RI ESG Briefing, July 15: new report from Oxford University’s Stranded Assets Programme

The round-up of environmental, social and governance news

Environmental

A new report from the Stranded Assets Programme at Oxford University’s Smith School has found “growing evidence” that environment-related risks are material and have the potential to impact the financial system and financial stability. The report – Financial Dynamics of the Environment: Risks, Impacts, and Barriers to Resilience – was commissioned by the UNEP Inquiry into the Design of a Sustainable Finance System.

The PSI Initiative has launched the Global Resilience Project, a project that aims to tackle natural disaster risk by identifying the most effective measures to combat disasters and helping communities implement them. The initiative is led by Insurance Australia Group, and its findings are outlined in a new report, titled: Building disaster-resilient communities and economies. Link

Responsible consumption (RC) products now accounts for at least 15% of all grocery sales, or a $400bn global market, according to a new report from The Boston Consulting Group, titled: When Social Responsibility Leads to Growth: An Imperative for Consumer Companies to Go Green. The report says that in the otherwise stagnant grocery sector, two-thirds of total growth in recent years has come from RC products, despite a higher price than conventional groceries, as quality improves and concerns about chemicals increase.

Social

The Pension Insurance Corporation, which provides insurance buyouts in the UK defined benefit pension sector, has provided £114m (€143.7bn) of funding as the sole investor in a loan allowing the University of London to redevelop some of its student accommodation. The project will deliver 1,200 rooms and will be run by campus accommodation provider University Partnerships Programme (UPP). It’s part of PIC’s infrastructure investment plan where it focuses on investing in long-term, secure debt investments to match long-dated liabilities.

The UN Global Compact, the United Nations’ business sustainability platform, says it expelled 285 companies in the first half of 2014 for failure to communicate progress for at least two consecutive years. The number of companies joining the UN Global Compact continues to exceed the number of expulsions, with 567 companies from around the world joining the initiative from January through June 2014.

Stiftung Abendrot, the CHF1.23bn (€1bn) Swiss sustainable pension fund, says a renewable commercial property project in which it invested CHF15.3m is now complete. The property, located in the Swiss city of Winterthur, offers 4000 square meters of office space. Its roof is outfitted with solar panels that provide the building with electricity. Last September, the pension fund said it had allocated €35m to construct apartments in a German town near Basle that would be powered and heated by solar power. All told, properties account for 23% of the scheme’s assets, along with equities (53%) and bonds (22%).h6. Governance

Harrington Investments, the California-based socially responsible investor with $160m (€117m), has warned in a blog posting that US drugs chain Walgreens may “go rogue” by relocating its headquarters to Switzerland in order to cut its tax payments. According to Harrington, Walgreens could take advantage of a loophole in US tax laws called “inversion.” “This typically involves the buyout of a foreign company – in Walgreen’s case UK peer Alliance Boots – followed by a “restructuring” to change its national identity for tax purposes,” wrote Harrington. The SRI investor also cited a news report saying Walgreen’s was being pushed into doing inversion by three hedge funds and a Goldman Sachs investment fund, which together own around 5% of the US firm’s stock.

Shareholders in Burberry voted by 52% against the pay package of CEO Christopher Bailey at the fashion house’s annual meeting last week in a non-binding vote. Bailey, who took the reins in May, has a salary package worth up to £10m.

Eumedion, the Dutch investor corporate governance group, has warned that that the public equity market is losing its function as a growth engine for companies after the number of listings of Dutch companies on the Amsterdam stock exchange fell from 160 to just under 100 between 2003 and 2014. Eumedion has published seven measures to promote public listings as an attractive option for smaller companies. It includes lowering the cost of an initial public offering (cost of supporting banks, listing fees, advisory fees), and researching a ‘lighter’ accounting regime for smaller, new listed companies.

Standard Life Investments, the UK-based fund firm, says shareholder engagement is “evolving” – with more discussion on remuneration policies representing another step towards improved governance, stewardship and trust. “If 2013 was the year of responsibilities and regulation, 2014 has emerged as the year of consultation,” the firm says.

ODIN Fund Management, the Norwegian mutual funds house and a PRI signatory, has hired Sustainalytics as its ESG research provider. ODIN is a subsidiary of SpareBank 1 Gruppen in Norway and has offices in Oslo, Stockholm, Gothenburg and Helsinki. It is known in the Nordic region for its value investment style with a long-term investment horizon. ODIN said hiring Sustainalytics would enable it to tailor ESG products to the preferences and values of different target groups. Jarle Sjo, Portfolio Manager at ODIN said: “An extensive selection process resulted in us entering a long-term collaboration with Sustainalytics. The quality of their services and an ambition to grow with the client led us to our decision.”