RI ESG Briefing, July 11: Natixis creates ‘green weighting factor’ methodology

The round-up of the latest ESG developments

Environmental

Natixis has created a ‘Green Weighting Factor’ methodology, which it will apply to its financing deals in anticipation of the introduction of a Green Supporting Factor and a green taxonomy in Europe. The factor adjusts the expected profitability of deals depending on whether they are climate-aligned or have an adverse environmental impact. At pilot stage, the process will be applied to the bank’s transactions within the automotive, real estate, electricity and mining sectors. Natixis has created its own green definitions, but has been set up to absorb the EU sustainability taxonomy, currently being developed by a Technical Expert Group – which includes Manuel Coeslier, a portfolio manager at Natixis subsidiary Mirova.

Macquarie Capital, the asset management arm of Macquarie Group, has launched the Green Investment Group (GIG) in America, after building a presence in Asia and Europe. According to Nick Butcher, Global Co-Head of Infrastructure and Energy for Macquarie Capital, the platform has brought in more than $20bn worth of investments into green energy projects to date. GIG has also announced a partnership with Candela Renewables, a US developer of greenfield solar projects, which has agreed to develop assets exclusively for GIG.

Catholic Relief Services (CRS) and the Inter-American Development Bank’s Multilateral Investment Fund (IDB/MIF) have launched Azure, a blended finance facility catalyzing both investment and grant capital to improve water and sanitation services for under-served communities in El Salvador. The announcement was made at the Third Vatican Impact Investment Conference in Rome. Azure is comprised of two integrated components: Azure Source Capital (ASC) and Azure Technical Services (ATS). ASC is a newly launched US-based finance company sponsored by CRS and IDB/MIF that will deploy loan capital to upgrade and expand water and sanitation infrastructure, initially in El Salvador and then in neighboring Central American countries. It will be managed by Total Impact Capital, an impact investing firm located in Maryland.

Social

A US food company has become what is believed to be the first US business to use trust law to restructure itself to support purpose-based entrepreneurship, ownership and succession, according to RSF Social Finance, the social investment firm that helped the process. RSF provided a $10m loan and $1m in working capital to help Oregon-based Organically Grown Company buy out previous shareholders and be housed in future under the Sustainable Food and Agriculture Perpetual Purpose Trust.

A £3m (€3.4m) pot is available to fund managers looking to invest in socially beneficial arts and culture programmes in the UK’s Northern Region. The money comes from the £15m (€17m) Northern Cultural Regeneration Fund and brings the total committed funds to £14.3m (€16.2m). The appointed manager will design and administer the investment program between April 2019 and March 2021. Link. Governance

The Governance Institute of Australia, the independent professional association, has urged investors to hold company boards to account, especially on non-financial matters such as corporate culture and governance. Steven Burrell, the Institute’s Chief Executive, said: “Shareholders can demand greater transparency about the business models, incentives and remuneration packages and if they don’t like what they see, they can do something about it by exercising their right to vote.” The comments were made in the wake of the third round of the Hayne Royal Commission, launched by the Australian government in 2017 to investigate misconduct in the banking, superannuation and financial services industry.

Japan Exchange Group, the operator the Tokyo Stock Exchange, and London Stock Exchange Group are to collaborate on sustainable investment-oriented financial market infrastructure initiatives. With their initial focus including the promotion of listing ESG-related products, the stock exchanges say they have already begun identifying areas for innovation across the full spectrum of ESG investment finance. JPX set up a Sustainability Committee on July 1.

Investors must consider whether tech giants such as Facebook, Amazon, Apple, Netflix and Google (the FANGs) are adequately managing standards of responsibility and addressing governance risks, a report by Hermes Head of Investment Eoin Murray has recommended. The report – entitled Sickly Tech – says concerns over data privacy in the wake of the Cambridge Analytica scandal are casting a shadow over strong returns, outlining three major investor risks: increased regulatory intervention; growing disengagement; and enforced breakup or nationalisation.

Unnamed major shareholders in Deutsche Bank shareholders have criticised the advisory role being taken at the bank by private equity firm Cerberus, according to the Financial Times. Deutsche had decided to hire Cerberus to advise it on restructuring its operations.

Data firm IHS Markit has created a one-stop ESG data service. The ESG Reporting platform is intended to act as a central source of sustainability reports, climate impact reports, carbon offset program data and other ESG-related information published by corporations. CEO Lance Uggla said the new offering would “provide an efficient, single source for information and data relevant for ESG-focused investors and other stakeholders”.

Companies outside France’s CAC40 index should improve talent pipelines to ensure women reach executive positions, a report released by French consulting firm Governance & Structures has recommended. According to the report, such firms lag members of the benchmark index. CAC40 companies saw an increase in the number of women within committees or as chairs from the end of June 2017 to June 2018, and have at least four board positions occupied by women in 80% of cases.