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RI ESG Briefing, June 18: NZ Super says it’s “working hard” on understanding climate risk

The round-up of the latest environmental, social and governance news

Environmental

The NZ$30bn (€18.3bn) New Zealand Superannuation Fund says it is putting “a major effort into understanding climate change risk and how to respond to it across our entire portfolio”. Gavin Walker, chairman of the Guardians of New Zealand Superannuation said in a speech this week in Wellington: “We are working hard on this subject matter and any changes to our investment strategy will only be made after careful consideration, be done properly and done once. In other words consistent with how we approach all our investment deliberations.”

It follows the country’s Green Party claiming the fund has been increasing its investment in the world’s dirtiest coal companies over the last three years. It cited analysis from the Parliamentary Library which it said shows that the fund “has increased the value of its investments in the world’s 20 dirtiest coal companies from NZ$29m at June 30, 2011 to NZ$36m at June 30, 2014”. But the NZ Herald quoted the fund as saying that its “total, proportionate exposure” to the companies will actually have reduced over the period of the analysis.

Caroline Lucas, the UK Green Party MP, asked
a question in Parliament about the responsibility of the House of Commons to divest the parliamentary pension fund from fossil fuels. “It is way above my pay grade to interfere with the parliamentary trustees of the pension fund here, and I leave the decisions on investments to them,” said Chancellor (Finance Minister) George Osborne, standing in for Prime Minister David Cameron during the session.

A climate change committee at Massachusetts Institute of Technology has rejected the idea of blanket divestment for all fossil fuel companies, but supports exiting coal and tar sand companies. In a 52-page report the panel concludes that dropping the investments would not likely have a sizeable impact on endowment returns. The Committee was tasked last year to launch an open, campus-wide conversation on how MIT can lead in confronting climate change. MIT president Rafael Reif is expected to unveil a climate change plan this year. It comes as two Democrat politicians propose a bill to divest Massachusetts’ $62.3bn public pension fund of its 8% holding in coal, oil and natural gas.

Social

As governments gather in Paris this week for the OECD Global Forum on Responsible Business Conduct, OECD Watch is asking for a revision of procedural guidance governing ‘National Contact Points’ referral system in order to bring about specific improvements to the way they execute their duties. It follows an analysis of cases of corporate wrongdoing brought to NCPs under OECD Guidelines for Multinational Enterprises over 15 years that has found they almost never resulted in companies being held accountable.

Northern Ireland is exploring opportunities to use social impact bonds to finance public services. Speaking at the Northern Ireland Assembly, Justice Minister David Ford said officials were looking at piloting alternative financing models for public service delivering, including social impact bonds.

Canada’s Responsible Investment Association (RIA) has published its first annual RIA Guide to Responsible Investment. The 40-page publication includes the latest research, news, and updates about responsible investment in Canada and directories of funds and companies providing RI products and services in Canada.h6. Governance

The California Public Employees Retirement System (CalPERS), at $302.3bn (€265.3bn) the largest US pension fund, has formed an ad hoc committee to review its global corporate governance principles. The Global Governance Policy Ad Hoc Committee will be chaired by Henry Jones, the CalPERS’ Board Vice President who chairs its Investment Committee. The new group is tasked with making a series of governance recommendations to the overall Investment Committee by the end of the year and the first item on its agenda is a review of the giant fund’s core governance principles.

Milford Asset Management, the Auckland-based boutique that was suspended by NZ Super from its NZ$281m active equity mandate amid a market manipulation investigation in April, has agreed to pay NZ$1.5m to the Financial Markets Authority regulator over the claims, though it denied it was liable. It accepted its board had inadequate oversight and control of the trading conduct under investigation. The firm has hired accounting firm PwC to review its governance, risk and compliance capabilities. The NZ Herald also reported Milford MD Anthony Quirk as saying the portfolio manager involved is now on extended leave.

Swiss private bank J. Safra Sarasin has paid Carsten Maschmeyer, a German billionaire who founded the financial advisory firm AWD, €10m to settle a lawsuit Maschmeyer had filed over a failed investment in a so-called “cum/ex” deal. Maschmeyer, who invested €40m in the deal, was returned €21m when he requested that the bank fully refund his money. After the other €19m did not materialise, Maschmeyer sued both J. Safra Sarasin and the bank’s former Deputy CEO Eric Sarasin, whom Maschmeyer said had guaranteed his investment. Eric Sarasin resigned over the incident. The bank still faces a separate lawsuit over cum/ex deals from Erwin Müller, another German billionaire.

Denmark has sent a “strong message” to other European countries by being the first to translate the EU’s new non-financial reporting rules into national law says campaign group the European Coalition for Corporate Justice (ECCJ). The Danish Parliament became the first to translate the rules into law on May 21 and the ECCJ noted that some aspects of the transfer go beyond EU requirements. The new law will apply to all Danish companies with more than 250 employees – approximately 1,100 companies – going far beyond the European threshold. From 2016, state-owned and listed firms with over 500 employees will have to comply.

Lorenzo Pellicioli, head of Italian industrial group De Agostini, has reportedly called for “dual-class” shares to be introduced at insurance giant Generali, in which De Agostini has a 2.4% stake. The Financial Times said he has called on the government to follow France’s example and automatically grant double voting rights to long-term shareholders. He was quoted saying that “performance is best” with long-term shareholders and that family capitalism was “better than wild public capitalism.” He was also quoted as being critical of the head of BlackRock in Italy, Andrea Viganò, for saying it would be problematic to issue dual-class shares at Generali.

Forum Nachhaltige Geldanlagen (FNG), the SIF for the German-speaking lands, has teamed up with eight think tanks and education establishments, to offer a new training programme for sustainable investments. The programme, which is funded by the European Commission, is targeted to financial advisors and other finance professionals. The partners include UKSIF in the UK; Novethic in France; Ethix SRI Advisors in Sweden; Kalaidos University of Applied Sciences in Switzerland; and Ghent University in Belgium.