RI ESG Briefing, January 2: Japan panel publishes draft ‘Stewardship Code’

The round-up of environmental, social and governance news

Environmental

New York Governor Andrew Cuomo has announced $210m in initial funding for the new NY Green Bank. Initial funding combines $165m redirected from other programs and $45m comes from the Regional Greenhouse Gas Initiative. “With this funding we will attract greater investment in New York, accelerate clean energy deployment, and modernize our grid,” Governor Cuomo said. The bank is expected to open for business and offer its first financial products in early 2014.

US listed sustainable infrastructure investor Hannon Armstrong has issued a $100m asset-backed ‘Sustainable Yield Bond’, securitizing cash flows from over 100 individual wind, solar and energy efficiency installations. The coupon, or interest rate, is 2.79%. This first bond was privately placed and the company said it had done the transaction “due to strong investor demand and favorable market conditions”.

MSCI ESG Research says it has seen an “escalation” among its 75 asset owner clients in measuring portfolio exposure to fossil fuels. “In 2014, we expect to see investors explore four major approaches to address this issue that range on a continuum from fully excluding carbon reserve holders to adding positive exposure to clean technology,” the firm says in its 2014 ESG Trends to Watch. It goes on to say: “We believe that valuation models will start to include more scenario planning around potential stranded assets”. One scenario is that if enough investors become concerned about a potential carbon bubble, there could be a “self-fulfilling prophesy” to how the financial community values current and future carbon reserves.

Social

Deutsche Bank has secured $75m private investor financing from institutional investors for the Microfinance Enhancement Facility (MEF), the body set up in 2009 to provide funding to microfinance institutions worldwide. The move will enable MEF to grant up to 75,000 additional loans, Deutsche said.

Triodos Bank and Avante Partnership Ltd. have extended their charity bond for dementia care. They are seeking to raise £5m through a five-year issue for new nursing and dementia care facilities in Kent near London. A planned 75-bed home will provide dementia care facilities and will support 40 full time jobs, 30 part time jobs and opportunities for six volunteers. The bond is likely to close in Spring 2014 unless fully subscribed prior to the closing date.h6. Governance

A draft of Japan’s version of the UK’s Stewardship Code has been published by an expert panel. The panel, chaired by the University of Tokyo’s Hiroyuki Kansaku, says the draft aims to promote a sustainable growth of companies through investments and dialogue.

Apple is advising its shareholders to vote against a proposal filed by fund firm Northstar Asset Management and John Harrington calling for a board committee on human rights to be set up. The investors argue the computer giant has become “embroiled in public controversies regarding the human rights implications of its products and supply chains”. But Apple says it is committed to the highest standards of social responsibility and human rights and that it is aware of “no other company that does as much to safeguard and empower workers”. Apple, which holds its annual meeting on February 28, says the proposed committee would be “redundant”. Link
Meanwhile, Trillium Asset Management has welcomed Apple’s decision to update its Nominating and Corporate Governance Committee Charter to include strong language on the importance of diversity in board candidates. Trillium and the Sustainability Group of Loring, Wolcott & Coolidge had engaged Apple on the subject. Trillium said: “Apple has further institutionalized its commitment to addressing gender and racial diversity at the board level.”

GES Investment Services, the engagement services provider, held its inaugural Engagement Day in Stockholm in November, with around 20 investor clients participating. On the agenda were supply chain management, sustainable energy and presentations from companies such as Shell.

Is US investment bank JP Morgan ‘too controversial to hold’ in your portfolio? That’s the question posed by sustainable fund firm Walden Asset Management. “How can an investment manager who integrates environmental, social, and governance (ESG) factors in investment decision-making hold J.P. Morgan stock?” queries Walden’s Heidi Soumerai in a client newsletter. But she says Walden has been impressed by the bank’s response to numerous issues. It and other investors met with board members and executives in November “to underscore” the importance of strong internal risk controls and better transparency.

The hot topics of executive compensation and sustainability are actually converging into one conversation, according to proxy advisory firm Glass Lewis. Its ‘Greening the Green: Linking Executive Compensation to Sustainability’ reviews the short- and long-term compensation plans disclosed by companies in their annual proxy filings.