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RI ESG Briefing, January 18: NZ Super-backed firm buys 3GW US solar portfolio

The round-up of the latest ESG developments

Environmental

Longroad Energy, the new renewable energy firm backed by the New Zealand Superannuation Fund, has bought a 3GW US solar development portfolio from Texas-based developer 7X Energy. Longroad and 7X will develop these projects and will work together to Longroad’s utility scale solar projects. NZ Super is an investor in Longroad alongside infrastructure firm Infratil. Link

Masdar, Abu Dhabi’s renewable energy company that is owned by state investment company Mubadala, has acquired 25% of the Hywind Scotland pilot park, the world’s first floating wind farm, from Norway’s Statoil. The facility, off Peterhead in Scotland, will power approximately 20,000 households when in production from late 2017. “We believe Masdar can be a strong partner also in future Hywind projects and we hope that our collaboration will result in future value creation opportunities for both parties,” says Irene Rummelhoff, Statoil’s executive vice president for New Energy Solutions. Masdar said the project is the “next stage in the evolution of the offshore wind industry”.

The Church Commissioners are facing opposition to its plan to build up to 1,200 houses on a greenfield site near Hereford in western England. The Environment Agency, the non-departmental public body, has set out its opposition to the Three Elms plan, as submitted, in a detailed six-page assessment covering issues including flood risk, contaminated land, drainage. The plan also has objections from brewing firm Heineken and foods group Sun Valley. The Church Commissioners, which manage £7bn for the Church of England, declined to comment.

Some 80% of banks are not integrating the results of environmental stress testing into their business decisions, according to research from Boston Common Asset Management. The analysis, backed by a slew of investors including the Church of Sweden and Australian Ethical Investment, looks at 28 of the world’s largest banks to see how they address climate-related risks in their business practices. Other findings include the fact that less than 40% of banks disclose goals for energy efficiency or renewables financing, while only half explicitly link climate strategy goals to executive compensation. For the full report, see here.

Allianz Capital Partners has invested tax equity in the 184MW Kelly Creek wind project in Illinois developed and owned by EDF Renewable Energy. The German firm said: “This investment adds to Allianz’ growing US wind farm tax equity portfolio in partnership with an experienced owner-operator.” With its third wind investment in the US, Allianz is further expanding its renewables portfolio and has now invested in a total of 73 wind farms and seven solar parks located in Austria, Finland, France, Germany, Italy, Sweden and the US.

Social

New Zealand-based boutique fund firm Pathfinder Asset Management has selected Sustainalytics as its environmental, social and governance (ESG) research provider. Working with Sustainalytics’ office in Sydney, Pathfinder will screen companies in its Global Water Fund for revenues including gambling and tobacco, as well as for involvement in controversial weapons. Pathfinder will also assess companies on environmental and labour and corruption records.

The Clinton Foundation has reportedly announced that it is laying off 22 employees as part of the last stages of its planned shutdown of the Clinton Global Initiative. It comes after Hillary Clinton lost the US presidential election and ahead of the inauguration of Donald Trump. Fox News reported that a WARN notice ( Worker Adjustment and Retraining Notification) was filed with the New York Department of Labor earlier this month and that the main office of the Clinton Global Initiative in New York City would be closing, with the layoffs due to the “discontinuation of the Clinton Global Initiative”.h6. Governance

Norihiro Takahashi, President of Japan’s JPY135trn (€1trn) Government Pension Investment Fund (GPIF), says the fund has received 27 applications for its ESG index mandate tender, potentially worth tens of millions of dollars, and will select the index by March this year at the earliest. RI reported the launch of the mandate tender in July last year. In a media conference, GPIF said it aims to help raise the value of Japanese shares through the ESG index. Takahashi said that for the GPIF to earn return as a long-term investor it was important that both companies’ financial returns and the broader, social economy created value together, and that its ESG investments would support this. GPIF believes that, as a result, ESG investment is one method to halt the current widening of economic inequality in the world.

The Securities and Exchange Commission has announced that BlackRock has agreed to pay a $340,000 penalty to settle charges that it improperly used separation agreements in which exiting employees were forced to waive their ability to obtain whistleblower awards. The SEC said more than 1,000 departing staff signed separation agreements waiving “any right to recovery of incentives for reporting of misconduct” in order to receive their monetary separation payments from the firm. “BlackRock took direct aim at our whistleblower program,” said Anthony Kelly, Co-Chief of the SEC Enforcement Division’s Asset Management Unit.

Separately, BlackRock has written to companies in the FTSE 350 Index, saying executive pay should be strongly linked to long-term performance and that it should only be increased at the same level of a company’s overall workforce. “We consider misalignment of pay with performance as an indication of insufficient board oversight, which calls into question the quality of the board. We believe that shareholders should hold directors to a high standard in this regard,” the letter said.

The US Supreme Court, the San Francisco Chronicle reports, has agreed to consider reviving an attempt by pension giant the California Public Employees’ Retirement System to recover some of the $300m it lost when investment bank Lehman Brothers collapsed in 2008.

The Tokyo Stock Exchange has published a status report on how listed companies have addressed Japan’s Corporate Governance Code as of December 2016 (Link). The report details that a total of 3,512 companies have submitted Corporate Governance reports with comply or explain statements as per the code. For 70 principles, 2,026 companies supplied a total of 9,746 explanations why they didn’t comply. The biggest reason for non-compliance was “having no plan to comply due to company-specific reasons” (45.1%), followed by 40 percent stating that “they have yet to decide whether to comply or not”, and 14.8 percent indicating “their intention to comply in the future”.

The Pensions and Lifetime Savings Association (PLSA), the UK pensions body – citing “provocative levels of executive pay” – has published an updated edition of its Corporate Governance Policy and Voting Guidelines, calling on investors to take a tougher stance on those who set executive pay policy. The guidelines aim to: promote the long-term success of the companies in which the PLSA’s members invest; and ensure that the board and management of these companies are held accountable to shareholders, such as pension funds. The guidelines call for companies to explain what steps they are taking to bring diversity, in all its guises, to their boardroom.

A new report from Canada’s Shareholder Association for Research and Education (SHARE) finds that companies in Canada’s most carbon-intensive sectors are not demonstrating “climate competency” in the boardroom. The report is called Taking Climate on Board: Are Canadian energy and utilities company boards equipped to address climate change? and SHARE reviewed disclosures from 52 companies across Canada’s energy and utilities sectors according to three aspects: board skills and experience, oversight, and risk disclosure. It said that while more companies are starting to talk about climate change in their reporting, only three boards disclosed any expertise amongst their members on the issue, and no board included climate change knowledge in its board competency matrix.