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RI ESG Briefing, Jan. 4: Denmark’s PKA formally rejoins the Principles for Responsible Investment

The round-up of the latest ESG developments

Environmental

Swedish state fund Sjunde AP-fonden (AP7) has reportedly put six energy companies – including Exxon Mobil – on watch for potential exclusion over climate change. IPE.com, citing a spokesperson, said the six companies are American Energy, Exxon Mobil, Gazprom, Southern Company, Transcanada and Westar Energy and the fund’s stakes in them are worth around €300m. The context is the Paris Agreement and the spokesperson added: ““With our norms-based approach, we thought this is exactly the kind of international, UN-type of agreement we work with.” The report added that AP7 has notified the companies that it could exclude them and that they have six months to respond.

Activist shareholder group Follow This, which represents retail investors in oil major Royal Dutch Shell, reportedly plans to file a resolution at next year’s AGM calling on the company to set targets for annual greenhouse gas emissions reductions. “We have talked to a lot of the major shareholders and they gave us input for the resolution,” founder Mark van Baal was quoted as saying by Reuters – adding he hoped large shareholders would support the motion before the AGM. Follow This’s resolution last year calling on Shell to invest fossil fuel profits in renewable energy had just 3% backing at the 2016 AGM, the report added.

Allianz Global Investors (AllianzGI) has announced an investment of over $400m on behalf of its clients into the Grande Prairie Wind project, a 400MW wind farm in Nebraska that is owned by BHE Renewables, a subsidiary of Warrren Buffett’s Berkshire Hathaway Energy. It’s the first infrastructure debt renewable energy investment made by AllianzGI in the US market and the financing consisted of unlisted bonds with a 20-year term that were privately placed with US and European investors via AllianzGI’s established infrastructure debt platform.

Social

Dutch development bank FMO has launched an updated sustainability policy, pledging to contribute to limiting global temperature increase to 2°C and preferably 1.5°C, as agreed at the Paris Climate Summit in 2015. Other key elements of the sustainability policy focus on human rights, equality for women and access to financial services for the poor. The FMO is also stressing its role in society. “Previously, the focus of investments was at avoiding negative effects on people, the environment and human rights,” says CEO Jurgen Rigterink. “In addition to the reduction of negative effects, we steer investments to more sustainable energy sources, the circular economy, or for example, companies that focus on women and the poor.” Link

The percentage of US institutional investors incorporating environmental, social, and governance (ESG) factors into their decisions has increased to nearly 40%, according to a survey from investment consultants Callan Associates’ latest annual “ESG Interest and Implementation Survey”. “This year there were 84 unique institutional US funds that responded, representing approximately $843bn in assets,” Callan said. Governance

Danish pension fund PKA has now formally rejoined the Principles for Responsible Investment (PRI), according to the initiative’s latest list of signatories. The fund was among a group of 11 which left the PRI in in 2013 over governance concerns. PKA was one of four Danish pension funds that confirmed last month that they planned to rejoin the PRI, claiming it had listened to their criticism. Other new signatories include Iceland’s Íslandsbanki hf. (VÍB) and Brasilprev Seguros e Previdência of Brazil.

Responsible investors have welcomed a new interpretive bulletin from the US Department of Labor on shareholder rights, saying it recognises the importance of proxy voting and fiduciaries engaging portfolio companies on ESG matters. The DoL emphasized that “proxies should be voted” and that shareholder engagement on “the nature of long-term business plans including plans on climate change preparedness and sustainability”, “diversity”, and “policies and practices to address environmental or social factors that have an impact on shareholder value” are appropriate. Trillium Asset Management’s Director of Shareholder Advocacy Jonas Kron said it “gives further support to the validity, significance, and productivity of fiduciaries exercising shareholder rights and engaging portfolio companies on ESG matters”. Link

The West Midlands Pension Fund has extended its proxy voting contract with advisory firm PIRC to March 2018, according to a filing on the EU’s tenders database. It had invited tenders for the provision of a proxy voting service for its direct equity holdings worldwide and corporate governance analysis and advice on these holdings. The procurement was originally run in 2011 for a five-year contract.

Eaton Vance, the New York-listed fund manager with $336.4bn under management, has closed its acquisition of responsible investment specialist Calvert Investment Management. The acquisition of “substantially all” of Calvert’s assets was conducted by a new Eaton Vance subsidiary called Calvert Research and Management. Terms of the deal weren’t disclosed. Eaton Vance Chairman and CEO Thomas Faust said the new arm is “dedicated to building on the Calvert brand and legacy to achieve global leadership in responsible investment management”.

The Council of Institutional Investors, the US shareholder body, has submitted a comment letter on the SEC’s proposal for required use of universal proxies in contested elections, and for clear disclosure of voting standards in uncontested elections. CII seeks to address nearly all questions raised in the proposal, summarizing key arguments in the first section of the letter. The CII said: “We commend the SEC for proposed amendments that address major longstanding CII concerns, and that are ‘well-researched, thoughtful and appropriate’.” The universal proxy proposal is an initiative to ensure that ballots for director elections include all nominees. Comments are due by January 9.