RI ESG Briefing, July 1: SEC Commissioner sees shareholder role in corporate diversity

The round-up of environmental, social and governance news

Environmental

Delegates at the 2014 General Assembly of the Unitarian Universalist Association, the US faith group, have passed a resolution calling for divestment from fossil fuel companies in the $165m UUA Common Endowment Fund (UUCEF). It requires the UUA to work with “current and prospective” pooled-asset managers to create more fossil fuel-free investment opportunities, with the objective of full divestment of UUCEF indirect holdings in the companies within five years. It will also see UUA invest “an appropriate share” of its holdings in securities that will support a swift transition to a clean energy economy, such as renewable energy and energy efficiency. President Peter Morales said: “I am proud that we are going to put our money where our values are on this issue.”

Germany’s Bundestag, or lower house of parliament, has approved a reform of the country’s renewable energy law (EEG) that includes cuts in subsidies for all renewables. It means that subsidies for new solar, wind and biomass installations will sink to €0.12 per kilowatt hour. In addition, the subsidies themselves will be capped at 2500 MW per installation. One exception: If a new wind or solar installation is built to replace an old one and its capacity is greater than 2500 MW, it can still qualify for a full subsidy. The law now goes to the Bundesrat, or upper house, for final approval.

Deutsche Bank says that it played a key role in financing Gemini, a 600MW Dutch offshore wind park that will be Europe’s second biggest when completed in 2016. Deutsche performed key “financing, hedging and syndication roles” for the €2.8bn project. “Considering the size and complexity of this project and the involvement of more than 20 equity and debt financiers, execution of the project financing in six months was a significant achievement,” the bank said. Other financiers include the commercial banks ABN Amro and BNP; the European Investment Bank; as well as PKA, a Danish pension scheme that has made a €120m equity investment.

Social

Sustainalytics, the ESG research firm, has published a study detailing the risks – whether regulatory or reputational in nature – that investors face when they invest in companies involved with the manufacture of aerial drones. According to Sustainalytics, the report also informs investors on ways with which they can best manage the risks associated with drones. The top manufacturers of the military technology are Boeing, Lockheed Martin and Northrop Grumman of the US, as well as Israel Aerospace Industries and Prox Dynamics of Norway.

PKA, the administrator five pension funds for Denmark’s health care and social service sectors, has invested DKK1.3bn (€147m) to build a new psychiatric hospital in Aarhus in what is being seen as the country’s biggest public-private partnership (PPP) project ever. PKA has teamed up with Danish firms KPC and Wicotec to realise the hospital, which will have a size of 50,000 square metres. KPC is the building contractor, while Wicotec will operate the facility once it is completed in 2019. According to Peter Damgaard Jensen, PKA’s Chief Executive, the investment had the dual benefit of better equipping Denmark’s health care sector while creating stable returns for PKA’s beneficiaries. Announcement (Danish)

The first charity bond has been listed on the London Stock Exchange through Retail Charity bonds, the new platform enabling UK charities to raise debt. Golden Lane Housing, the housing arm of disability charity Mencap, aims to raise £11m through its bond, which it will spend on building 30 homes for more than 100 people with learning disabilities. It will pay 4.375% interest per year, payable twice yearly. The bonds are expected to mature on 29 July 2021.h6. Governance

Shareholders can have a “powerful impact on corporate diversity” according to Securities and Exchange Commissioner Luis Aguilar. “As you exercise your fiduciary duties and obligations as pension fund trustees and asset managers, you should pay close attention to the importance of diversity in the boardroom and how it could impact the company’s bottom line,” he said in a recent speech. “Your voices can make a difference—and you should not hesitate in making them heard,” he adding in the address Evaluating pension fund investments through the lens of good corporate governance.

UKSIF, the UK Sustainable Investment and Finance Association, has welcomed the new report on fiduciary duty released today (July 1) by the independent Law Commission. CEO Simon Howard said: “Our members and others in the investment community have long recognised that the law on fiduciary responsibility was “confusing and inaccessible” as the Law Commission puts it. We are pleased that the Commission has accepted the case for clarification. In particular we are glad that they make it clear that trustees should consider environmental, social and governance factors where they are financially material.”

Separately, Paul Lee, Head of Investment Affairs at the National Association of Pension Funds (NAPF), the UK trade body, said it was “extremely helpful” to have the reassurance that pension trustees should use their judgement as to what is in the beneficiaries’ interests over the appropriate time horizon. He added: “In many cases, trustees will decide that this will encompass risks that will go to value over the long-run, including issues such as governance and environmental matters.”

UK Business Secretary Vince Cable has welcomed the launch of an Enhanced Code of Conduct for executive search firms to support more women appointments to FTSE 350 boards. More than 70 firms signed up to an original voluntary code of conduct launched in 2011. In response to the independent Sweeney review in February 2014, the search industry has developed a new enhanced code to “recognise those firms driving progress and embedding higher standards”.

The Comptrollers for New York State and New York City, who look after a total of $304.7bn (€223.2bn) in pension assets for state employees, have written to 20 US firms in which they hold shares to urge them to uphold the rights of LGBT (lesbian, gay, bi-sexual and transsexual) employees wherever they do business. “We want them to describe what steps they are taking to ensure workplace rights of LGBT employees in nations where LGBT rights are increasingly under attack,” they said, citing Russia and several African countries as examples of such nations. The companies written to include the US’ best-known companies, including Coca-Cola, General Electric, JPMorgan Chase, McDonalds and Proctor & Gamble. Link

Calvert, the US sustainability specialist, has recommended including Comcast Corp., the Nasdaq-listed communications firm, for inclusion in the Calvert Social Index. Comcast has recently been reviewed and now meets the Index’s standards for workplace labor, Calvert said, adding: “The company demonstrates evidence of improved labor policy commitments and performance.”

The University of Cambridge’s Institute for Sustainability Leadership, together with European Climate Foundation, the Institutional Investors Group on Climate Change (IIGCC) and UNEPFI has just published a report, authored by Dr Rory Sullivan, that distils the key findings from the recently released Intergovernmental Panel on Climate Change Fifth Assessment Report for investors and financial institutions. See

Federico Buenrostro, who was chief executive of US pension giant CalPERS until 2008, intends to plead guilty to involvement in a “pay to play” scheme, the Wall Street Journal reports. According to the report, Buenrostro and former CalPERS board member Alfred Villalobos colluded to get a $14m payoff from a private equity firm called Apollo in exchange for agreeing to invest $3bn in Apollo’s funds.