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RI ESG Briefing, August 7: California plans $6bn water bond as drought persists

The round-up of environmental, social and governance news

Environmental

California Governor Jerry Brown has proposed a $6bn (€4.5bn) water bond amid serious drought conditions in the state. Brown wants a “no-frills, no-pork water bond that invests in the MOST CRITICAL PROJECTS without breaking the bank”. The plan provides for water use efficiency and recycling, effective groundwater management and added storage and is tied to a comprehensive Water Action Plan.

The Wellcome Trust, the £16.5bn (€20.8bn) UK charity, has bought the Co-operative Group’s farms business for £249m. The business, which will now trade as Farmcare Trading Ltd, has been bought as a going concern, with just under 250 staff transferring. The operations comprise 15,997 hectares (39,533 acres) of freehold and third party owned land and 15 farms. The trust said: “Over the last 20 years, we have become one of the largest landlords in the UK as part of owning a globally diversified portfolio. We seek to be one of the most responsible.”

The European Investment Bank (EIB) has signed a deal with the Development Bank of Southern Africa (DBSA) for a R1.4bn (€98m) finance contract to support the development of the !Ka Xu 100 MW concentrated solar power in the Northern Cape, South Africa. The DBSA said it was confident that it would help limit the the “adverse impact of energy generation on the environment”. Announcement

German and Austrian onshore wind power offer some of the best opportunities for investors, according to a new report by KGAL, a Munich-based provider of closed infrastructure funds. In Germany, the KGAL report said that in 2013, 3GW of new onshore wind capacity was installed – a 25% increase over the previous year. The report also said that in coming years, the German government expected between 2.4GW and 2.6GW of additional onshore wind capacity each year. Though a smaller market, the KGAL report said Austrian onshore wind was seeing dynamic growth. By the end of 2014, 2GW of new capacity is to be installed, putting the country well ahead of its goal of having 3GW in place by the end of the decade. Link

Social

The City of Portland, Oregon, is reportedly set to form a socially responsible investment committee. “We’re doing something we don’t think any other city in America has done,” City Commissioner Steve Novick was quoted as saying by local TV channel KOIN 6 during a hearing. And Portland would also contract an outside data research vendor to provide reports on eligible investments. KOIN 6 also reported the city is under pressure from activists to not buy bonds from fossil fuel companies.

The former New York Mayor, Michael Bloomberg, has announced that Bloomberg Philanthropies is to make its first ever impact investment of $US5m into Little Sun. The organization makes portable solar-powered lamps which are sold in Africa as a safer and cheaper alternative to kerosene, which is expensive and has negative affects on users’ health – inhaling four hours worth of kerosene fumes is equivalent to smoking forty cigarettes. The impact investment will be by way of a low-interest loan.h6. Governance

The impact of investors going ‘underweight’ in a company on effective corporate governance has been identified by Simon C.Y. Wong, the governance adviser affiliated with Northwestern University School of Law and the London School of Economics. Writing in the New York Times, Wong – a former partner at Governance for Owners, says: “At a time of rising expectations for institutional investors to assume “stewardship” responsibilities for investee companies, it is doubtful that underweight shareholders can fulfil this role credibly.” Link

A coalition of 7,500 shareholders, who lost an estimated £12bn as a result of Lloyds Banking Group’s ill-fated takeover of HBOS, have launched proceedings in the UK High Court against the bank and its former directors. The Lloyds Action Now group says the bank deliberately withheld information from shareholders about the parlous sate of HBOS when they were asked to approve the takeover. Lloyds has said the group has no legal basis to their claims. Link

A report by Finnwatch, an NGO for corporate social responsibility, has found that at least €37bn of the €160bn in assets held by Finnish pension schemes is invested in funds domiciled in tax havens or countries known for their light tax burden. These, according to the report, include Luxembourg, Ireland and the Cayman Islands. It also said the schemes were directly invested in companies that have been criticised recently for tax evasion. They include beer company SABMiller, oil giant Shell, coffee company Starbucks, commodities trading firm Glencore Xstrata as well as Finnish forestry and paper firm Stora Enso. Link

Australia: 43 companies on the main ASX200 index issued assured sustainability data in 2013 – a rise from 39 in 2012, according to research from consultants Net Balance, that also finds an emerging trend of companies assuring human rights disclosures in addition to environmental data. Net Balance predicts levels of assured sustainability data on the ASX200 will continue to rise following the ASX’s Corporate Governance Council’s recommendation that listed organisations disclose economic, environmental and social sustainability risks and measures to manage these risks.

The California Public Employees Retirement System (CalPERS), the largest US pension fund, has hit back at allegations that there is ‘excessive secrecy’ surrounding its private equity investments from the First Amendment Coalition, a US campaign group for free speech. The coalition says that while information on CalPERS’ public traded securities is readily available, its private equity investments have little transparency. In a statement, CalPERS says there is a wealth of private equity information on its website and includes a series of links with relevant details.

Ernst & Young, the consulting firm, has found that more US companies disclosed that they engaged with shareholders on corporate governance topics this year: half of S&P 500 companies disclosed engaging with investors in 2014 compared to just 6% doing so just four years ago. And EY said that many companies also strengthened governance-related disclosures in their proxy statements through “enhanced content, formatting and use of graphics”. But it adds that some investors are concerned that companies may begin to treat engagement as a “check-the-box exercise rather than a genuine effort to communicate”. The findings come in its 2014 proxy review.