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RI ESG Briefing, January 6: AustralianSuper, Vermont, US pay ratio, Montreal Carbon Pledge

The round-up of environmental, social and governance news

Environmental

AustralianSuper, one of Australia’s largest industry superannuation funds with more than A$80bn (€54.6bn) in funds under management, has reportedly asked the country’s biggest banks how they are responding to carbon exposure risk. The Sydney Morning Herald quoted Andrew Gray, investment manager for governance, as saying: “We’ve actually engaged with the boards of the banks and have been asking them about this issue themselves.” The dialogue was “constructive”, he was quoted adding.

The $4bn Vermont Pension Investment Committee has announced that is a co-filer of a shareholder resolution asking oil giant ExxonMobil to report to shareholders by the end of November on its plans to adopt quantitative goals for reducing total greenhouse gas emissions from its products and operations.The investor is joining a coalition of 47 global investors coordinated by the Interfaith Center on Corporate Responsibility (ICCR) and advocacy group Ceres. Vermont State Treasurer Beth Pearce said: “By requesting this as part of an investor coalition, Vermont has a significant seat at the table to advocate for change.”

There are now 25 global investment institutions signed up to the Montreal Carbon Pledge, the initiative that was launched at the PRI in Person event last year committing investors to measuring and disclosing the carbon footprint of their portfolios annually. Among the most recent signatories are Öhman Fonder, Australian Ethical Investment, Folksam, Australia’s HESTA, Canadian insurer Co-operators, the Central Finance Board of the Methodist Church and Epworth Investment Management Ltd.

German re-insurance giant Munich Re has acquired a 286.6MW wind park in Texas from Invenergy, the project’s developer, marking its first infrastructure investment in North America. The purchase price was put in the double-digit millions of euros range. The 156-turbine Miami Wind Energy Center came on stream in September 2014. According to Holger Kerzel, Managing Director at MEAG, Munich Re’s captive asset manager, the wind park investment ensured a further geographic diversification of the re-insurer’s €247bn portfolio. Staying with Germany, development bank giant KfW has, on the instruction of the German Ministries for Environment and for Economic Cooperation, provided a loan worth €654m to Morocco for the construction of two more solar parks in the country. The parks, to be located in the Ouarzazate region, will have a combined capacity of 350MW.

Social

AustralianSuper is supporting a new news website called The New Daily. “The New Daily is not part of AustralianSuper’s investment portfolio and the cost of it is part of the Fund’s communications and marketing budget,” the fund said. The free site provides national, state and world news as well as sport, entertainment, lifestyle and weather. The New Daily is produced by Motion Publishing Pty Ltd and its editorial content is being overseen by former Age and Herald Sun editor Bruce Guthrie and pioneering digital and print publisher, Eric Beecher. The editor of The New Daily is Thomas Hunter, former News Director for the business sections of The Age and Sydney Morning Herald.

A new report from consulting firm KPMG has looked at the link between ESG and financial performance. “A New Vision of Value: Connecting corporate and societal value creation” had input from PRI signatories and the PRI’s Director of Policy & Research, Helene Winch. The report explores how corporations’ social and environmental externalities are increasingly being internalized by new regulation, changing market dynamics and intensifying stakeholder action, and highlights the implications for revenues, costs and risk.

The NZ$27bn (€17.6bn) New Zealand Superannuation Fund has formed a 50/50 consortium with Infratil Ltd., the listed infrastructure firm, to buy retirement housing group RetireAustralia for A$640.2m. NZ Super said: “The sector’s attractive demographics and future growth opportunities make it a good fit for long-term investors such as the NZ Super Fund.”h6. Governance

The Securities and Exchange Commission, the US financial regulator, is reportedly set to debate the controversial Dodd-Frank “pay-ratio” rules as soon as the middle of this month. Political news site Politico was quoting unnamed insiders at the SEC. The proposal would require listed firms to disclose the ratio of what they pay their CEO to the compensation of their median worker. In mid-December a group of Senators wrote to SEC Chair Mary Jo White urging the agency to “move forward with a final rule as soon as possible”.

The British Coal Staff Superannuation Scheme, the £8.7bn (€11bn) UK mining sector pension fund, has reportedly filed a lawsuit in the US against Towers Watson alleging the consulting firm was “negligent” in its advice relating to a £250m currency hedge. The fund is suing the firm for more than £47m, reported CIO, citing a company filing with the Securities and Exchange Commission. CIO quoted a Towers Watson spokesperson as saying the firm disputes the allegations and that it would defend the matter “vigorously”; the BCSSS declined to comment.

Guy Hands, the Chairman of Terra Firma, has written in a series of New Year’s Resolutions for a UK financial newspaper that the country’s political parties should accept that man-made climate change is real and that a long-term energy policy should favour onshore wind and solar, which he said were already the most cost efficient forms of energy. Writing in the CityAM newspaper, he said the UK government should also be channeling money into finding storage solutions for renewable energy, which he said was the ‘Holy Grail’.

The European Parliament has created a formal cross-party group for long-term investing and reindustrialization with a view to creating a framework for its promotion. The new group has received support from 65 European deputies as well as many civil society organizations.

A survey of 642 institutional investors including pension, sovereign wealth and insurance funds representing $31 trillion in assets, has found that 54% of respondents believe that ESG investing offers advantages in terms of long-term growth and alpha generation. 55% of the respondents said it also helped with risk reduction, notably on contentious issues, social conflicts and ecological disasters.
The Financial Times has reported that Germany has overtaken the UK as the home of Europe’s highest paid corporate executives – which it put down in part to “public and investor pressure” on pay at UK public firms. The FT was citing a study of pay policy at more than 500 firms led by Professor Xavier Baeten of Belgium’s Vlerick business school.

Ethos, the Swiss pension fund-owned corporate governance group, has teamed up with 11 institutional shareholders to submit a resolution to the extraordinary general meeting of chemicals group Sika to remove an ‘opting out’ clause from the company’s articles of association. It would allow French industrial group Saint Gobain to buy, from the Burkard family, Schenker Winkler Holding, which holds 52% of the voting rights with only 16% of the capital, without making an offer to the rest of the capital. “This is very detrimental to minority shareholders and endangers one of the flagships of Swiss industry,” Ethos said.