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RI ESG Briefing, July 25: Sweden’s Alecta backs $175m microfinance securitisation

The latest ESG market developments

Environmental

Seventy percent of companies are failing to disclose their impact on forests, repeatedly shunning requests from CDP, the investor-backed environmental data NGO. According to CDP’s new report, The Money Trees, the disclosure request was made to over 1,500 companies deemed to have a significant impact on or to be susceptible to deforestation. Of those that responded to the request, 24% showed no or limited action to reduce deforestation.
KfW’s debut green bond has reached maturity. In June 2014, the German development bank made its entrance into the green bond market – an asset class of which it is now one of the biggest and most respected players – with a 5-year, €1.5bn deal. It was the largest green bond ever issued at the time.
Madrid has joined the International Network of Financial Centres for Sustainability (FC4S) – convened by the UN Environment Programme. José María Roldán, President of the Spanish Banking Association, said the move would help Spain “to learn from the experiences developed in other countries and implement joint initiatives that can help companies comply with climate imperatives”. Madrid will be represented by the Centre for Responsible and Sustainable Finance in Spain (FINRESP). FC4S now has 27 members.

Social

Swedish pension giant Alecta and US government agency Overseas Private Investment Corporation (OPIC) are “key investors” in a $175m microfinance securitisation instrument created by ResponsAbility, the Zurich-based impact specialist that recently had investment from Australia’s Christian Super. US impact investing firm Calvert Impact Capital also provided private capital into the deal, which will pool the borrowing needs of 26 micro and SME finance organisations. The US dollar denominated securitisation, which has an expected maturity of three years, offered investors a choice of three different risk return profiles (senior, mezzanine, and junior) in a listed, transferable bond format. JP Morgan acted as arranger and placement agent in the deal. “This type of security allows Alecta to invest capital extremely efficiently,” said Alecta CEO Magnus Billing.

BNP Paribas has agreed a sustainability-focused loan with UK housing association Optivo. The five-year, £50m revolving credit facility has its interest rate tied to the housing association’s performance on specified social impact indicators. The loan will be used for general corporate purposes, but the savings made on the interest rate will be reinvested in employment programmes. There is an option to increase the size of the facility to £75m and extend its tenor.

Social impact and real estate specialist Venn has released its first social impact report, measuring their effect on “the US’s most economically and socially downtrodden areas”. Having just raised $40m, the start-up – which claims to be focused on the Sustainable Development Goals – says the impact-focused approach could “revolutionise” real estate investing globally.h6. Governance

Social media giant Facebook has agreed to create an independent privacy committee including its board of directors, having received a $5bn fine with the US Federal Trade Commission over its handling of the issue. The settlement also requires Facebook to restructure its governance of privacy issues. As well as the new committee, CEO Mark Zuckerberg has agreed to certify Facebook’s compliance with its new rules, and the firm will have to conduct privacy reviews of every new and modified product or service and document its decisions about user privacy.
A National Advisory Board (NAB) on Impact Investing has been launched in Spain under the leadership of Juan Bernal of Caixa Bank as chair and Jose Luis Ruiz de Munain as CEO. Report, Towards an Impact Economy: Recommendations to boost Impact Investment in Spain sets a strategy for the Spain NAB over the next three years (in Spanish).
Microsoft has been praised for its decision to postpone its ‘political giving ‘, and create employee advisory councils. Fred Humphries, Corporate Vice President, US Government Affairs at Microsoft said that employee feedback had prompted the company to provide “greater transparency” on its political spending. Initially, Humphries has “implemented a brief hiatus for political contributions” until the autumn. One payment will be allocated in that time, he added, “to a bipartisan group of lawmakers on their work with us on a range of company priorities, including immigration and equality, and policies to promote privacy, climate, trade and the Cloud.” The new employee councils will contribute their views on all contributions, and will be announced later in the summer.

Coca-Cola Co and PepsiCo Inc will leave the Plastics Industry Association after pressure from NGOs about the impacts of lobbying efforts on rolling back laws that ban single-use plastic. Greenpeace USA hailed the decisions as a big win, while Coca Cola reportedly said it had quit “as a result of positions the organisation was taking that were not fully consistent with our commitments and goals”, although it didn’t elaborate further.

For the first time in its nearly hundred years of existence, the S&P 500 has no all-male boards among constituent companies. The last of the holdouts, Copart, has appointed CyrusOne CFO Diane Morefield to its board of directors. According to Bloomberg, the final 14% of companies in the stock index with all-male boards took almost 20 years to “close the gap.” Now, many of the companies can work toward what shareholder advocates consider a minimum level of female representation: at least three directors.