RI ESG Briefing, February 4: Massachusetts’ new $27m social impact bond initiative

The round-up of environmental, social and governance news

Environmental

Bank of America Merrill Lynch has teamed up with US solar panel maker SunPower to develop $220m (€162.9m) of US residential rooftop solar projects through a leasing program. Homeowners will get solar systems with SunPower panels at little to no upfront cost by agreeing to buy the power via long-term agreements. BofA Merrill and SunPower have worked together since 2009, when BofA Merrill began financing large solar projects SunPower designed and constructed for public agencies in California. Link

The Divest-Invest Philanthropy initiative groups together more than a dozen US-based philanthropic bodies with an asset base of nearly $2bn with a commitment to divest from fossil fuels and invest in the new energy economy. The founding members are united around a shared conviction that investments must not undercut philanthropy’s mission to serve the public good. Rather, endowed assets should advance both financial and ethical goals. Link

The European Bank for Reconstruction and Development (EBRD) has set up a US$100m sustainable energy and energy efficiency financing programme in Ukraine. Raiffeisen Bank Aval is the first bank to sign up to the new framework, with financing from the EBRD of US$20m; it – and the banks expected to join the programme later – will provide individual loans to eligible local companies that are developing energy efficiency and renewable energy projects.

Social

Massachusetts Governor Deval Patrick has announced what’s claimed to be the US’s largest financial investment in a Pay for Success/Social Impact Bond initiative, which is designed to improve outcomes for hundreds of at-risk young men in the probation system or leaving the juvenile justice system. The Massachusetts Juvenile Justice Pay for Success Initiative is in partnership with nonprofit service provider Roca, advisory firm Third Sector Capital Partners and commercial and philanthropic funders. The state has committed up to $27m for the seven-year project. Third Sector secured $18m of private financing, including $9m from the Goldman Sachs Social Impact Fund.

Third Sector Capital Partners is also advising Cuyahoga County (Cleveland) in Ohio on another ‘pay for success’ initiative that aims to keep homeless families together by using private investor funding. If the project succeeds, the county can save millions in foster care payments over the next five years, it is hoped.

The UK government has published its Social Investment Roadmap, setting out plans to extend support in the tax system for the ways that people can invest in social enterprise in 2014. It builds on a formal consultation on social investment tax relief, published in summer 2013 and draft legislation published in December 2013. It sets out the government’s plans to, among other things, set up a government-run accreditation scheme for Social Impact Bonds eligible for social investment tax relief.h6. Governance

Swiss pension fund association ASIP has recommended that its members review their business relationships with banks to ensure they don’t provide kickbacks to external asset managers or sales specialists. ASIP said that if kickbacks had been paid any during the last ten years, its members could demand their money back plus interest. Should the banks refuse to pay, ASIP added that the pension scheme could sue. It follows a ruling by a Swiss federal court which held that kickbacks for asset management activities or sales are illegal. Experts estimate that the country’s more than 2000 pension schemes lose up to CHF700m (€573m) worth of kickback payments each year. Link (German)

The Washington State Attorney General’s Office has recovered $31m for the Washington State Investment Board (WSIB) in a settlement related to the 2008 collapse of investment bank Lehman Brothers. The lawsuit, filed in May 2009, alleged Lehman failed to disclose material facts in connection with the various securities it sold to Washington, including the true value and risky nature of its mortgage-related assets. “This settlement is a substantial victory for the state of Washington and the beneficiaries of the funds managed by the WSIB,” said Investment Board Executive Director Theresa Whitmarsh.

US industrial group Caterpillar could be facing a shareholder call for it to conduct a proxy advisor competition, similar to that proposed at tech firm Cisco last year. Caterpillar has asked the Securities and Exchange Commission to allow it to omit the proposal from its 2014 proxy statement. The motion has been filed by Myra K. Young, wife of shareholder activist James McRitchie, the person behind the Cisco proposal in 2013.

Deutsche Bank’s asset management arm DWS is reportedly becoming impatient with German airline Lufthansa’s delay in appointing a new CEO, according to a report in the Frankfurter Allgemeine Zeitung. Fund manager Henning Gebhardt said Lufthansa was taking too long to appoint Roche-bound Christoph Franz.

Sweden’s Nordea Bank and Denmark’s Danske Bank have both reportedly taken steps against Israeli banks involved in construction in the West Bank. The Jerusalem Post said Danske recently said on its website that it was boycotting Bank Hapoalim for “legal and ethical” reasons. And Nordea Bank, the largest in Scandinavia, has sought clarifications from Bank Leumi and Mizrahi- Tefahot Bank about their activities, it added.

Proxy firm Manifest Information Services has highlighted in a blog posting what it calls a “selective mailing sent out to a privileged few” by Novartis. Manifest said the Swiss drugs firm faxed an advance copy of its AGM meeting notice to selected names on its share register before the formal dispatch to ordinary shareholders. Manifest said the episode “undermines the principle of fair access to information to the owners”.