RI ESG Briefing, Aug. 27: California State Controller prefers fossil fuel engagement to divestment

The round-up of the latest ESG news

Environmental

California State Controller Betty Yee, who sits on the boards at both of the state’s pension giants CalPERS and CalSTRS, has come down on the side of engagement over divestment in the fossil fuel debate. “I am not convinced that divestment is the best approach,” she writes in the Sacramento Bee. “The sheer volume of energy and magnitude of pension assets that needs to be replaced is simply too great. The better alternative is engagement.” She said she sees the potential for “swaying” corporate behaviour to ease the transition to a green-energy economy.

Australia: Newcastle in New South Wales – home of the world’s biggest coal port – has voted to exit its holdings in the country’s big four banks if they continue to fund fossil fuel projects. The Sydney Morning Herald reports
that about 80% of the City of Newcastle Council’s A$270m investment portfolio is held in the big four banks, mostly through term deposits.

Denmark’s DONG Energy has acquired the project rights to develop up to 3GW of offshore wind capacity in the UK from SMart Wind, a consortium involving UK renewable energy firm Mainstream and Siemens Financial Services. Financial details were not disclosed. DONG now owns the rights to develop the offshore wind parks Hornsea One, Two and Three, having bought those for Hornsea One in February. The parks are to be located between 31 and 190 km off the Yorkshire coast and generate up to 4.2GW in wind power. “We have invested around £6bn (€8.2bn) in the UK, and the Hornsea Zone provides us with an exciting development opportunity, not least because of the sheer size of the project and the high generation potential,” said DONG Executive Vice President Samuel Leupold. Announcement

New analysis from the Grantham Research Institute on Climate Change and the Environment has found that emissions pledges ahead of UN climate summit are not ambitious enough to avoid dangerous climate change. The report was put together by Grantham and the ESRC Centre for Climate Change Economics and Policy at London School of Economics. The authors of the paper were Rodney Boyd, Joe Cranston Turner and Bob Ward. Link

Social

Australia’s first social impact bond, described as social benefit bonds in the country, has triggered an 8.9% return to private investors in its second year – up from 7.5% in its first year. The bond aims to prevent children from entering out-of-home care. The bond raised A$7m (€4.4m) from investors to run the seven-year programme. It has institutional backing including NGS Super, a fund for community workers, and Christian Super. Link

Nearly a third (30%) of UK finance professionals feel pressure to compromise their ethical standards, according to a survey released by the Chartered Institute of Management Accounts (CIMA). This is up from 18% three years ago. CIMA also said one-fifth of the UK respondents said whistleblowers were regarded as troublemakers by management. Working with colleagues from different areas in the firm was cited as the top cause of pressure to compromise ethical standards (20% of respondents). Other causes were meeting reporting deadlines (18%) and working with partners internationally (14%), CIMA said. Governance

Lady Barbara Judge, the chair of UK pensions lifeboat scheme the Pension Protection Fund, hopes she can help break the “glass ceiling” for females in Japan, according to an interview with the Wall Street Journal. Judge was appointed a director at industrial group Lixil earlier this year and she told the Journal: “A foreign woman is like a secret weapon”.

UniSuper, one of Australia’s largest institutional investors, has reportedly criticised funders of class actions saying they take too large a share of settlements. The Sydney Morning Herald reports that Luke Barrett, head of legal and risk, at A$50.3bn (€31.5bn) UniSuper criticised litigation funders for charging 30%-40% of the recovery amount. Barrett said UniSuper has participated in class actions in the US and in Australia.

Cologne’s public prosecutor will not indict a former manager at J. Safra Sarasin who was responsible for the Swiss bank’s “cum-ex” deals on charges of tax evasion. A spokesman for the prosecutor said Christian Gmünder had merely been fined €10,000 for his involvement with the deals. Until 2012, when the loophole was closed, cum-ex deals profited from repeated German value-added tax (VAT) refunds. The Swiss bank, which was not owned by Safra Group at the time, stopped offering the deals after then. Cologne’s prosecutor also downplayed a Swiss news report suggesting that Eric Sarasin, who resigned as Deputy CEO over the cum-ex affair last October, would soon be vindicated. “Eric Sarasin’s lawyer may say that, but our investigation continues,” the spokesman said.

Investors have filed a class action securities lawsuit against Houston-based Plains All American Pipeline for providing “false and misleading statements” about company polices regarding pipeline maintenance and monitoring. The suit was filed after an oil spill from a ruptured pipeline near California damaged miles of environmentally sensitive and protected coastline. Plaintiffs say the spill and the company’s response effort contributed to a 30% decline in the firm’s share price. Link

The Canadian Coalition for Good Governance has released a policy paper recommending that Canadian companies and legislators support proxy access – the ability of shareholders to nominate directors. Under Canadian corporate law, although shareholders elect directors, they typically are not involved with choosing the nominees for the board. The CCGG says Canada will benefit from meaningful shareholder input into the nomination process and that such input is an essential component of shareholder democracy

Around 40% of board directors at companies which comprise the Standard & Poor’s 500 equity index are aged 64 or more, up from just 18% ten years ago, Bloomberg Business reports. Citing data from executive recruiter Spencer Stuart, it went on to report that the retirement age for directors had been edging higher. This year, one-third of the 357 boards specifying a retirement age had set it at 75 or older – compared with just 5% in 2004. The data also reflected that an S&P 500 director earned an average of $277,237 (€241,031) in compensation for attending around eight meetings annually.