RI ESG Briefing, May 10: Children’s Investment Fund, PIRC, Tri-State Coalition, S&P, Alliance Trust

The round-up of the latest ESG developments


The Tri-State Coalition for Responsible Investment has issued a shareholder rebuttal to the Southern Company in relation to its proposal that the US electric utility holding company issue a report on its strategy for aligning business operations with the IEA 2˚C scenario, while maintaining the provision of safe, affordable, reliable energy. “Southern’s current climate-related disclosure is backward-looking, static, and vague, while the challenge of planning for a 2˚C scenario requires forward-looking, strategic disclosure,” the US body states ahead of the company’s AGM on May 25.

Analysts at S&P have warned that banks will face a credit rating downgrade should they fail to address climate change risks in their portfolios. A research note also suggests that new regulation, company reputation and litigation may pose a greater threat to financial institutions and asset managers than the direct results of climate change. “There is no time for complacency”, the note reads, adding that any change to global climate would have “multi-layered and significant” ramifications if institutions fail to act soon.

The San Francisco Public Utilities Commission is reportedly set to issue $240m in green bonds linked to wastewater. The certification comes from the London-based Climate Bonds Initiative, according to a Reuters report. It quoted an analysis by ESG research firm Sustainalytics as saying that more than 300 miles (483km) of the city’s sewers are more than 100 years old.


SRI fund firm Trillium Asset Management has written to fellow shareholders of Discovery Communications to encourage the US television channel operator to produce a board diversity report by September 2016. Trillium says it wants to “foster greater diversity” on Discovery’s board by making sure female and minority candidates are considered, citing potential regulatory and reputational risks, increasing shareholder value and matching industry peers as prime factors. The resolution is co-filed by a number of other big investor names including the New York State Common Retirement Fund.

Several finance sector leaders have warned that the UK government and regulators will intervene to cap executive pay in the private sector unless investors and boards start tackling the issue, the Financial Times reports. Nigel Wilson, chief executive of Legal & General, suggested that a growing disparity between CEO and worker pay would “erode public confidence in the system”, while Helena Morrissey, chief executive of Newton Investment Management, said that pay practices had gone “badly awry”. Paul Drechsler, chairman of the CBI employers’ federation, added that “a sustainable society is predicated on trust in its leadership.”h6. Governance

The Children’s Investment Fund (TCI), the UK-based activist hedge fund, has sent a letter to Volkswagen’s board, blasting it for allowing management to reward itself despite the diesel emissions scandal. In the letter, TCI Chief Executive Chris Hohn said it was intolerable of VW’s management and board to pay themselves €400m over the last six years while the scandal was brewing. According to press reports, the TCI owns 2% of VW, though it’s not clear whether it has voting or preferred shares. VW, which is majority owned by the Piëch and Porsche families, declined to comment on TCI’s letter.

Shareholder advisory group PIRC has urged its shareholder clients not to vote in favour of a remuneration report at UK baker Greggs’ AGM today (April 10). The firm’s CEO, Roger Whiteside, is poised to take home a £2.6 million salary for his 2015 performance after triggering the payment of £1.4 million of long-term incentives this year. PIRC describes the variable element of Whiteside’s pay packet as “nonsense” and the 79:1 CEO pay ratio at Greggs as “not appropriate”.

Investor services firm Broadridge has said that its retail proxy voting website, ProxyVote.com, has received over 7 million individual investor votes representing ownership of more than 85 billion shares since its relaunch in September 2015 – and that more than 25% of the votes were submitted from a mobile device. Richard Daly, Broadridge’s CEO, said on an earnings call that involving more investors in the corporate governance process was a “core strategic priority”.

The board of Alliance Trust has fired a warning to its auditor, Deloitte, after an overpayment of around 10% was added to bonus payments for former CEO Katherine Garrett-Cox and previous CFO Alan Trotter. The mistake inflated their pay packets by around £100,000, the Sunday Times reports, and arrived at the peak of activist investor Elliot Advisors’ interest in the Trust, its upper management and their remuneration. Lord Smith of Kelvin, Alliance Trust’s chairman, said the issue was being investigated internally. “We take it very seriously”, he added.

Data from research firm Proxy Insight has identified the investors who most frequently support executive pay awards at the biggest companies in the US. At the top of the list are Goldman Sachs, Northern Trust and TIAA, which were found to have voted in favour of US pay reports in 98% of cases from June 2014 to June 2015. BlackRock and T. Rowe Price are also among the most frequent US supporters, backing pay reports in 97% and 96% of instances respectively. At UK companies, meanwhile, TIAA has supported 100% of pay votes, followed by Vanguard (99%) and Northern Trust (99%).

A poll from consulting firm EY has found that a quarter of asset managers plan to pay for their own research once new European regulations are in place. Only a fifth of asset managers said they would pass research costs on to investors, while 8% said that they would charge some clients but not others. Half of the 100 fund houses surveyed are still undecided about how they would respond to new rules included in Europe’s MIFID II legislation, which will end the practice of “bundling” research costs and trading fees paid to the sell-side by asset managers.