RI ESG Briefing, December 10: Morgan Stanley, MEAG, CII, Royal London, FTSE4Good, VW

Environmental

Investment bank Morgan Stanley is reportedly winding down a group that develops and structures North American solar projects. Reuters, citing people familiar with the matter, said it was part of a plan to cut staffing levels in its fixed income business by up to 25%. It added that a company spokesman declined to comment.

MEAG, the asset manager for German re-insurer Munich Re with €255bn in assets, has made another acquisition
in the renewable energy space, buying two Swedish wind parks for SEK425m (€45.8m). One of the two parks, Jung-Åsa, is already on stream and can generate up to 12MW of renewable power. The other park is Iglasjön which, when completed next year, will have a capacity of 26.4MW. The seller of the parks is Swedish wind power firm Eolus, which will be retained as their operator as part of the deal. In October, MEAG said that under its expanded renewable investment programme, it would allocate up to €8bn to the space “over the mid-term.”

German Environment Minister Barbara Hendricks has urged the country’s investors to follow the recent example of insurance giant Allianz and re-direct their investments from fossil fuels to renewable energy. “Effective climate protection is only possible if money is re-directed to investments dealing with climate protection,” Hendricks told
the German Parliament. “If Allianz can change its investment strategy, foundations, churches, cities and even private citizens can do so too.”

The International Standards Organisation (ISO), the international organization with a membership of 162 national standards bodies, is revising its core greenhouse gas standards in an “extensive review process” it says will affect the future of carbon management globally. It comes amid the ‘bottom-up’ approach exemplified by the INDCs (intended nationally determined contributions) at COP21. Link

Social

UK-based Access Foundation for Social Investment, set up earlier this year to provide grants to charities to help them access social investment, has announced that its £60m pot of investment-readiness funding will be managed by social investment intermediaries. In a newsletter, Access said that consultation had shown organisations “don’t know where to turn to access social investment”, so it wants existing intermediaries in the sector to deliver the funding. Home page

A pilot A$10m social benefit bond, or social impact bond, keeping vulnerable children out of foster care in New South Wales in Australia is reportedly on track to deliver investors its targeted return of more than 5% a year. The SIB was structured by the Commonwealth Bank of Australia and Westpac Institutional Bank, and is one of two SIB trials put in place by the NSW government. First full-year results from the SIB, published by the Benevolent Society this month, show it is preventing children from entering foster care. Returns will be paid to investors at the end of the full five-year term if the programme meets measured outcomes.h6. Governance

The Council of Institutional Investors, the US fund industry group, has released two publications on the best ways to conduct and disclose investor-company engagement. The first report, ‘CII Investor-Company Roundtable: Effective Engagement’ is the result of a roundtable in July. The second CII publication, ‘Best Disclosure: Company-Shareholder Engagement’ highlights 10 companies’ 2014 or 2015 proxy disclosures of their engagement practices. The CII has also written to the Financial Accounting Standards Board (FASB) expressing “strong objections” to two FASB proposals that it says could eliminate valuable information from companies’ financial statements. The proposals would change the current test for materiality and allow companies to exclude details from financial statements unless exclusion would trigger anti-fraud provisions of U.S. securities laws, CII said. Link

Royal London Asset Management, the UK’s largest mutual life, pensions and investment company, says it remains concerned about corporate governance at retailer Sports Direct. “Until the company improves both its governance and its relationships with employees, shareholders face substantial risks,” said RLAM’s Corporate Governance Manager Ashley Hamilton Claxton. Separately, the firm – controlled by entrepreneur Mike Ashley – faced an undercover report
in The Guardian about the treatment of its workers.

Trillium Asset Management, on behalf of its client the Congregational Council of Plymouth Church UCC of Seattle, recently filed a shareholder proposal at New York-listed food group Chipotle urging it to “adopt principles for minimum wage reform, to be published by October 2016. SRI specialist said the issue was “particularly concerning” at Chipotle due to an August 2015 Reuters report which pointed out that Chipotle pays its leadership “more than a thousand times what they pay their typical worker”.

Volkswagen AG has been ejected from the FTSE4Good Global Index, a sustainable equity index with 792 members, due to the recent emissions rigging scandal. In a statement, index overseer FTSE Russell said VW and 31 other ejected firms aren’t eligible for re-entry into the index for at least two years. FTSE Russell also said 40 new companies would be added to the index owing to their performance on ESG (environmental, social and governance) issues. The index’s biggest holding is US tech giant Apple, which has a 3.8% weighting. Link

The Judicial Panel on Multidistrict Litigation, the US body which determines whether civil actions should be transferred to a single court, has reportedly consolidated more than 500 suits accusing Volkswagen of cheating emissions standards. Law360.com reported the panel as saying California federal court in San Francisco is the best venue given that almost 20% of the suits were filed in the state.

US mutual funds’ support for corporate political spending disclosure resolutions “held firm” in the 2015 proxy season, according to the latest survey of mutual fund voting records conducted by the Center for Political Accountability, the Washington-based advocacy group. “This year, funds voted for disclosure 42% of the time on average, slightly above the 40% vote last year,” it said.