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RI ESG Briefing, February 16: S&P Ratings, Dutch governance, Trillium Asset Management, BaFIN

The round-up of the latest environmental, social and governance news

Environmental

Twenty-nine leading Irish academics, drawn from the seven Irish universities, have published an open letter urging all political parties and their representatives to deliver decisive commitments on climate action, and to create an inclusive and sustained citizen-led national discourse on the issue. An online petition to endorse the call has been set up.

Having rated its first offshore wind project, Meerwind, in Germany last year, Standard & Poor’s Ratings Services explains in a new report that offshore wind projects have certain risks that distinguish them from their onshore counterparts. ‘With Offshore Wind Projects Set To Take Flight, What Factors Will Move Ratings?’ was written by Michael Ferguson, Michael Wilkins, Luisina Berberian and Trevor J D’Olier-Lees and looks at key credit drivers, financial risk and related criteria and research.

Capital Stage has, as part of a standing mandate from German insurer Gothaer, acquired four solar parks in Italy with a combined capacity of 16.9MW. The purchase price of €65.4m for the parks includes both equity and debt capital. Located in the Italian region of Piedmont, the parks came on stream in 2011 and benefit from a fixed feed-in tariff of €0.27 per kilowatt hour that is valid until 2031. In December 2014, Gothaer allocated €150m to Capital Stage, a listed German renewables firm, for the purpose of acquiring solar parks in Italy, France and Germany. Announcement (German)

Staying with solar parks, German renewables investor Luxcara has acquired five of the facilities in the UK for €52.6m. Seller of the 34.4MW solar parks is their project developer Conergy, which like Luxcara is based in Hamburg. Luxcara said the acquisition was for its third renewable energy fund, known as FLAVEO. FLAVEO was launched last fall after taking €50m in seed money from German institutional investors. By the end of March, Luxcara hopes the fund will take in as much as €250m in assets from the investors. FLAVEO aims to deliver returns of 5.5% per annum.

Social

The UK’s Social Stock Exchange has updated its ESG framework to add economic impact and launched its third annual research book. The guide delivers looks at each member firm and provides an overview of the impact investing market as a whole. Over the last 12 months, the number of SSE member firms has grown by over 150% to 30 organisations. These companies have a total value of over £2bn and during 2015 they have collectively raised in excess of £400m from capital markets. Link

Edinburgh University has reportedly amended its ethical investment policy following student campaigns calling on it to divest from arms and fossil fuels. Student groups say that one of the most important developments made in the updated ethical investment policy is that they have provisionally secured student representation in the University Investment Committee.

The Organisation for Economic Co-operation and Development (OECD) will host a month-long public consultation on its draft guidelines on due diligence and responsible supply chains in the garment and footwear industry. The voluntary guidelines, Due Diligence Guidance for Responsible Supply Chains in the Garment and Footwear Sector, is designed to help businesses and governments identify, mitigate and account for risks, particularly to human rights, in supply chains. Link. Governance

The Dutch Corporate Governance Code Monitoring Committee is consulting on revising the country’s Corporate Governance Code. The consultation ends on April 6 April and the committee wants to adopt the new code in the course of 2016; it will apply to financial years starting on or after 1 January 2017. Proposals include a greater focus on long-term value creation.

The Pensions and Lifetime Savings Association, the UK trade body formerly known at the National Association of Pension Funds, has emphasised “the growing recognition” of the materiality of Environmental, Social and Governance (ESG) factors to investment. “ESG should now be considered an integral part of investment, not just an additional consideration driven by reputational concerns,” the PLSA said in its response to a draft strategy document from the Financial Reporting Council watchdog.

German financial regulator BaFin is undertaking a review of all relevant asset managers in Germany to determine whether there is any evidence of ‘benchmark hugging’ – that is funds that charge fees for active management but only deliver benchmark returns. BaFin’s move follows a recent study by the European Securities and Markets Authority (ESMA), which found that between 5 and 15% of EU-registered funds could potentially be benchmark huggers. ESMA stressed, however, that its study was preliminary, and that now it would ask national regulators to investigate more deeply. A BaFin spokeswoman said that for that regulator’s probe, both quantitative and qualitative approaches would be used in scrutinising German funds.

Software firm Adobe has responded to a shareholder proposal on workforce diversity by Trillium Asset Management, the US SRI specialist, by increasing the extent of diversity data it publishes and providing ‘meaningful’ disclosure around its strategies to attract and retain women and underrepresented minorities. Trillium – which has now withdrawn the proposal – said that the ratio of male to female employees at the firm has been virtually unchanged for the past five years at 70% to 30%. And, in 2014, highlighted that Hispanics represented just 4% of Adobe’s U.S. workforce and blacks represent 2%.

Renault/Nissan, Peugeot Citroen PSA and Ford have all failed to respond to a request by investors to car manufacturers for more information on lobbying activities and CO2 and efficiency standards compliance, raising concerns about the level of transparency in the industry. The request by investors, with combined assets under management of £625bn, comes in the wake of the VW emissions test cheating scandal in October last year. Campaign groups ShareAction and InfluenceMap have published a report with the results.

Dutch insurer Delta Lloyd faces considerable shareholder opposition to its planned €1bn rights issue, which it says is necessary to strengthen its core capital under Solvency II, the EU’s new regulatory scheme for insurers. According to Reuters, 32% of Delta Lloyd’s shareholders will vote against the rights issue at an extraordinary general meeting (EGM) on March 16. The rebel shareholders, Reuters said, include major Delta Lloyd investors like Fir Tree Partners, Fubon Financial Holding, Greenlight Capital and Highfields Capital Management. The insurer requires a simple majority for approval of the rights issue, which would dilute the value of older shares.