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RI ESG Briefing, December 18: California pension funds react to coal divestment call

The round-up of the latest ESG news

Environmental

The California Public Employees Retirement System and the California State Teachers Retirement System have both reacted to a call for them to divest coal. Kevin de Leon, the Democratic President Pro Tempore of California’s Senate, said it was “time for us to move our massive state portfolios to lower carbon investments”. “California has prohibited its energy companies from buying or importing coal power, and state funds should match that,” de Leon said. He will introduce legislation in January to order CalPERS and CalSTRS to begin divesting completely from coal. CalPERS said it believes that “engagement is the first call of action” while CalSTRS said it would review its coal investments in 2015: “CalSTRS is a patient, long-term investor, and the ultimate impact of our investment in coal is something that we will be assessing in the coming year.”

Calvert Investments, Addenda Capital, F&C Investments, MN Investments and NEI Investments are the latest joiners to a coalition of investors who have publicly committed to grow a large and robust green bonds market. The investors’ commitment was first released at the September UN Climate Summit backed by a range of investors including CalSTRS and the Swedish AP buffer funds. The new joiners this week brings the asset under manager represented under the statement to $2.2 trillion. Statement

The Catherine Donnelly Foundation, a Canada-based religious trust, will no longer make any direct investments in any of the 200 listed companies with the largest coal, oil and gas reserves listed in the Carbon Tracker Initiative’s “Unburnable Carbon” report. In a statement, the foundation said that in keeping with its commitment to stewardship and ecological and social justice, it would seek out companies investing in renewable energy, other low-carbon fuel sources and energy efficiency instead. The Vancouver Observer reports that while the foundation had used an engagement approach, the board decided that a “business as usual” approach is not sustainable and divestment is the best strategy to break the stalemate on climate action.

Social

UK social investment bank Big Society Capital has launched a competition for small and medium private firms in the UK, the Daily Telegraph reports. The Business Impact Challenge will see one firm win up to £15m to implement a project that generates strong business and social value in the UK. The winning project will be chosen by a panel that includes former Standard Chartered chairman Mervyn Davies, dotcom entrepreneur Martha Lane Fox and Big Society Capital chair Harvey McGrath, who was formerly chair of Prudential.

The County of Cuyahoga, Ohio, is launching the US’s first county-level social impact bond (SIB). The SIB (called pay for success project in the USA) will support homeless families with children in out-of-home foster care. Investors into the SIB are the Reinvestment Fund, the George Gund Foundation, the Cleveland Foundation, Sisters of Charity Foundation of Cleveland and Nonprofit Finance Fund. Link. Governance

The Interfaith Center on Corporate Responsibility (ICCR), the US coalition of almost 300 faith and values-driven organizations with combined assets of more than $100bn, has reportedly succeeded in getting banking giant JPMorgan Chase to improve its corporate governance practices. American Banker said the bank would release a 100-page report in which it will provide a full account of its recent legal settlements and matters under investigation and detail executive clawback policies “sometime before the end of the year”. The report quoted the ICCR as saying it would go a long way toward restoring the bank’s credibility with shareholders.

The new Corporate Human Rights Benchmark, a project to rank the corporate human rights performance of international companies, has won £80,000 (€101,946) start-up funding from the UK government. Business Minister Jo Swinson said: “We are throwing our weight behind this benchmarking project, which will make it easy for people to understand corporate human rights performance, see how companies fare in the rankings and enable investors and regulators to challenge those whose performance is behind those of others.” The initiative involves Aviva Investors, Calvert Investments, Dutch sustainable investment body VBDO, ESG research house EIRIS and the Institute for Human Rights and Business and the Business and Human Rights Resource Centre.

The Responsible Investment Association Australasia (RIAA) is seeking to kick start a debate in Australia around long-termism and responsible investment. It will be hosting John Kay who led the UK review of equity markets and long-term decision-making in the country next year. RIAA says that while the debate on long-termism and responsible investment has developed momentum in Europe and North America the discussion has evaded much consideration in Australia, including being largely absent from the recent findings of the Financial Services Inquiry.

Swedish pension fund manager AMF has selected the MSCI ESG Indexes as benchmarks for its global equity portfolios worth $15bn (€12.2bn). AMF, which has $65bn (€52.9bn) AUM, has also selected MSCI for ESG research, ratings and screening tools. Peder Hasslev, CIO of AMF, said: “We are now focusing our investments in companies with a better understanding and implementation of ESG in their operations.”

The Financial Reporting Council (FRC), the UK watchdog, plans to “undertake scrutiny” of adherence to the Stewardship Code and encourage asset managers and owners to provide better accounts of their engagement policies and practices over the next two years. It has released its Strategic Plan for 2015/16 and it will focus on four areas, including investor stewardship and corporate governance. On stewardship, the FRC will take a number of actions, including trying to assess the percentage of mandates awarded by asset owners by asset managers that explicitly refer to stewardship and influencing the development of the new EU Shareholder Rights Directive. Link