RI ESG Briefing, Feb. 15: First major investor supports ‘Follow This’ sustainability resolution at Shell

Environmental

The Pensions Infrastructure Platform (PiP), the UK infrastructure manager backed by pension schemes, has agreed with Trina Solar to acquire six 5MW solar farms following the successful conclusion of each farm’s construction phase. “The nature and location of the six assets provide a well-balanced and geographically diversified portfolio,” PiP said in a statement – adding it would use them as a foundation for further acquisitions of similar assets. PiP’s Chief Investment Officer Ed Wilson said: “We are pleased to have been able to work with Trina Solar to structure and execute a transaction that provides our investors with the long term, inflation linked cash flows they are seeking to support their accrued pension payment obligations.”

Investors and insurers with more than $2.8trn in assets under management have reportedly called on G20 countries to phase out fossil fuel subsidies by 2020. Leading industrial countries should work “to accelerate green investment and reduce climate risk” the investors said ahead of a meeting of G20 foreign ministers in Germany. The 16 signatories, Reuters reported, include Actiam, Aegon Asset Management, Aviva Investors, KBI Global Investors, La Francaise, Legal & General and Trillium Asset Management.

Finnish pension fund Varma says that the carbon footprint of its corporate bond portfolio fell by a quarter last year, while its equity holdings saw a 22% drop in carbon intensity – putting it 36% lower than its benchmark. The €42bn fund, which is the largest private investor in Finland, performed the assessment as part of decarbonisation targets set for 2020. As well as bonds and equities, the firm said its real estate portfolio was 8% less carbon intensive, year on year. “We have focussed our investments on low-emissions industries and reduced our investments in energy-intensive companies,” said Varma’s CIO Reima Rytsölä. However, he warned: “Such a low carbon footprint is vulnerable to changes in equity investments in emissions-intensive industries, so we are cautious about being overly positive. It is likely that the carbon footprint will fluctuate even to a considerable degree from one year to the next.”

The New York City Pension Funds have appointed Mercer and Trucost to help them integrate climate change considerations into their investments. The funds announced the plans last year, citing the financial risks around climate change. Mercer will address ways to incorporate global warming considerations into the funds’ asset allocation, manager selection and risk management processes, while Trucost will perform a carbon footprint analysis of their public equity investments (except in the case of the Teachers Retirement System, which has appointed Mercer for both services). The process is expected to be complete by the end of the year.

Social

The first ‘benefit corporation’ (B Corp) has gone public with education company Laureate Education raising $490m from investors. Under the benefit corporation structure, first created in Maryland in 2010, companies must balance the interests of all its stakeholders in operating its business. Link

A group of US Republicans has reportedly proposed axeing the lion’s share of existing climate-related regulation in the country, in favour of the implementation of a national carbon tax. The Climate Leadership Council, a newly-formed coalition comprising veteran Republic figures such as James Baker, Henry Paulson, George Shultz, Marty Feldstein and Greg Makiw, has put forward the suggestion in contrast to some calls for climate change to be addressed at federal level. The carbon tax would increase over time, starting at $40 per ton.h6. Governance

ACTIAM, the Utrecht-based asset manager, says it is supporting the sustainability resolution filed by the Follow This campaign group. The resolution calls on Shell shareholders to take a leading role in the transition to renewable energy. Dennis van der Putten, Head of Responsible Investment at ACTIAM, said: “Shell has a large store of human capital which it can use to further the energy transition.” Mark van Baal, founder of Follow This, said he was pleased that ACTIAM was the first major investor to publicly support Shell and encourage it to take the lead in the energy transition. He added: “We expect other large Shell shareholders as well to assume their own responsibility in this regard.” The Follow This resolution will be put to a vote at the Shell shareholders’ meeting on May 23. Link

The Church Investors Group, the UK faith investment group, says it is following the debate on the disclosure of internal pay ratios with interest. “Any information that you are able to provide in terms of how internal pay differentials and trends are monitored and managed at your company would be gratefully received,” it says in a form letter to corporates ahead of this years AGM season. “Going forward,” it adds, “we expect to write to prioritised FTSE350 companies in regards to climate change, water use and Modern Slavery.”

Nordea’s team for Responsible Investments has recommended an exclusion of the three companies behind the Dakota Access Pipeline. The three companies in question are Energy Transfer Partners, Sunoco Logistics and Philips 66. Nordea has sought a dialogue with the three companies behind the pipeline about an alternative route. “The companies have declined any form of dialogue with Nordea,” the Nordic finance giant said.

CalPERS, the California pension giant, is facing calls to divest from the Dakota Access Pipeline. According to reports, more than 100 people crowded into the fund’s board meeting calling for divestment from the companies building the DAPL.

Christian Brothers Investment Services (CBIS), the US-based Catholic investment group, has updated its proxy voting tool, adding new graphics, charts and tables, “to better highlight our voting record and provide details on the impact we are having”. CBIS has now added its full voting volume, votes by proposal category, meetings by type and sector, “how we align (or don’t!) with management”, and more. “In addition, we still provide the full, searchable database of our historical voting record,” the investor says.

Law firm Robbins Geller says its partner Stuart Davidson has been named to the five-lawyer Plaintiffs’ Executive Committee charged with overseeing what may be the largest data breach lawsuit in history, relating to the Yahoo! breach in September last year. The online firm announced that up to 500m user accounts had been breached by hackers in 2014.

Hermes Investment Management, the fund manger ultimately owned by the BT Pension Scheme, is calling for an enhanced corporate governance code for private infrastructure assets. The code would provide essential social services to help close the governance gap and ensure consistent and optimal outcomes for investors, employees and other stakeholders. The paper ‘Corporate Governance of Public Service Infrastructure Assets’, outlines key areas for consideration, designed to help close what Hermes says is a “governance gap” created by the lack of existing relevant and/or appropriate reference points for these businesses.