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RI ESG Briefing, May 12: Eurosif calls for sustainability pillar in EU’s Capital Markets Union

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

Environmental

France-based asset management giant Amundi has launched the first index funds and exchange traded fund in Europe tracking the MSCI Low Carbon Leader indices. Two open-ended index funds, the Amundi Index Equity Global Low Carbon and the Amundi Index Equity Europe Low Carbon, will replicate the MSCI World Low Carbon Leaders and the MSCI Europe Low Carbon Leaders indexes respectively. Also launched is an ETF tracking the MSCI World Low Carbon Leaders index, listed as of today (May 12) on Euronext Paris, and then cross-listed on the main European markets.

A ‘stranded assets toolkit’ has been developed by First State Investments, the US$156.9bn Australia-based asset manager. It follows the formation of its Stranded Assets Working Group (SAWG) in December 2013 and is comprised of investment professionals from the ESG Committee to assess risks associated with potential fossil fuel asset stranding. The toolkit assists its internal investment teams to assess company exposure to the issues and documents First State’s assessment of best practice management based on a series of questions sent to a number of its fossil fuel holdings.

Dutch-based banking giant ING is reportedly to end financing (lending and underwriting) coal mining companies that produce more than 1m tons of coal extracted using the controversial mountaintop removal (MTR) technique. Campaign group BankTrack said ING revealed the move at its AGM and it follows similar declarations from other European banks Barclays, BNP Paribas, RBS and Société Générale.

Social

UK charitable housing association Hightown celebrated raising £27m (€37.5m) for a retail charity bond by opening the market at the London Stock Exchange today. The bond, which supports affordable housing, is the second bond issued through the Retail Charity Bonds platform on the London Stock Exchange created by social investor Allia, with global investment bank Canaccord Genuity. Separately, the Thera Trust, a charity that supports adults with learning disabilities, is seeking to raise £6m for a charity bond listed on the Euro MTF market of the Luxembourg Stock Exchange. It is working with social investment intermediary Investing for Good in raising proceeds for the bond.

A new survey of responsible investing by the Commonfund Institute, the National Association of College and University Business Officers and the Association of Governing Boards of Universities and Colleges has looked at the policies, practices and attitudes to RI among 200 US colleges and universities. The study included 123 private and 77 public institutions that have made – or who are considering – a commitment. The study encompasses institutions with a combined asset base of over $88.8bn in assets. Link. Governance

Eurosif (the European Sustainable and Responsible Investment Forum) has called for sustainability to be included as the sixth principle of the European Union’s ambitious Capital Markets Union project. Eurosif is making 23 specific policy recommendations to incorporate investors’ concerns about sustainability and excessive short-termism in the development of the CMU. The recommendations are focused around five high-level themes. They are: 1) Incorporate a strong and comprehensive corporate disclosure policy package 2) Ensure that ESG considerations are incorporated in investment practices 3) Align incentives to reward corporate and investor stewardship 4) Promote a sound corporate governance framework via active and long-term oriented share- ownership 5) Scale-up long-term sustainable growth by leveraging financial innovation.

The California State Teachers’ Retirement System (CalSTRS) has reportedly launched a ‘proxy fight’, seeking board seats at fashion and sportswear company Perry Ellis International. The Wall Street Journal said CalSTRS was partnering with activist hedge fund Legion Partners; they own a combined 6.3% of Perry Ellis’s shares.

Aberdeen Asset Management will “take action” against companies that have had the same auditors for decades, according to a Financial Times report quoting the fund firm’s head of corporate governance, Paul Lee. Lee – a former Director at Hermes Equity Ownership Services – told the paper Aberdeen would take a “more strident line” on the issue, starting with this year’s annual general meetings.

The International Union of Operating Engineers Local No. 478 Pension Fund has reportedly sued currency broker FXCM for allegedly misleading investors about its financial prospects and concealing weaknesses. The fund accused FXCM of fraud and artificially inflating its stock price, according to a Reuters report citing a complaint filed in federal court in New York. The report quoted an FXCM spokesperson as saying the company would vigorously defend the allegations.

A shareholder proposal on recyclable packaging at US food group Kraft received 29.2% shareholder support at the company’s AGM last week. The proposal was filed by advocacy group As You Sow, who said the amount of waste generated annually by the US sales of just Kraft’s Capri Sun juice pouches alone would circle the globe “nearly five times”. The pack is made from a foil/plastic laminate that cannot be recycled into new pouches and is rarely collected. “Shareholders are concerned that the company is using packaging essentially designed to be dumped in a landfill,” said As You Sow.

The new UK government has named Sajid Javid as the Business Secretary to replace predecessor Vince Cable. A former banker, Javid – described by the Financial Times as “a Thatcherite and free-enterprise Tory” – takes over a brief which includes corporate governance and stewardship.