‘Power of the Proxy’ to control and reduce unjustified CEO pay at listed firms: “Our goal is to help shareholders, including mutual funds, pensions, foundation, endowments, and individuals to create proactive change in a broken system.” The initiative is headed up by Rosanna Landis Weaver, a former senior analyst on the executive compensation team at Institutional Shareholder Services (ISS) and former Governance Initiatives Coordinator at Change to Win Investment Group. It has already co-filed its first shareholder resolution on Executive Compensation with drug retailer Walgreens.

“Civil remedies” against pension funds for not engaging with companies have been suggested – by business group the Institute of Directors in the UK. “I am not a lawyer, but if there were civil remedies available against pension funds because they have been listless and apathetic in the way they engaged with companies in which they had large positions – that could be quite a constructive way to nudge shareholder activism,” IoD Director General Simon Walker said in an interview with the Guardian.

September 23 is shaping up to be a red-letter day. On the agenda is the start of the United Nations Climate Summit, hosted by Ban Ki-moon in New York – part of the broader Climate Week in the city. The same day also sees the start of the UN World Partnership Summit on Sustainable Development (which runs to September 26) in London. Meanwhile, in Calgary, Canada, look out for McKinsey presenting its joint initiative with Canada Pension Plan Investment Board (CPPIB) on ‘Focusing Capital on the Long Term’ at the ES&G Forum. And the International Corporate Governance Network (ICGN) is hosting a debate and reception in Montreal on the same day – ahead of PRI in Person which runs from September 24-26.

Phitrust, the French corporate governance activist manager, has adopted its shareholder engagement programme for the 2014-2015 season and says it will focus on two main governance themes. The first will challenge a reversal of the one share, one vote principle that has been amended by the “Florange” law in France, which was introduced in March this year. This allows double voting rights for some shareholders and authorises boards to block takeover bids. Phitrust says the law undermines the rights of minority shareholders and the freedom for takeover bids to progress. The fund manager says it will also engage with French banks regarding the increase in fines and legal proceedings against them, notably in the US following BNP Paribas’ $8.9bn fine, and the impact this has on shareholders. It says it will be campaigning for director compensation systems that include claw-back clauses to improve accountability and control of long-term risk.

A new paper published by the European Corporate Governance Institute (ECGI) looks at bank holdings of public bonds and their role in sovereign defaults. The study is called Banks, Government Bonds, and Default: What Do the Data Say? It was written by Nicola Gennaioli of Bocconi University, Alberto Martin of the Universitat Pompeu Fabra and Stefano Rossi of the Krannert School of Management.