Environmental
The Metropolitan Transportation Authority (MTA) for New York City says it will target retail investors in particular for its inaugural $500m (€441m) green bond to be sold next week. The bond has been assigned a debt rating of ‘AA+’ and assured as green according to standards developed by the Climate Bonds Initiative. With the proceeds, MTA will finance upgrades of existing rail lines for New York City and Long Island. The bond’s coupon, or interest rate, as well as maturity will be decided after a two-day offering beginning February 17. Interestingly, MTA has not hired any Wall Street banks as underwriters for its green bond, but instead three small financial firms known for their diversity of management.
The US Supreme Court has dealt a blow to President Barack Obama’s plan to cut carbon emissions from US power plants by 32% against 2005 levels. In a 5-4 decision, the Court said the ‘Clean Power Plan’ (CPP) could not go ahead until legal challenges to it were settled. According to press reports, 27 US States have challenged the CPP, which relies on executive powers granted by the 1970 Clean Air Act. The Court’s action also has international consequences, as the CPP is key to the US upholding its CO2 emission pledge that is enshrined in the COP21 agreement.
A framework for investors to address climate risk and reduced greenhouse gas emissions from property portfolios has been published by UNEP Finance Initiative, PRI, property industry body RICS and investor groups IIGCC, INCR Ceres and IGCC.
Link to report
Peter Norman, the former Swedish Financial Markets Minister, will chair a new research programme at the Stockholm School of Economics (SSE) looking into how the financial system can better contribute to sustainable development, and enabled by a SEK30m (€3.2m) grant from the Swedish foundation Mistra. SSE will collaborate with several institutions, including the Royal Swedish Academy of Sciences, the London School of Economics, Henley Business School as well as Swesif.
German insurance giant Allianz has made its first investment in the US wind power industry, teaming up with Bank of America to acquire two wind parks in New Mexico. According to Allianz Capital Partners (ACP), the insurer’s infrastructure investment arm, the Roosevelt and Milo parks were developed by French energy firm EDF and have a combined capacity of just under 300MW. ACP did not disclose the amount of its investment, but German press reports put it at €200m, or one-third of the total cost of the transaction. Including this transaction, Allianz has invested €2.9bn in renewable projects, including 60 wind parks and seven solar installations.
The Stockholm County Council (SLL), which has issued two green bonds with a volume of SEK2.9bn (€305m), plans to sell a third denominated in euros. SLL has begun a roadshow in several cities around Europe – among them London and Paris – to gauge investor support, Business Green reports. Bookrunners for the bond include Crédit Agricole, Danske Bank, the Royal Bank of Scotland and Nordea, the reports said. With the proceeds from its green bonds, the SLL finances sustainable transport and construction projects.
PensionDanmark has completed the construction of a biomass power plant in the UK, according to reports. It is part of a joint investment with Copenhagen Infrastructure Partners and BWSC, said European Pensions. The report said the £162m power plant has been completed “well ahead of schedule” having been commissioned in August 2013. It quoted PensionDanmark CEO Torben Möger Pedersen as saying the joint venture means they have found a model that provides the investor with an attractive return with limited risks.
ACCIONA Energy, part of the Spanish group of the same name, has closed tax equity financing for the 93MW San Roman Wind Farm in Texas with Bank of America Merrill Lynch. It recently acquired the facility as part of the company’s renewed focus on building renewable energy projects in the US. “We believe the financial services sector is in a unique position to help and provide the much needed capital and financing to accelerate a low carbon economy,” said Todd Karas, head of Renewable Energy Finance at BofA Merrill in a statement.
The US Government Accountability Office, the “congressional watchdog” which investigates how federal government spends taxpayers’ dollars, has released a report looking at whether the Securities and Exchange Commission’s plans to do more on climate related disclosure. It finds that the SEC may address the issue as part of a wider look at disclosure effectiveness. Link
A new report from the European Systemic Risk Board looks at the risks for the financial industry of a transition to a low carbon economy. It finds the transition implies a wide-range of carbon assets would become stranded and the EU financial system has significant direct exposure to fossil-fuel firms. It says in response, the ESRB could support enhanced information collection and disclosure and consider incorporating climate-related prudential risks in regular stress tests.
Link
Legal action against investors who ignore climate risk would not be simple, but could succeed, according to Howard Covington, a former investment management chief, environmental lawyer James Thornton and climate economist Professor Cameron Hepburn. In an article for science weekly Nature, the trio argue that systemic climate risk is an issue which investors, who have duties of care, now ignore at their peril. Link
Electricity giant AGL Energy is launching a $3bn renewable energy project fund and investing $20m in a Californian solar and battery storage developer reports the Sydney Morning Herald. The move comes as AGL announced a few days early that it would quit natural gas production and caps.
Calvert Investments has launched the Calvert Global Water Index (CALH20). The index focuses on investing in companies dedicated to the responsible stewardship, sustainability and accessibility of Earth’s water. It is the sixth addition to the company’s suite of responsible indexes.
Social
Dutch sustainable investment association VBDO has release a report on the Dutch impact investment market, which finds that 55% of institutional investors surveyed are engaged in impact investment. Based on self-reported data, impact investments currently amount to 1.7% of the Dutch institutional investment market. The report also found the three largest Dutch pension funds and the three largest Dutch insurance companies represent 87% of the total. Most investors allocate less than 1% of their assets to impact investments, although some allocate as much as 8%.
Link to report*The Association of the Luxembourg Fund Industry* and the Luxembourg Private Equity and Venture Capital Association have made a number of recommendations to improve the lacklustre European Social Entrepreneurships Funds (EuSEF) Regulations, including making registration requirements less burdensome. A European Commission consultation on the EuSEF regime closed on the 6th January.
Link
Financial advisers and other finance professionals with an interest in sustainable and responsible investment will now be able to learn more about the area. A consortium of nine European partners have combined to develop a sustainable investment training course for financial advisers. The training programme is composed of different modules, including e-learning units, webinars and in some countries, in-person workshops. The consortium comprises: OeGUT – Austria (Project Coordinator); Akaryon GmbH – Austria; ECOeffekt – Germany; Ethix SRI Advisors – Sweden; FNG – Germany, Austria, Liechtenstein and Switzerland; Kalaidos Univ. of Applied Science – Switzerland; Novethic – France; UKSIF – UK; U Ghent – Belgium.
ABP, the €356bn Dutch civil service pension fund, faces being split into 14 separate funds or rearranged into separate clusters, according to reports citing a policy review by the government. Pensions & Investments said a letter from the Ministry of the Interior and Kingdom Relations in the Netherlands to the House of Representatives set out four alternative governance models for the giant investor.
A number of groups are urging the US government to strengthen requirements on responsible investment for US investors with holdings in Burma. Currently, US investors who invest at least $500,000 in Burma are required to submit a report to the US government about their human rights and land use policies, their contact with the Burmese military and their payments to the Government of Burma. The US government is consulting about the reporting requirements for these investors: Link
The US Small Business Administration (SBA) is proposing to define a new class of small business investment companies that will seek to generate positive and measurable social impact in addition to financial return. Dubbed, “Impact SBICs,”, the SBA aims to expand the pool of investment capital available primarily to underserved communities and innovative sectors, as well as support the development of America’s growing impact investment industry.
The Institute for Human Rights and Business, the United Nations Environment Programme (UNEP) Inquiry into the Design of a Sustainable Financial System, have published a joint report exploring the relationship between human rights and sustainable finance. It looks at emerging developments among central banks and other regulators in opening the door to considerations of how inequality and social risk impact their mandates and the financial sector.
Link
The Journal of Wealth Management has published a paper entitled, “Social Finance and the Post-Modern Portfolio: Theory & Practice.” The research and its findings, authored by several members of US-based Athena Capital Advisors, support a new approach to Modern Portfolio Theory that introduces metrics of social return in the construction of portfolios.
Governance
The CEO of Norges Bank Investment Management (NBIM), which is in charge of Norway’s €707bn sovereign wealth fund, has criticised the corporate governance at Volkswagen, saying that it is not “a model for Germany.” Speaking to the Frankfurter Allgemeine newspaper, NBIM CEO Yngve Slyngstad said one of the problems with VW’s governance is that minority investor rights are ignored. “We already made this point during the 2008 takeover battle between Porsche and VW. But it doesn’t seem that the families who control VW want to listen to us,” Slyngstad said. NBIM has a 1.2% stake in VW, while the Porsche and Piëch families hold a majority of the voting rights in the embattled automaker.
The Sustainability Accounting Standards Board (SASB) and the Institute of Management Accountants (IMA) have announced a new Memorandum of Understanding (MoU) to advance the management and disclosure of non-financial information in corporate reports. It outlines the basis for ongoing “cooperation, collaboration and alignment” between the two organizations.
In a revealing report from the Nathan Cummings Foundation, JPMorgan and Fidelity voted against every single shareholders sponsored proxy access proposal last year. Vanguard supported only 18% of them, including those at Level 3 Communications and Regeneron Pharmaceuticals. Since 2004, US mutual funds have been required by the SEC to disclose how they cast their proxy votes in what are called NPX filings. The data analysed was provided by Fund Votes.
The Trades Union Congress, the UK union umbrella body has released its 2015 report on fund manager voting. It looks at the voting records of fund managers, pension funds and proxy voting agencies in 2014. It found that median support for retrospective remuneration reports was at 40%, whereas median support for future remuneration policy was just 27%. The TUC suggests that this may be because fund managers believe they can have more influence through remuneration policy votes, as they are forward looking, and binding. By contrast, remuneration reports are on remuneration that has already been paid, and the shareholder vote is only advisory.
Great-West Lifeco says its Canadian funds arm GLC Asset Management Group Ltd. (GLC) has become a signatory to the Principles for Responsible Investment. It said the move was a “tangible sign” of its commitment to the development of a more sustainable global financial system.
Stock exchanges from Kazakhstan, Mexico, Morocco, Norway and Spain have just announced their public commitment to produce guidance on environmental, social and governance (ESG) disclosure by the end of 2016. They join eight others that announced their commitment at the launch of the United Nations Sustainable Stock Exchanges (SSE) initiative’s ‘Campaign to Close the ESG Guidance Gap’.
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