RI ESG Briefing, July 2: BP says $18bn Deepwater Horizon settlement in shareholders’ long-term interests

Environmental

Oil giant BP says it has reached an $18.7bn settlement of damages claims from the US government and five states after the Deepwater Horizon rig disaster in the Gulf of Mexico five years ago. Carl-Henric Svanberg, BP’s chairman, said: “The board therefore believes that this agreement is in the best long-term interest of BP and its shareholders. The US Justice Department said it could be the largest settlement with a single entity in American history.

Danish infrastructure investor Copenhagen Infrastructure Partners (CIP) says its second institutional fund has, following a recent closing, taken in DKK14.7bn (€1.9bn) in assets – or almost DKK5bn more than expected. Launched last September with the support of eight Danish pension schemes – among them PensionDanmark, PFA and Lægernes Pensionskasse – CIP’s “Copenhagen Infrastructure II” targets projects in Western Europe and North America like biomass plants, wind parks and transmission grids. CIP said that since the fund’s launch, even more investors had decided to participate. They include Norwegian pension schemes Kommunal Landspensjonskasse and Oslo Pensjonsforsikring; a UK pension fund managed by The Townsend Group and the European Investment Bank. Announcement

The Vatican may consider divesting its holdings in fossil fuels, according to a report in The Guardian citing a church official. It quoted Flaminia Giovanelli, a lay member of the Vatican’s Pontifical Council for Peace and Justice, as saying she thought the €6bn Vatican bank may in the future consider divestment. The paper said the statement was made at a press conference on July 1 to discuss the pope’s recent encyclical on the environment.

Campaign group WWF has called on Danish pension funds to up their responsible investing activity after it found the 16 largest funds continue to invest ‘significantly’ in fossil fuel companies, according to reports. European Pensions said the NGO assessed the biggest funds and found despite an increasing trend towards greener investments, that all 16 continue to hold a significant amount of assets in companies that have a negative effect on climate change. So, the WWF has urged funds to divest from fossil fuels.

Social

Real estate firm LaSalle Investment Management has made its first investment on behalf of 100% SRI French public service additional pension scheme L’Etablissement de Retraite additionnelle de la Fonction publique (ERAFP) after it was awarded a 10-year European investment mandate in the first quarter of this year. The acquisition is a freehold retail block in Birmingham, UK. It was purchased for £14.9m (€20.2m) from Green Property on behalf of receivers, representing a net initial yield of 6.6%. Link

Meanwhile, Hermes Investment Management has released ‘Responsibly in practice’, a report looking at how to integrate responsible property investment (RPI) in practice. Hermes is calling on the industry to follow its approach. Home page. Governance

The Securities and Exchange Commission, the US regulator, has proposed rules to establish listing standards requiring companies to adopt policies that require executives to pay back incentive-based compensation that they were awarded erroneously. It’s part of work required by the Dodd-Frank Act and SEC Chair Mary Jo White said: “The proposed rules would result in increased accountability and greater focus on the quality of financial reporting, which will benefit investors and the markets.”

Retail investors have reportedly flocked to car giant Toyota’s innovative ‘Model AA’ class shares. Reuters reported that the $4bn issue, underwritten by Nomura Securities, had sought to attract longer-term shareholders. Under the plan, the unlisted shares (named after Toyota’s first car) must be held for five years, after which they can be converted to common shares, although the plan has been criticised by foreign investors.

The NZ$29.6bn (€17.9bn) New Zealand Superannuation Fund has appointed Auckland-based Mint Asset Management to a NZ$150m active New Zealand equities mandate. “Mint is a welcome addition to our stable of managers and we look forward to working closely with them,” said Matt Whineray, NZ Super’s Chief Investment Officer. NZ Super also has an active New Zealand equity mandate with Devon Asset Management and a further mandate with Milford Asset Management remains suspended and is being managed by the Guardians until further notice.

Investors are engaging with French utility Engie (formerly known as GDF Suez) about its €2.5bn green bond, RI understands. The bond has come in for criticism from NGO BankTrack, which claims the proceeds partly went to finance the controversial Jirau mega-dam in Brazil. The project has had “egregious environmental, social and human rights impacts” the campaign group says.

The separation of the asset management division from Swiss private bank Notenstein has taken place, with the division apparently relocating to Zurich and a re-branding in the works. Raiffeisen, the Swiss cooperative bank that owns Notenstein, said last October it had hived off the division and merged it with another asset management boutique in its possession called TCMG. Named Notenstein AM, the new firm was to start in Basle with 180 employees and CHF13bn (€12.4bn) in assets under management. But now Swiss news reports say that most of the firm’s employees will be relocating to its new base in Zurich, adding that Notenstein AM will be rebranded. Link

A new academic study looking at the role of investment consultants has been put together by Gordon Clark of Oxford University and Ashby Monk of Stanford University. They find the relationship between consultants and their asset owner clients is “characterised by ambiguity”. “There is a lack of clarity as to the precise roles and responsibilities of both parties,” Clarke and Monk write. ‘The Contested Role of Investment Consultants: Ambiguity, Contract, and Innovation in Financial Institutions’ is available here.