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RI ESG Briefing, January 23: ISS to replace GRId governance ratings with QuickScore

The round-up of environmental, social and governance news

Environmental

Global institutional investors, with an estimated $71trn of assets under management in the OECD, “are a potentially important source of finance for green growth” according to the new Green Investment Report – The ways and means to unlock private finance for green growth delivered at the World Economic Forum in Davos. “Successfully mobilizing institutional funds in equity injections can be achieved through complex financial engineering by providing the investor with a ‘quasi fixed-income position’, for example, by sharing the benefit of public financing incentives (such as feed-in tariffs) in renewable-energy projects. A fixed-income position can provide the investor with long-term returns in line with their investment strategy and risks. Opportunities exist to develop green projects with long-term returns that can attract institutional investors but the public sector needs to support this through improved policy frameworks.”

Demeter Partners, the Paris-based environmental investment firm, has announced that it has become a signatory to the UN Principles for Responsible Investment, strengthening its commitment to socially responsible investment. Demeter said: “By signing to the PRI, Demeter Partners actually demonstrates a genuine thinking about social matters led by the company since its start.”

Low Carbon Accelerator (LCA), the UK-listed clean investment vehicle, has run into a slight snag in its attempt to sell off its portfolio to Sterling Planet, as announced earlier this month. LCA said the “first completion” under the agreement has been deferred until February 1. LCA had earlier said it would sell its entire holdings for £2.74m (€3.3m) – “at a substantial discount to book value”.

Social

Institutional investors last year showed the most interest in environmental, social and governance (ESG), emerging markets and long-duration fixed income investment products, according to a report from research firm Cerulli Associates cited by Pensions & Investments. ESG and socially responsible investing saw increased interest from all institutions – particularly public pension funds, the report added.

A new report from Eurodad, the European Network on Debt and Development, explores how the hidden ownership of companies and other legal structures facilitates tax evasion, corruption and related crimes. It outlines the different ways that individuals abuse companies, trusts and other vehicles in order to evade taxes. The report is called “Secret structures, hidden crimes” and is available here. Governance

Institutional Shareholder Services (ISS), the leading proxy advisory firm, is changing its “GRId” (Governance Risk Indicators database) governance ratings system to the new QuickScore offering, according to Corporate Counsel. “Effective late February/early March 2013, ISS will replace GRId with ISS Governance QuickScore, which is the first in a suite of ISS QuickScore solutions designed to identify risk within portfolio companies,” ISS said in a letter quoted on the site. QuickScore will be made available to institutional investors and companies in late February and will initially cover 4,100 companies in 25 markets. The new offering will move away from GRId’s color-coded concern levels, instead using a numeric, decile-based score. Further information will be available here from January 24.

“Tremors and cracks” is the theme of the latest annual report from the Hong Kong-based Asian Corporate Governance Association (ACGA), produced in association with CLSA Asia-Pacific Markets. “Since issuing our last CG Watch report in 2010, cracks in Asian corporate governance have become more apparent. Indeed, our scoring of companies has seen slippage, after rising for most of the past decade following our introduction of comprehensive CG scoring of Asian corporations in 2001,” the report states. The 220-page report finds that the highest ranked markets in the region are Singapore, Hong Kong, Thailand, Japan and Malaysia.

Last year’s US proxy season was the “Year of Engagement”, according to David Drake, President of proxy advisory firm Georgeson. “After years of this slow, incremental growth, the 2012 proxy season became the Year of Engagement and witnessed a marked increase in company/shareholder interaction — engagement that was not limited to a few days out of the five- or six-week period between the mailing of the corporate proxy statement and the last days of a proxy solicitation campaign prior to the annual meeting,” he writes. Link

Proxy advisors Glass Lewis recommended shareholders vote against Siemens Chairman Gerhard Cromme at the company’s AGM in Munich today. The firm cited scandals at industrial group ThyssenKrupp which Cromme chairs and previous bribery allegations at Siemens. “We believe shareholders would be better protected going forward by the election of individuals who are neither associated with the company’s bribery scandal nor ongoing legal concerns and oversight failures at other companies,” Glass Lewis said.