RI ESG Briefing, June 17: Papal Encyclical, NEI Investments, Thomson Reuters, development banks

Environmental

Support has been expressed for Pope Francis’s encyclical on climate change. The Interfaith Center on Corporate Responsibility (ICCR) declared its “readiness to join with all who are resolved to harness the political and moral courage required to reverse the destructive path we have chosen for far too long”. And UK responsible investment watchdog ShareAction says the encyclical will add to the momentum of voices challenging obstructive climate lobbying by companies. Catherine Howarth, Chief Executive of ShareAction, called it a “punchy challenge to business lobby groups that are working behind the scenes to undermine an international deal on climate change”.

The fossil-fuel divestment campaign has “painted a bull’s eye on the wrong target”, according to Robert Walker, Vice-president, Ethical Funds and ESG Services, at NEI Investments, in an opinion piece published in the Globe & Mail. “Investors,” he says, “should engage with fossil-fuel companies and the companies on the demand side of the energy equation. We all need to be working toward energy efficiency and using new, cleaner energy technologies where possible. Investors can also work with forest products, and mining, oil and gas companies to protect the boreal forest – the world’s largest terrestrial carbon bank.”

The world’s six large multilateral development banks (MDBs) delivered over US$28bn in financing last year to help developing countries and emerging economies mitigate and adapt to climate change. It brings their collective commitments to more than US$100bn, over four years, according to the fourth joint report on MDB Climate Finance. Link

A solar energy firm in Vermont has divested its own pension assets from fossil fuels. SunCommon, which is a Vermont Benefit Corporation, says it has divested its 401k employee retirement plan of fossil fuels. It says it is in keeping with its “legal charter that directs the company to attend to the triple bottom line of people, planet and profit, the 69 employees were offered mutual fund options that support clean energy.” SunCommon automatically signs up each employee to the company’s 401k retirement plan on their first day of work, matching up to 4% of their salaries. SunCommon employees, in three and a half years of business, have amassed over $740,000.

Social

News and data giant Thomson Reuters has announced
new partnerships with two anti-slavery organizations, Verité and Liberty Asia, to turn the power of data analytics onto corrupt labor brokers and people traffickers. “Companies and financial institutions can become unwitting participants in slavery due to a lack of understanding of their suppliers, partners or contractors: although they may have a thorough understanding of their immediate contractors, sub-contractors may expose companies to further risk,” it said.h6. Governance

Laura Berry, Executive Director of the Interfaith Center on Corporate Responsibility (ICCR), has written to the Washington Post in response to an editorial on June 8 that defended Mary Jo White’s record as chair of the Securities and Exchange Commission. She said the Post “ignored the agency’s founding mission: to protect investors”. Berry wrote: “After the Supreme Court’s decision in Citizens United, corporate spending in campaigns greatly expanded, which could present a risk to businesses’ bottom lines and shareholders’ investments. But without an SEC disclosure rule, investors often are left in the dark about which candidates and causes their investments support.”

Investment bank JPMorgan Chase will not have to face a shareholder lawsuit alleging it failed to properly investigate the so-called ‘London Whale’ $6.2bn trading scandal, according to a federal appeals court ruling. The derivative action, one of several to stem from the debacle, saw shareholder Ernesto Espinoza claim the bank had not done enough to pursue those responsible for the affair. But the 2nd U.S. Circuit Court of Appeals in New York said a lower court judge hadn’t abused his discretion by dismissing the lawsuit by Espinoza. But the judges added: “We express our view that the better approach would be to review the case de novo.”

The Securities and Exchange Commission (SEC) plans to consult investors over the summer over how to strengthen the audit market, the FT reports. One of the ideas under consideration is compulsory disclosure of auditor tenure, according to Joseph Carcello, a member of the SEC’s investor advisory committee. Figures compiled for FTfm by ESG analyst MSCI show a large number of S&P 500 companies have used the same auditor for well over 50 years.

Ecclesiastical Investment Management, the UK fund manager, is to rebrand as EdenTree Investment Management. The name change will take effect from 6 July and coincides with the launch of an updated company website. Its funds, such as the Ecclesiastical Higher Income offering, will remain unchanged and the business remains part of the Ecclesiastical group. “We will continue to operate an active, value-based and long-term approach to stock picking, building on the long track record of delivering profit with principles for investors and charities,” said investments director Sue Round.

A new index of boardroom behaviour has being put together by the Institute of Directors, the 38,000-member UK business body. The IoD is building the index after a series of scandals, including the 2008 banking crisis and Tesco’s accounting problems, to try to predict the next reputational hit to the UK’s biggest companies. The index looks at firms’ adherence to governance codes, while also taking account of the views of a survey of 400 IoD members and accounting bodies.