RI ESG Briefing, July 27: Council of Institutional Investors welcomes FTSE’s Snap decision

Environmental

PFA, Denmark’s largest commercial pension fund, is set to track the carbon emissions of companies it invests in, excluding those it finds breach the Paris climate accord, reports Reuters. The announcement was made by the $95bn fund’s CFO, Anders Damgaard, who also said the fund was reviewing whether it could match the returns from the four sectors (energy, industrials, utilities and materials) which contribute more than 80% of the carbon emissions in its portfolio from alternative investments. AP7, Sweden’s largest national pension fund, sold its holdings in six firms it said violated the Paris agreement in June.

The Universities Superannuation Scheme has agreed to acquire a combined 10.94% stake in Kemble Water Holdings Limited, the ultimate holding company of UK utility Thames Water, from investors QSuper, Alberta Investment Management Corporation (AIMCo) and OPTrust. Following completion, USS will become the third largest shareholder in the company. The transaction is expected to close later in the year.

Climate-KIC Australia, a new public-private innovation partnership aimed at finding solutions for climate mitigation and adaptation, has been launched. Based on the European Climate-KIC model, established six years ago by the European Institute of Innovation and Technology (EIT), the Australian non-profit aims to link businesses, entrepreneurs, research, investors, and government to address the challenges and harness the opportunities of climate change.

The South African city of Cape Town has announced its commitment to divest from fossil fuel assets, according to climate campaign group 350.org. The city’s mayor, Patricia De Lille is quoted as saying it would “instruct investors not to put our money into fossil fuel-related companies or for it to be used to fund the development of dirty and unsustainable projects”. She added: “We want our investments to be aligned with our principles of resilience and sustainability.”

Social

The Pension Protection Fund’s Board is to host a Memorial Lecture in the name of Ebba Schmidt on September 19. Schmidt led and implemented the responsible investment programme at the UK’s £30bn pension lifeboat fund before dying of cancer in 2015. The London lecture, delivered by Oxford Professor Gordon Clark, will be on the topic: ‘An Integrated Approach to Sustainable Investment is a Winning Strategy’.

The Ontario Teachers’ Pension Plan, Canada’s largest single-profession pension plan, has acquired an Iberian funerals business called Mémora from private equity group 3i – calling it a “unique opportunity”. Jo Taylor, Senior Managing Director, International, at Teachers’, commented: “Mémora presents a unique opportunity to invest in a sector we have extensive experience in and fits our investment mandate perfectly. It would also support “the delivery of a best in class customer relations model.” Proceeds of the sale to 3i stand at £117m.

Japan is reportedly debuting social impact bonds (SIB), with a SIB to fund a Kobe city programme on chronic kidney disease. Sumitomo Mitsui Banking Corporation and others are set to invest around 30 million yen ($267,714) says Reuters. The investors will receive annual interest of up to around 5% if the project meets measured outcomes.

An online petition calling on the European Union to cease trade talks regarding Western Sahara with Morocco has been created. It urges the EU to respect the rights of the region’s Saharawi people and to abide by the Court of Justice of the European Union (CJEU) ruling that no EU trade or association deal with Morocco can be applied to Western Sahara without the express consent of “the people of Western Sahara”, as it is a “distinct and separate territory” from Morocco.h6. Governance

The Council of Institutional Investors (CII), the US investor body, has applauded index firm FTSE Russell’s preliminary decision to bar social media firm Snap and companies with virtually zero voting rights in the hands of public shareholders from inclusion in the Russell 3000 and other FTSE Russell indexes. “This is an important breakthrough for all investors,” said Executive Director Ken Bertsch, adding the decision is a “rebuke” to companies that deny public shareholders a voice. The index provider said it made the decision based on client feedback

The State Universities Retirement System of Illinois (SURS), the $20bn administrator of the US State’s public academic pension fund, is soliciting proposals for securities litigation monitoring and evaluation services. SUR’s Board of Trustees will retain up to five firms from the Request for Proposals, which will constitute a list of “approved counsel”, to be consulted by the fund in securities litigation matters.

It’s been reported that there was a record amount of securities fraud suits (226) filed in the first half of this year. Bloomberg was citing a Cornerstone Research and the Stanford Law School Securities Class Action Clearinghouse report released this week. It said the number of new lawsuits is the highest for the first half of any year since enactment of the 1995 Private Securities Litigation Reform Act. Almost 5% of US listed firms were sued in class actions in the first half.

NOW: Pensions, the UK workplace pensions company owned by Danish labour market pension fund ATP, has reportedly chosen to withdraw itself from The Pension Regulator’s master trust assurance list of providers for auto-enrolment whilst it works through “historical issues”. The master trust assurance framework helps trustees of defined contribution (DC) schemes assess whether they meet equivalent standards of governance and administration set out in the Regulator’s DC code. CEO Morten Nilsson cited the change of a third-party administrator and the complexity of some cases as the cause of delays in processing contributions for a “small percentage of clients” which ultimately led to the decision to withdraw.

John Ruggie, the Harvard professor that authored the UN’s Business and Human Rights principles, has released a new article called Multinationals as global institution: Power, authority and relative autonomy. He writes: “One conclusion seems inescapable: in light of the multinational’s power, authority, and relative autonomy, the time-worn mandatory/voluntary dichotomy inhibits rather than advances our coming to grips with the challenges posed by corporate globalization.”

AI algorithms have reportedly confirmed a lack of diversity on corporate boards globally, according to the New Scientist. Despite year on year improvement, the algorithm, which detected the age, race, and sex of board members at nearly 500 of the largest companies based on their websites, found that only 21% of corporate executives were female. The study also found that only 3.6% of executives were black and only 16.7% were Asian.

The Global Reporting Initiative’s (GRI) Sustainability Reporting Framework improves the quality of ESG disclosures, according to research by the Governance & Accountability Institute and New York based Baruch College. The Institute also found that in 2016 82% of S&P 500 companies published sustainability reports – up from 53% of companies in 2012 – highlighting the increasing trend of disclosures surrounding ESG metrics by companies.

Companies in the UK are reportedly preparing to hold their annual general meetings using electronic means only. Reuters reported that at least 12 firms have amended their bylaws this year to allow for AGMs to be held electronically in the future – though only luxury goods outfit Jimmy Choo has actually done so. But, citing Broadridge Financial Solutions, the report said that some 177 US have done so as at the end of June.