RI ESG Briefing, March 24: South Africa’s PIC, US class actions, CalPERS, Carbon Tracker

The latest environmental, social and governance news


South Africa’s state-owned Public Investment Corporation (PIC), which runs the assets of the Government Employees Pension Fund (GEPF), says it has recently concluded transactions for two renewable energy projects, valued at R22bn (€1.7bn). The transactions are for the construction of two Concentrated Solar Power (CSP) stations, Ilangalethu (Ilanga) and Xina, in which the PIC has taken direct 20% equity stake, respectively. In addition to equity stake in Ilangalethu, the PIC will also provide R600m of debt to the project. Based in the Northern Cape, the two power stations are expected to contribute a combined 200MW to the national electricity grid. Link

The California Public Employees’ Retirement System (CalPERS), the largest US pension fund, has argued that calls for large investors to simply “exit” the global energy sector and sell shares in fossil fuel companies is “well intentioned but flawed”. In an article in the Financial Times, CEO Anne Stausboll reckons a “more constructive and proven approach” is for investors to engage with the companies. “First and foremost, we have a fiduciary duty to be a principled and effective investor to meet our financial commitments to our members and employer partners,” she writes, adding that a “seat at the table” is the best way to use investments in a sustainable manner.

Climate Tracker, the environmental think tank, says the market for thermal coal is in “structural decline” in the US. In a new report, the NGO argues: “Squeezed out by an abundance of cheap shale gas and ever tightening pollution laws, it may be a harbinger of things to come for other fossil fuel markets globally.” The 25-page report The US Coal Crash paints a bleak picture and makes “grim reading for investors”, finding that in the last few years the sector has been hit by a combination of cheaper renewables, energy efficiency measures, rising construction costs and a rash of legal challenges as well as the shale gas revolution.

This year could see a record $30bn in corporate “green bond” issuance, according to ratings agency S&P cited by Reuters. “We expect green bond issuance to remain relatively buoyant given investor appetite for green products as well as issuers taking advantage of the exceptional demand,” S&P Ratings Services said in a statement quoted by the news agency. The surge showed growing demand among investors for green investments “amid concerns about climate change”.


Investment bank Morgan Stanley says investing in sustainability has “usually met and often exceeded” the performance of comparable traditional investments, both on an absolute and risk-adjusted basis, across asset classes and over time. The Sustainable Reality report reviewed 10,228 open-end mutual funds and 2,874 separately managed accounts over the last seven years. The bank finds that sustainable equity mutual funds met or exceeded the median return of traditional equity funds for 64% of the time periods examined and that they also had equal or lower median volatility for 64% of the time. It also revealed that long-term annual returns of the MSCI KLD 400 Social Index, which comprises firms scoring highly on environmental, social and governance (ESG) criteria, exceeded the S&P 500 by 45 basis points from inception in 1990 to the end of 2014.

Social investment group Bridges Ventures has committed £1.65m (€2.25m) to the first active social impact bond (SIB) in the UK healthcare sector. The ‘Ways to Wellness’ programme will launch next week, providing up-front funding for innovative ‘social prescribing’ interventions by four specialist providers in Newcastle in northern England. It is aiming to improve the health outcomes of over 11,000 people. It means that Bridges’ Social Sector Funds have now backed 13 UK SIBs.h6. Governance

A new report has found that total settlement dollars in securities class actions in the US hit their lowest mark in 16 years in 2014. The average settlement amount also reached its lowest level since 2000, according to Securities Class Action Settlements—2014 Review and Analysis from consulting outfit Cornerstone Research. It found that total settlements dropped to $1.1bn – from $4.8bn in 2013, “primarily due to a lack of large cases”. “The class action securities fraud market appears to be shrinking, whether measured in terms of the size of settlements or in the severity of new actions filed,” observed Professor Joseph Grundfest, director of the Stanford Law School Securities Class Action Clearinghouse. “It may also mean that public pensions could have fewer large cases to draw them into the lead plaintiff role.”

Canada’s SHARE (the Shareholder Association for Research and Education) has issued an advisory recommending support for the ‘Aiming for A’ shareholder climate resilience proposals at BP and Shell. “Companies need to address the strategic aspects of value creation and investment risks in the transition to a low carbon economy,” it says.

A US state judge has thrown out a lawsuit brought by Harvard University students calling for the Ivy League college’s endowment to divest fossil fuel companies, according to reports. The New York Times reported that Justice Paul Wilson of Superior Court wrote that the students had no standing to sue Harvard or co-defendant, the Massachusetts attorney general. The students, though “fervent and articulate and admirable”, had brought their case to a forum that couldn’t grant the relief they seek, the paper quoted Wilson as saying.

The majority of institutional investors actively consider ESG criteria when making alternative investment allocations, according to a survey by LGT Capital Partners and Mercer. The survey of 97 institutional investors in 22 countries, also found that most believe ESG improves risk-adjusted returns and is an important aspect of risk and reputation management. Titled “Global Insights on ESG in Alternative Investing,” the research focuses on why and how institutional investors incorporate ESG considerations in alternative asset classes.

The Guardians of New Zealand Superannuation, the manager of the New Zealand Superannuation Fund, are to run a survey to measure stakeholders’ perceptions of its activities and performance, and to see “how well we are connecting and working with our external partners”. An independent research company called Colmar Brunton has been commissioned to carry out the project, which comes in the wake of scrutiny over NZ Super’s Portuguese banking losses.

French and Italian companies risk alienating equity investors if they enact corporate governance changes, according to a commentary from Kames Capital, the £55bn (€70bn) fund firm that’s part of Aegon NV. Kames’ Corporate Governance Manager Miranda Beacham says a series of legislative changes set to be enacted across core European countries may impact the appeal of owning equities in those regions unless the proposals are amended. She was referring to the Florange Act in France and the Growth Decree in Italy, which will give investors who hold shares for more than two years double voting rights.