RI ESG Briefing, Aug. 21: US SIF, Council of Institutional Investors, BNP Paribas, Hermes, TÜV SÜD

The round-up of sustainable finance developments


ORIX, a Japanese financial services group that owns Dutch asset manager Robeco, has begun construction on a yet-unnamed 6.5MW geothermal power plant in the Minami-Kayabe region of Hokkaido which will use heat from hot springs in the area to generate electricity. Geothermal energy is said to be a stable energy all through the year regardless of season. ORIX is currently in negotiations with US geothermal company Ormat Technologies, a strategic partner, over a joint geothermal business in Japan and Asia.

California State Treasurer Fiona Ma has announced $74m in tax-exempt green bond financing for CalPlant 1, a company that will turn rice straw into medium density fibreboard to be used in the manufacture of flooring, furniture, doors, shelves and other products. CalPlant 1 self-certified the bonds as green “because they are consistent with the Green Bond Principles adopted by the International Capital Market Association”, according to a release from Treasurer Ma’s office.

QIC Global Real Estate (QIC GRE), an Australian retail property investment manager, has issued a A$300m ($203.8m) green bond to fund a minimum 35% reductions in greenhouse gas emissions intensity across three properties in its flagship REIT, the QIC Shopping Centre Fund (QSCF). The green bond is the first issued globally by a retail property landlord. The issuance has been certified by the Climate Bonds Initiative; and the National Australian Bank (NAB) was the arranger and joint-lead underwriter.

Only 9% of ASEAN banks have a climate risk strategy or assessment process, despite most now recognising the issue as material, according to WWF. The NGO’s third annual ESG review assesses 35 banks across six ASEAN countries and concludes that they are “responding slowly” despite growing expectations from regulators and investors that banks should manage such risks. “Central banks of Malaysia, Singapore and Thailand have joined the Network for Greening the Financial System, which is recommending central banks and supervisors to better integrate climate-related risks into financial stability monitoring,” the authors said, adding that by the end of 2019, seven banking associations or regulators in ASEAN will have issued sustainable banking guidelines.


BNP Paribas has announced a £75m (€81.9m) sustainability-linked loan to the Peabody Trust for general corporate purposes, its third social impact loan to a UK housing association this year. Under the loan’s terms, Peabody stands to pay a lower interest rate if it delivers an agreed number of affordable childcare programs.

Pittsburgh’s PNC Financial Services, one of the leading financers of US private prisons, has agreed “not extend any additional credit to companies operating private prisons”, following engagement from US SRI firm Trillium, as part of a wider engagement with the bankers of the controversial industry overseen by the Interfaith Center on Corporate Responsibility (ICCR). Eight banks – including US giants JP Morgan and Bank of America – have announced this year that they would stop financing private prisons and immigration detention centres.h6. Governance

The US SIF has welcomed the Business Roundtable’s “commitment to lead their companies for the benefit of all stakeholders but said the US business lobby group “could make progress in their new strategy by withdrawing its request to the SEC to make it more difficult for shareowners to bring resolutions on key ESG issues”. In a LinkedIn posting, US SIF CEO Lisa Woll said: “Without any details of real changes that have been committed to already or will be committed to, it’s impossible to know truly what intent or results will be. For certain, we want to make sure that this change does not result in the companies being less welcoming of shareholder resolutions.”

The Council of Institutional Investors said the roundtable was “undermining board and CEO accountability to shareholders” and that it proposes “no new mechanisms to create board and management accountability to any other stakeholder group”.

Hermes Investment Management, on behalf of the UK’s BT Pension Scheme (BTPS), and an unnamed Australian fund are reportedly “working closely” with Argent, the company developing London’s King’s Cross, after it was revealed that controversial facial recognition software is being used in the area. Both investors are bankrolling the development of the site. Link

Germany’s TÜV SÜD, the company that signed off on the safety of the Brumadinho tailings dam four month before it collapsed, has told Reuters that it has pulled out of conducting safety assessments of dams. The dam operated by Brazilian mining company Vale SA collapsed killing almost 250 people in January, prompting greater scrutiny on the sector’s management of tailings dams by investors.

ESG investment criteria – such as those that exclude so called sin stocks – currently have a “credit neutral effect” on collateralised loan obligations (CLOs) ratings, according to Moodys. But this could change if such criteria become “more restrictive and collateral remains scarce”. Though the credit rating body adds that any “negative credit implications” are “unlikely to persist in the long term”.

WeWork, the Californian workplace rental start-up looking to IPO, is “pushing the outer bounds of what’s acceptable for a public company”, Glenn Davis, research director at the Council of Institutional Investors, an investor advocacy group, is quoted by Reuters as saying. WeWork’s CEO and co-founder, Adam Neumann is looking to control the start-up through his ownership of shares with high voting power, a common structure among newly listed Silicon Valley firms.

Egil Matsen, Deputy Governor of Norges Bank, has said that responsible investment is part of the mission of Norway’s NOK8.9trn (€919bn) sovereign wealth fund. Last year, the fund sent 35 letters to companies relating to children’s rights; 35 on climate change; and 30 on water management. The remarks were made at the annual Karl Borch lecture, hosted by the Norwegian school of economics on the topic of sustainable finance.