RI ESG Briefing, August 5: CDP, SwissRe, ING, Peabody, EIB, Rabobank,

A round-up of the latest ESG news

Environmental

Dutch banking group ING says it has funded €27.8bn of projects aiming to solve environmental challenges in the first half of 2016, as it seeks to help its clients “transition to becoming more sustainable”. According to the bank, which launched its first green bond in November 2015, the majority of the funding was channelled into projects that had recently been found to have improved their sustainability practices, with the remainder going to new projects. ING’s Chief Executive Ralph Hamers said that deals included funding projects “in renewable energy and sustainable buildings”, among other areas.

The European Investment Bank (EIB) will invest up to €62m in SUSI Renewable Energy Fund II. The fund is managed by SUSI Partners, a Swiss sustainable investment advisor. The investment will be guaranteed under the European Fund for Strategic Investments. “In the EU we are creating initiatives and incentives to facilitate the low-carbon transition,” said Miguel Arias Cañete, EU Commissioner for Climate Action and Energy. “I encourage the private sector to follow in these footsteps and seize the opportunities the Juncker Plan, the EIB and the energy transition present.” The EIB aims to commit at least 25% of its lending to renewable energy. The SUSI fund currently has a portfolio of 13 wind and solar assets in Europe, with a combined capacity of some 170MW.

Data centres’ water use is concerning investors, according to Bloomberg. The centres, which house large-scale computer systems, require large quantities of water to prevent overheating. In areas like California – which hosts many of the world’s largest data centres because of its strong tech industry – this is a serious concern, as the state is experiencing its fifth year of drought. In an interview with Bloomberg Briefs, Brian Rice, portfolio manager at the California State Teachers’ Retirement System, said investee companies must be “cognizant of their water use and take the appropriate steps to minimise their water use and recycle water.” This applied not only to those firms with data centres, he added, but also portfolio companies in other high water-consumption sectors, such as agriculture.

The number of cities disclosing their environmental performance has boomed since COP21, says the CDP. In Africa, there has been a rise of nearly 400% in the number of cities disclosing via the London-based NGO – up to 46, from just 12 before the Paris climate summit. In Europe there has been an 83% rise, to 131 cities. 533 cities worldwide currently disclose through the CDP – a rise of 70% from last year.h6. Social

Swiss Re has partnered with the government of the Chinese province of Heilongjiang and local insurer Sunlight Agriculture Mutual Insurance to undertake “the first ‘anti-poverty’ insurance deal in China”. The reinsurance contract covers 28 “poverty-stricken” counties in the province, providing financial compensation for damage to property and lives caused by natural disasters and extreme weather events. The total coverage for the pilot scheme is RMB2.32bn. Swiss Re President for China John Chen said: “It is one of the top priorities of the government bodies in China to better manage natural catastrophe risks, and it has been the desire of the insurance companies in the market to play a bigger role in this sector,” adding that he expected the pilot to be rolled out in other Chinese provinces.

Rabobank, the Norwegian Investment Fund for Developing Countries (Norfund) and Dutch development bank FMO are partnering on an initiative to create a new financial service provider (FSP) to catalyse investment in SMEs across Africa. The three firms currently hold stakes in several FSPs in sub-Saharan Africa, and have agreed to pool their resources to create Arise. Arise, which will start with $660m in assets, will take minority stakes in African FSPs that serve SMEs. It is hoped that Banco Montepio, a financial group based in Portugal with banking investments in Africa, will join the partnership in the near future.

Governance

Bank Nagara Malaysia (BNM), Malaysia’s central bank and financial regulator, has issued a new set of enhanced corporate governance standards for the country’s financial institutions. Focusing largely on increasing the effectiveness of corporate boards, the code includes requirements for a minimum number of independent directors, a board tenure limit of nine years and tighter controls on remuneration packages that promote reckless risk-taking. There is also a requirement for financial institutions to adopt a code of ethics that “promotes ethical, prudent and professional behaviour” backed up by a new whistleblowing policy.

American coal mining firm Peabody Energy Corp has proposed paying its six top executives bonuses totalling $11.9m for meeting performance targets, despite filing for bankruptcy protection in April. The incentive package, which for the first time includes targets for cleaning up disused coal pits, would see CEO Glenn Kellow’s pay increase from $1m to $3.9m if all targets are met. Peabody wrote in a filing with a US Bankruptcy Court that such incentives would help the company maximise value for stakeholders, after identifying some $1.14bn worth of “environmental liabilities” that require attention before it emerges from bankruptcy. Elsewhere, the SEC has written to the Bank of America to ask why it paid seven executives an average package of $9.8m, after the banking group failed to disclose full analysis of upper management’s performance or target-meeting.