RI ESG Briefing, March 18: San Francisco Employees fund adopts RI engagement strategy

The round-up of the latest ESG news.

Environmental

The $16bn (€15bn) San Francisco Employees’ Retirement System board has voted to move towards what it calls “level-two engagement”, meaning it will actively attempt to influence the policies of boards in which it invests, and ultimately divest if necessary. SFGate reports that it is part of a debate around its $540m (€509m) investment in fossil fuels. Victor Makras, chairman of the pension fund said: “If you want to divest you have to start somewhere. Our mere size and names brings something to the engagement process.”

Anne Simpson, director of governance at the California Public Employees Retirement System (CalPERS), at $299.5bn (€264.6bn) the largest US pension fund, has said long term owners need to step up on climate risk and opportunity and hold boards accountable for making the transition to low carbon. She was speaking at the Carbon Bubble event in San Francisco.

The World Bank has launched a second green bond for European retail investors linked to the Ethical European Equity Index. The Green Growth Bond 05/2023 has an eight-year maturity. It follows the bank’s first Green Growth Bond which was offered to retail investors in Belgium and Luxembourg and had a total of $91m (€85.6m) in subscribers. The new issue is linked to an index consisting of 30 European stocks, selected for inclusion based on an analysis by ESG ratings agency Vigeo and Forum Ethibel, an association that audits companies’ ESG. The index is owned, calculated and managed by Solactive. BNP Paribas Corporate and Institutional Banking partnered with the World Bank on the AAA-rated bond. Announcement

New research aimed at providing investors with the information required “for screening, engagement, or divestment” on coal has been put together by the Stranded Assets Programme at Oxford University. Stranded Assets and Subcritical Coal: The Risk to Companies and Investors has been prepared by Ben Caldecott is Director of the Stranded Assets Programme and his colleagues Gerard Dericks and James Mitchell, with support from the Generation Foundation and the HSBC Climate Change Centre of Excellence. Link

Enel, Italy’s largest utility firm, has said that it shares the “goal” of containing the world’s temperature increase below 2 degrees Celsius, as it pledges to lead the industry’s efforts to reach this target, the Financial Times reports. In a joint statement with Greenpeace, Enel announced that it was phasing out new investments in coal and said it was “feasible” for Enel to achieve carbon neutrality before 2050 through greater investments in renewable energy and energy efficiency. The move follows a meeting this week between Enel’s chief executive Francesco Starace and Kumi Naidoo, the international executive director at Greenpeace.

The US secretary of state John Kerry has reportedly labelled investing in coal “simply destructive”. Online newswire Responding to Climate Change reports that Kerry told an audience at think tank Atlantic Council that he wanted to “stop government funding” for coal and oil, and said it “made no sense” to invest in high carbon sources of energy. Kerry said the US would target “wasteful fossil fuel subsidies” at upcoming meetings of the G20 and Asia Pacific Economic Cooperation forum. Two major new trade deals with Europe and Pacific countries under negotiation should include “high standards” for environmental protection, Kerry added.

British renewable energy company TLS Hydro Power Ltd has launched a £2.5m (€3.5m) retail bond issue. Funds raised will be used to finance the development of new hydro power schemes including a 1 MW project in the Perth and Kinross district in Scotland. Dutch-based Triodos Bank helped develop the bond that delivers 7% fixed interest for 5 years.

The US Energy Department has released a report looking at the future of wind power up to 2050 and its potential economic benefits. The report, Wind Vision: A New Era for Wind Power in the United States, says that with technological advancements driving projected cost reductions, in combination with continued siting and transmission development, wind power can be economically deployed in all 50 states. It says wind power could displace more than 12.3 gigatonnes of greenhouse gas emissions by 2050, equating to a global economic value of $400bn.

A coalition of major insurers including Aviva, Axa and Munich Re have lent their support to the upcoming new United Nation global framework for disaster risk reduction, saying there is a particular role for the insurance industry – as risk managers and institutional investors – in implementing the framework which for the first time includes a role for the private sector. The 3rd United Nations World Conference on Disaster Risk Reduction is being held in Japan this week. Link. Social

Swedish buffer fund Andra AP-fonden (AP2) has teamed up with My Life, a social enterprise working on integration and diversity in the Swedish employment landscape, to mentor its employees on diversity. Announcing the partnership, AP2 CEO Eva Halvarsson said diversity was a core issue for the fund. It comes as MSCI research finds corporate boards with more women are less likely to get hit by scandal, Germany passes legislation requiring major companies to allot 30% of seats on non-executive boards to women and New York Comptroller Scott Stringer says his Project Boardroom campaign is working with the 30% Club and 2020 Women on Boards to increase women on corporate boards.

Katherine Garrett-Cox, chief executive of the Alliance Trust, the venerable UK investment trust, has said the risk of modern slavery in companies’ supply chains is a “material investment issue”. Garrett-Cox was speaking at a UK parliamentary event on the Modern Slavery Bill and Transparency in Supply Chains co-organised by Hermes Investment Management, Rathbone Greenbank Investments, Alliance Trust and campaign group Anti-Slavery. The UK government recently added a clause to the bill, requiring companies to report on risk in their supply chain of slavery, following investor pressure. Garrett-Cox praised the boldness of the bill and spoke about her commitment to good business practice and sustainability.

The value of private equity deals in Africa reached their second-highest level on record in 2014 as population growth and an increasingly stable political climate helped drive international interest in the continent. The total value of deals in Africa last year was $8.1bn, just short of the $8.3bn high recorded in 2007, according to figures from the African Private Equity and Venture Capital Association (Avca).

Governance

TIAACREF has reportedly joined the ranks of the leading investors backing “proxy access” at companies, the right of shareholders to nominate directors. Reuters cited a letter from the $851bn asset manager urging companies to change their bylaws in an attempt to make boards more accountable. The benefits would be “multi-faceted” the report quotes the letter as saying. It is signed by William Riegel, TIAACREF Asset Management’s chief investment officer and Bess Joffe, managing director for corporate governance.

It’s been reported that Citigroup, Goldman Sachs and Morgan Stanley have lost out in their attempt to block a union-backed shareholder proposal calling for them to disclose “golden parachutes” for executive who leave to work for the government. Reuters reported that the Securities and Exchange Commission told the investment banks that they cannot exclude the union umbrella body the AFLCIO’s resolution from their AGM ballots. The banks “fought hard to prevent shareholders from having a vote on more transparency around government service golden parachutes,” it quoted AFLCIO’s investment office director Heather Slavkin-Corzo as saying.

The British Venture Capital Association, the private equity trade body, has launched a supplement to its Guide to Responsible Investment. Produced in association with PwC, it shows how private equity and venture capital-backed companies are putting environmental, social and governance policies into practice and features a series of case studies drawn from entries to the BVCA’s Responsible Investment Awards over the last two years. The BVCA opens its Responsible Investment Awards in early April.

Pension fund manager British Columbia Investment Management Corporation (bcIMC) has become a shareholder in the new Canadian exchange operator called Aequitas that is hoping to rival the Toronto Stock Exchange. Aequitas said a new funding round was “significantly oversubscribed”, raising about C$30m, Reuters reported. Aequitas is already backed by Royal Bank of Canada, Barclays, pension giants OMERS and PSP and others.

Corporate lobbying disclosure remains a top shareholder proposal topic in the US this year. More than 60 investors have filed proposals with more than 50 companies asking for lobbying disclosure reports that include federal and state lobbying payments, payments to trade associations used for lobbying and payments to any tax-exempt organization that writes and endorses model legislation. Among the companies are the likes of AT&T, Bank of America, BlackRock, Chevron, Citigroup, ExxonMobil, Goldman Sachs, IBM, JPMorgan Chase, Lockheed Martin, Morgan Stanley, Wal-Mart and Walt Disney, according Walden Asset Management and the labour group the AFSCME.

Kenya: the Nairobi Securities Exchange has joined; the United Nations’ Sustainable Stock Exchange Initiative (SSE). CEO Geoffrey Otieno Odundo said: “By joining the SSE initiative we are boldly communicating to our regulator, shareholders, employees, listed firms, market intermediaries, investors and the general public of our commitment to promote integrated reporting on environmental, social and governance issues in Kenya.” It becomes the 18th member of the SSE and fourth in Africa, alongside Egypt, Nigeria and South Africa.