RI ESG Briefing, July 12: LAPFF to be more supportive at AGMs where appropriate

The round-up of environmental, social and governance news

Environmental

UKSIF, the UK’s Sustainable Investment and Finance Association, has backed a letter to Parliament’s influential Treasury Select Committee seeking an inquiry into why government economists have apparently blocked a major review into resource depletion, climate change and UK growth prospects. Other signatories to the missive include: Aviva Investors, Climate Change Capital, The Co-operative Asset Management, First State Investments, Impax Asset Management Group, Triodos Bank, WHEB Group and the Friends of the Earth.

Impax Asset Management, the low carbon investment specialist, has released a white paper called Beyond Fossil Fuels: The Investment Case for Fossil Fuel Divestment. The 10-page report says there are legitimate questions about the effects on portfolio risk and returns from the partial or complete divestment of fossil fuel stocks. “So the question becomes: how should a fiduciary compare the risks to portfolios presented by stricter carbon regulations to the risks associated with reducing exposure to fossil fuel stocks?”

Netherlands-based bank Rabobank has reportedly said it will not lend money to shale gas companies. A spokesperson has said the bank’s North American office would not lend to any entity engaged in fracking.

Social

A special edition of the Journal of Corporate Citizenship on Responsible Investment in Emerging Markets has been published with guest editors, Rory Sullivan, Senior Research Fellow at the University of Leeds and Daphne Bilouri, Partner at West Sands Advisory, the emerging and frontier markets advisor. It looks at the practicalities of implementing responsible investment in emerging markets and the outcomes (financial and social) that result. Sullivan notes: “The journal also opens up wider questions around the implications of foreign investment for the stability of emerging markets. As we reflect on the causes and consequences of the global financial crisis, we need to be aware that the inflows of foreign investment into emerging markets may have the perverse effect of increasing their vulnerability to future financial shocks.”h6. Governance

The Local Authority Pension Fund Forum attended the annual meeting of retailer Marks & Spencer this week, but “under very different circumstances” from previously. In 2009 LAPFF, which represents UK funds with more than £115bn (€132.9bn), filed a shareholder resolution at M&S seeking the separation of chairman and CEO roles, which was eventually taken up. The forum now believes the company has improved its governance and attended the AGM to provide shareholder support for the board. It’s part of a decision to attend more AGMs, after feedback from companies disappointed by the lack of institutional shareholder presence at the meetings. “The Forum intends to attend a number of AGMs to provide positive feedback to boards where appropriate.” Link

Canada’s securities regulators will assess whether a “regulatory intervention” on proxy advisory firms is necessary given “concerns raised and risks identified”. The Canadian Proxy Infrastructure Review will seek to identify weaknesses in the processes used by parties in the Canadian indirect holding system to collect, manage and transmit data regarding voting entitlements and voting instructions that undermine the accuracy of proxy voting results. The news comes in the regulators’ latest three-year plan.

Five major German banks have drawn up a set of common principles for management remuneration. In a joint position paper, Commerzbank, Deutsche Bank, DZ Bank, HSBC Trinkaus & Burkhardt and HypoVereinsbank say they have committed to “ethical principles in the remuneration of management” with the core aim to make remuneration systems open and transparent and without “false incentives”. Link

Securities and Exchange Commissioner Daniel Gallagher has said the SEC should consider new guidance to make sure investment advisers fulfil their fiduciary duty when they follow the recommendations of proxy advisory firms in shareholder elections. He was speaking at a conference organised by the Society of Corporate Secretaries and Governance Professionals in Seattle. SEC guidance would “go a long way toward mitigating the concerns arising from the outsized and conflicted role of proxy advisory firms” he said.