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RI ESG Briefing, January 14: Moody’s consults on green bond assessment methodology

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

Environmental

Moody’s Investors Service, the ratings agency, is seeking feedback to its proposed Green Bond Assessment (GBA) methodology. It stresses the GBAs aren’t credit ratings; rather, they are forward-looking opinions of the relative effectiveness of the issuer’s framework for managing, administering and reporting on environmental projects financed by green bonds. The assessments are expressed using a scale ranging from 5 (excellent) to 1 (poor), encapsulating Moody’s views weighted as follows: organization (15%), use of proceeds (10%), disclosure of use of proceeds (15%), management of proceeds (15%) and ongoing reporting and disclosure (20%). It is inviting market participants to comment by February 12.

Vermont State Treasurer Beth Pearce has been quoted saying she opposes a plan that calls for the divestment of fossil fuel companies from the state’s pension funds. Governor Peter Shumlin, in his State of the State address last week, called for the state’s funds to exit fossil fuel companies like Exxon Mobil. But Pearce has reportedly said the pension funds would lose some $10m if it sold out it. She told VPR radio: “When you start to legislate what you’re going to invest in I think that’s a situation where you could end up with other stocks and other issues going down to the road. I think the term slippery slope does apply there.” Link

What’s the right price for carbon? That’s the question tackled by Vitor Gaspar, Director of the Fiscal Affairs Department at the International Monetary Fund (IMF), in an article for the World Economic Forum. “Renewables and other forms of ‘green technology’ are getting a lot of attention from the media,” he writes. “However, in order for these new technologies to be created and widely disseminated, firms have to be rewarded for adopting them—this is the bottom line. The most effective way to do that is to price carbon right.” Without this, Gaspar reckons, relying on technological progress to solve climate change “looks a lot like banking on miracles”.

Social

HESTA, the A$32bn (€20bn) Australian superannuation fund, has reportedly made a multimillion-dollar investment in Horizon Housing, a community housing provider in Queensland. HESTA [Health Employees Superannuation Trust Australia] made the investment through its $30m Social Impact Investment Trust, which is managed by Social Ventures Australia.

The 2016 Access to Nutrition Index has been launched today (January 14). It ranks the world’s biggest 22 food and beverage companies on how far they are, among other things, producing healthier foods, making them more affordable and accessible and influencing consumer choice by marketing and labeling their products more responsibly. The 2016 ATNI also includes an assessment of the breast-milk substitute marketing practices of the six largest baby food companies. The Index was first released in 2013. Link. Governance

The Financial Reporting Council, the UK watchdog, says feedback on engagement between companies and investors was positive in 2015 “with many feeling that the quality of dialogue has improved and that companies are more responsive”. Last year saw an increase in shareholder voting activities at companies meetings with 73% voter turnout, it added in its new Developments in Corporate Governance and Stewardship report. But it said that while there has been very good progress on reporting of boardroom gender diversity policies, a “disappointing number” of companies make no reference to the broader concept of diversity including race and experience. The FRC will tier signatories to the Stewardship Code and announce the results this summer. Overall, the report finds the quality of corporate governance in the UK remains high, but while there are signs of improved engagement, reporting against the Stewardship Code’s principles is of inconsistent quality.

Walden Asset Management, the US SRI specialist, says it achieved an “impact rate” of 45% in its engagements with companies in 2015. This rate reflects the percentage of companies demonstrating improvement relative to companies reached through engagement. By the primary ESG topic areas, ‘impact rates’ ranged from 22% (for lobbying disclosure) to 52% (for climate change).

South Korea is reportedly developing a stewardship code. Korea Times reports that the draft for the “Korea Stewardship Code” has been prepared by the Financial Services Commission, and will reinforce responsible investment based on active voting rights of institutional investors.

The Securities and Exchange Commission (SEC) has given the OK to a shareholder proposal from the $184.5bn (€170bn) New York State Common Retirement Fund which recommends that a US power utility further reduce its greenhouse gas emissions by producing more renewable energy. South Dakota-based NorthWestern Energy holds its AGM in April and the fund has submitted a carefully worded proposal urging, essentially, more renewable energy production. In the proposal, Patrick Doherty, Director of Corporate Governance at the fund, states: “With board oversight, we seek a report assessing how NorthWestern is adapting its business model to enable increased deployment of low-carbon electricity generation resources as a means to reduce societal greenhouse gas emissions and protect shareholder value.”

The Directors’ Collective is new initiative focused on India convened by US-based business membership and research association along with professional services firm KPMG, executive search firm Russell Reynolds Associates and law firm Khaitan & Co. The collaboration is designed to guide corporate directors in carrying governance and compliance responsibilities as “India Inc.” prepares for the demands placed upon boards and top executives by new regulations, they said.