RI ESG Briefing, March 14: SEC blocks investors’ bank break-up proposals

Environmental

UBS, the Switzerland-based banking giant, says its Renewable Energy & Clean Technology team raised approximately $5.7bn from 12 transactions last year, according to its new annual report. Deals included the initial public offering of Borregaard, GT Solar’s $220m convertible bond and the $72m IPO of US biodiesel producer Renewable Energy Group. Its socially responsible investment (SRI) assets totalled $253.73bn at the end of 2012 – representing 11.4% of its total invested assets (2011: 11.1%). The increase was “largely due to growing demand for screening services and the expansion of the Sustainability and Responsible Property Investment strategy to an increased number of investment funds”.

TIAA–CREF, the US academic sector asset manager, is to put $5m into a new agricultural research centre at the University of Illinois, according to the Financial Times. The idea is to help turn farmland into an asset class that can rival commercial real estate. “This industry is in its infancy, it’s where commercial real estate was 30 years ago”, the FT quoted the firm’s Jose Minaya, head of global natural resources and infrastructure investments, as saying.

Global law and tax firm CMS has announced what it says are the first pan-European standard green lease clauses for real estate. The 20 clauses “will simplify the deployment of green leases across one or more European countries” it says. Green Lease Clauses in Europe – a practical approach allows investors, managers and occupiers to streamline their contracts across their European operations, CMS adds. “Investors will see it as a way to protect their investment with the property’s sustainability maintained during its lifetime,” added Bruno Duquesne, Head of Real Estate at CMS Belgium.

Social

Commonfund, the US investment management firm which provides services to non-profits, endowments, pension plans and family offices, has become a signatory to the UN Principles for Responsible Investment (PRI). Commonfund was founded in 1969 and manages over $24bn for more than 1,500 institutions. Bouwfonds REIM, the €7.2bn real estate investment fund group that’s ultimately part of Rabobank, has also signed up to the PRI.h6. Governance

Investor groups have lost out in their bids to get questions about US bank break-ups onto the banks’ AGM agendas this year. Investors including the AFSCME, CtW Investment Group, the AFL–CIO Reserve Fund and Trillium Asset Management had variously tried to file the resolutions at Bank of America, Citigroup, Morgan Stanley and JP Morgan Chase. But the Securities and Exchange Commission is allowing all the banks to omit the resolutions from their proxy ballots this year as they are “vague and indefinite”.

A proposal from shareholder activist John Harrington calling for JP Morgan to act to prevent “illicit financial flows” – especially to terrorist organisations – has also been blocked by the SEC, which said it “does not focus on a significant social policy issue”.

Some of the governance practices developed for listed companies can be ‘borrowed’ to improve a perceived “misalignment of interests” between private equity executives (‘general partners’) and their clients (‘limited partners’). That’s the theme of a new article by Martin Steindl, the former Senior Corporate Governance Officer for the International Finance Corporation (IFC) who is now in a similar role at Dutch development organisation the FMO. He writes: “Just as investors have advocated changes in corporate governance and disclosure practices to be able to act more effectively as stewards of publicly-listed companies, it may be time that GPs and LPs consider a fund governance model that allows LPs to more effectively meet their own obligations as stewards for their investors.”

New York City Comptroller John Liu has announced that the city’s pension funds have reached clawback agreements with US financial groups Capital One, Citigroup and Wells Fargo. They will expand their policies on clawbacks to cover misconduct that causes financial or reputational harm. “Executives need to be held financially accountable for misconduct that harms the company, and that includes improper behavior and reckless risk-taking by those they manage,” Liu said. He added it was a “vital step” toward reining in out-of-control executive pay based on short-term gains. The funds have now withdrawn their shareholder proposals at the banks, following similar agreements last year with Goldman Sachs, JPMorgan Chase, and Morgan Stanley.