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RI ESG Briefing, May 19: San Francisco water bond, Glencore, Fabege, ExxonMobil, CIRCA, Boston Consulting

The round-up of the latest ESG developments

Environmental

In what’s being claimed as a world first, the San Francisco Public Utilities Commission (SFPUC) has become the first entity to issue a green bond certified under the Water Climate Bonds Standard, a screening tool that specifies the criteria that must be met for bonds labelled as “green” or earmarked for funding water-related, low carbon initiatives. Proceeds from the $240m Wastewater Revenue Bond will fund eligible projects in sustainable stormwater management and wastewater projects included in the SFPUC Sewer System Improvement Program (SSIP) Phase1. Third-party verification that the issue met the Climate Bonds Standard came from Sustainalytics, the ESG research firm.

Listed Swedish real estate firm Fabege has made its first issue under its new Green MTN [medium term note] programme. The SEK600m (€64m) issue had Handelsbanken as its sole bookrunner. “We are very happy about the great interest shown in this first issue under our new Green MTN programme and have noted strong demand from investors with a focus on sustainability,” said Åsa Lind, Head of Treasury at Fabege. Fabege – which counts Norges Bank Investment Management and Stichting Pensioenfonds ABP amongst its largest investors – will also apply for a listing of the bond on the Nasdaq Stockholm Sustainable Bond List.

A shareholder resolution on climate change proposed by the ‘Aiming for A’ shareholder coalition was overwhelmingly approved in a vote at mining firm Glencore’s AGM in Zug, Switzerland, earlier today, receiving the support of 98% of shareholders who registered a vote. The same resolution was also passed earlier in the AGM season at Glencore’s mining sector peers Anglo American and Rio Tinto, with votes in support of 96% and 99% respectively. With all the resolutions passing with the support of more than 75% of shareholders, the three companies are legally obliged to implement them.

The Industrial Development Bank of Turkey has issued the country’s first green bond. The $300m bond will be used for investments in renewable energy and energy efficiency. IFC, a member of the World Bank Group, invested $50m into the product. The World Bank Group has pledged to step up its investments in climate to 28% of annual commitments and leverage an additional $13bn of private sector co-financing by year 2020.

Social

The University of Northampton in central England is considering issuing a ‘scholarship bond’ to fund a new scholarship programme for prospective students. The University of Northampton Scholarship Bond would be managed by UK-based charity and social bond specialist Allia and be a five-year ethical savings bond donating interest to the university, which is currently identifying interest in the bond. It has committed £1m and is seeking to raise a further £7m.

UK body the Pensions and Lifetime Savings Association (PLSA) has released a “Made Simple” guide to advise pension schemes about building a rigorous ESG investment structure, available for free as a PDF on the association’s website. It gives simple explanations and practical help for asset managers to integrate ESG factors into their investment decisions, said Lesley Williams, the PLSA’s chair, and reflects growing evidence that considering such issues can lead to better risk-adjusted returns. She added: “This isn’t about going greener but about achieving better outcomes.”h6. Governance

ExxonMobil has written to shareholders to address questions raised by some of them over Item 12 on its annual meeting agenda, the climate resilience resolution submitted by the New York State Common Retirement Fund and co-filed by the UK’s Church Commissioners. Exxon, which holds its AGM on May 25, pointed investors to its Outlook for Energy report and its 2014 white paper, entitled Energy and Carbon – Managing the Risks. “Our investments are ‘stress tested’ across a broad range of economic variables, not just a single scenario, to help ensure economic viability, resilience, and long-term value creation,” wrote Jeffrey J. Woodbury, the oil giant’s Vice President of Investor Relations and Secretary.

A group of activist hedge funds have reportedly formed a lobby group to promote the benefits of shareholder activism across the US. Reuters said the Council for Investor Rights and Corporate Accountability (CIRCA), formed on Wednesday (May 18) is committed to promoting the actions of shareholder activists, and their positive impact on corporate governance and business policies at listed firms. The trade body is backed by a consortium of activist firms, but they weren’t officially named, though the news agency cited a source as saying they included names such as William Ackman of Pershing Square, Carl Icahn, Daniel Loeb of Third Point, Paul Singer of Elliott Associates and Barry Rosenstein of Jana Partners.

The manager of Norway’s sovereign wealth fund has announced that it intends to join the raft of class-action lawsuits filed against Volkswagen over the German carmaker’s emissions scandal. In an emailed Norges Bank Investment Management statement, the fund’s spokeswoman Marthe Skaar said that lawyers had advised that Volkswagen’s conduct has given rise to “legal claims under German law”. She added: “As an investor, it is our responsibility to safeguard the fund’s holding in Volkswagen.” Last year, the fund claimed that the car maker’s actions had contributed to a loss of NOK4.9bn in the second quarter of 2016.

Sustainability is increasingly important for investors, as evidence mounts that companies’ environmental, social, and governance performance has an impact on long-term financial success, according to Boston Consulting Group’s seventh sustainability report. A survey of more than 3,000 executives from more than 100 countries found 75% of senior executives in investment firms see a company’s sustainability performance as materially important to their investment decisions—and nearly half would not invest in a company with a poor sustainability track record

Efforts to diversify corporate boards in the US are stalling, suggests a report published by executive search firm Heidrick & Struggles, with women making up only 29.8% of new directors named last year, an increase of 0.6% on last year’s figures. The firm has delayed its prediction for the date that female appointments match those of male candidates by two years to 2026, correspondingly. Of the 399 appointments made to US boards in 2015, African-Americans made up 9.3%, Hispanic candidates 4% and Asian & Asian-Americans 4.8%.