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RI ESG Briefing, Feb. 11: Chilean exchange asks MSCI for ESG index feasibility study

The round-up of environmental, social and governance news

Environmental

A new report from US sustainability advocacy group Ceres looks at the state of corporate climate change reporting and associated comment letters on the issues from the Securities and Exchange Commission (SEC), the US financial regulator. The report – Cool Response: The SEC & Corporate Climate Change Reporting – also provides recommendations for the SEC and companies on improving the quality of reporting.

Ceres has also published an analysis of escalating water demand in hydraulic fracturing operations in the US and western Canada called Hydraulic Fracturing & Water Stress: Water Demand by the Numbers. Link

The European Bank for Reconstruction and Development (EBRD) is supporting a 37.5MW wind farm project in Orla, eastern Poland, with an investment loan of up to PLN94m (€22m) for the financing of the construction and operation of phase 1 of the project, which will install a total capacity of 22.5MW. The EBRD says the project is of “special significance” given that power generation in Poland remains dominated by coal and lignite-fired plants and that “a major push to reinvigorate the renewables sector is required”.

Social

A group of US investors, led by New York State Comptroller Thomas DiNapoli and New York City Comptroller Scott Stringer and a coalition of 19 investors, have written to major corporate sponsors of the Winter Olympic Games in Sochi calling for them to defend lesbian, gay, bisexual, and transgender (LGBT) rights in Russia. It follows initial outreach to 10 firms in December, of which six responded (McDonalds, Visa, General Electric, Dow Chemical, Coca-Cola and Omega [Swatch]). Letters sent to Panasonic, Proctor & Gamble, Samsung and AtoS were not answered, the investors said.

The decision by US pharmacy chain CVS Caremark to stop selling cigarettes and other tobacco products has been welcomed by investors such as CalPERS and Calvert Investments. While CVS estimates that it will lose approximately $2bn a year in revenues, Calvert said the move “generates shareholder value well beyond this metric”. Writing in Crain’s Chicago Business, Tom McCaney of the Interfaith Center on Corporate Responsibility (ICCR), said CVS’s decision was “momentous” and called for rival Walgreen to follow suit.

A range of property companies and investment managers have signed up to GRESB, the Global Real Estate Sustainability Benchmark. They include AMP Capital, Singapore-based CapitaLand, US-based Goodman, investment manager Heitman, SNS REAAL subsidiary SNS Asset Management, France-listed Unibail-Rodamco and Vesteda of the Netherlands.h6. Governance

Chile: index firm MSCI has been chosen by the Santiago Stock Exchange to produce a study on the feasibility of creating an ESG index for the Chilean Stock Market. It comes as the company has announced that it is opening a new office in Santiago and launching a new index to “capture the investment opportunities in the Latin America Pacific Alliance countries of Chile, Colombia, Mexico and Peru”.

Proposals to oblige Japanese companies to have more outside directors will go to the Japanese Diet later this month, according to governance firm GMI Ratings, citing the government. “Whether these proposals will be watered down in the face of the business lobby remains to be seen,” GMI said; though it noted than Canon, Toyota and Hitachi have all recently announced outside board members.

The financial sector in the UK has paid out twice as much in bonuses since the crash than it has paid in corporation tax, according to union umbrella body the Trades Union Congress (TUC). It cited figures from revenue authorities that show that between 2008-09 and 2012-13, the finance sector contributed £32.4bn (€39bn) in corporation tax. This was “dwarfed” by the £67.6bn paid out in bonuses over the same period, the TUC said.

French bank Société Générale is reportedly talking with the French regulator about how to apply EU-wide legislation that includes splitting the roles of chairman and chief executive, which came into force this month. The bank is led by Frederic Oudea as combined chairman and CEO, a relatively uncommon tied role for a large European bank, which has come under fire at previous annual general meetings (AGMs) from investors including PhiTrust, the French fund manager, and Hermes, the UK funds house. SocGen has defended the role in the past saying it was the best solution for the bank following a series of in-house scandals including the Jerome Kerviel affair.

Investor services firm Broadridge Financial Solutions has reportedly backtracked on a decision to change the way it counts advance voting at company annual meetings. “Both sides of a proxy contest will continue to receive interim voting updates for their own and each other’s ballot,” the company was quoted as saying in an email to clients by the Wall Street Journal. The move follows an internal review and reverses a decision that had upset pension investors sponsoring shareholder resolutions, most notably at JP Morgan Chase’s AGM in May, the Journal added.

ERAFP, the €15bn Paris-based French Public Service Additional Pension Scheme – a 100% SRI pension fund – has hired OTCFin, a New York based firm, as a financial consultant. OTCFin is specialized in risk and portfolio management products and services for institutional investors. In December 2013, ERAFP awarded US equities mandates to Natixis Asset Management’s US-based Loomis, Sayles subsidiary and Robeco Boston Partners. A stand-by mandate was awarded to Morgan Stanley Investment Management.
The assets are being run on a “conviction” basis with no tracking error limit and feature regular dialogue with investee companies.