RI ESG Briefing, May 3: PGGM, utilities, NEPC, Local Government Super, GRI, RobecoSAM

The round-up of the latest ESG developments

Environmental

Dutch asset manager PGGM has reportedly shelved plans to join in the construction of a major Mexican wind farm due to resistance from local communities. IPE cited spokesman Maurice Wilbrink as saying the giant investor has relinquished its rights to participate in the 396MW project as part of a consortium with Macquarie and Mitsubishi Corporation – and that it won’t take part in any other wind projects in the country. PGGM took a 33.75% stake in venture to build the 132-turbine project in Oaxaca state four years ago. “It is now clear the project will remain controversial, and that it will no longer deliver the risk-adjusted returns we expected,” Wilbrink was quoted as saying.

A global network of more than 270 institutional investors, representing assets worth more than €20trn, has warned global utilities of the threat of climate change. The Institutional Investors Group on Climate Change launched its new report, Investor Expectations of Electric Utility Companies: Looking down the line at carbon asset risk as a guide to investors to enable engagement with the boards of utility companies. “With so many countries now clearly committed to implementing the Paris Agreement, institutional investors are concerned that some electric utility companies are not sufficiently prepared for the transition to a lower carbon economy necessary to limit global warming to well below 2°C,” said Stephanie Pfeifer, CEO at the Institutional Investors Group on Climate Change. Investors were setting out “as clearly as possible” their expectations for utilities’ actions to address climate change risks.

Following the Paris Agreement signing ceremony at the United Nations on April 22, the Climate Action 2016 Summit will convene global leaders from government, business and civil society on May 5-6 in Washington, DC to showcase and discuss actions all sectors are already taking to make the Agreement a success. The national governments that have signed on to the Paris Agreement will need the support of international organizations, the private sector and civil society, and Climate Action 2016 will provide the forum for demonstrating actions currently underway. Speakers include Al Gore, Anne Hidalgo, Paul Polman and Ségolène Royal. Co-hosts include Ban Ki-moon and Michael Bloomberg.

Social

“Institutional investors don’t have to sacrifice returns in order to have a principled investment strategy” – that’s the view of US investment consultant NEPC. Kristine Butler, a Senior Consultant in NEPC’s Endowments & Foundations practice, added: “It’s important the asset owner community understands that impact investing is based on more than merit alone. The assets, be they in equities or fixed income, must align with the strategic framework of a risk-adjusted portfolio.” She added that client interest has grown significantly in the past five years “and we expect the same growth for the foreseeable future.”

The board of Local Government Super (LGS), the Australian super fund, has reportedly reaffirmed its commitment to ESG. Investment Magazine said the fund’s board has reviewed its investment beliefs, which it does every two years. It quoted LGS director Michelle Blicavs as saying one of the challenges the board faced was understanding how to implement its core value that ESG factors need to be considered in all decisions, not just those releated to investment. The reported added that Blicavs was proud of LGS’ Sustainable Australian Shares option which has returned 10.73% since launch four years ago.h6. Governance

Sustainability standard setter GRI and RobecoSAM, the investment specialist focused on Sustainability Investing (SI), have released research called ‘Defining What Matters: Do companies and investors agree on what is material?’ Funded by the Alcoa Foundation, it examines whether the information companies disclose in their sustainability reports correlates with what investors want to know. The study found general alignment between disclosed topics and investor interests. The research also indicates GRI’s approach to materiality is appropriate as a basis for disclosures to investors, as it gives a broad perspective on risk. Additionally, these new findings indicate a number of ways in which companies can improve their disclosures to make them even more relevant for investors.

The Norwegian Government Pension Fund, the world’s biggest sovereign wealth fund is reportedly launching a “crackdown” on executive pay. The Financial Times, citing CEO Yngve Slyngstad, said the influential investor would target high salaries at companies worldwide. “We have so far looked at this in a way that has focused on pay structures rather than pay levels,” he was quoted as saying – adding that the fund would look at the “appropriate level” of executive pay as well.

The City of Palm Beach Gardens Firefighters’ Pension Fund has been appointed as class representative in a case against BancorpSouth, according to law firm Robbins Geller. It said the Honorable Todd Campbell of the US District Court for the Middle District of Tennessee issued an order appointing the fund as class representative, and Robbins Geller as class counsel, to represent BancorpSouth investors. The case alleges that BancorpSouth violated the Securities Exchange Act by making false and misleading statements and omissions regarding compliance with Bank Secrecy Act and anti-money laundering regulations. Robbins Geller added it was gratified the court rejected what it called the defendants’ “frivolous contentions and desperate attacks”.

Robbins Geller has also hailed the decision by Judge Loretta Preska of the Southern District of New York granting final approval of a $272m recovery in a case that challenged Goldman Sachs’s mortgage securitization practices. “After seven years of hard-fought litigation, the settlement concludes one of the last remaining mortgage-backed securities (MBS) purchaser class actions arising out of the global financial crisis,” the firm said. The settlement resolves claims that Goldman Sachs used registration statements to sell mortgage pass-through certificates that incorporated false and misleading statements about the quality of the certificates issued by various securitization trusts in violation of the federal securities laws. Link

The EY Center for Board Matters (CBM) has launched a new online resource called Corporate Governance by the Numbers. It will provide timely data topics in corporate governance, such as director elections, board composition, board and executive compensation, Say-on-Pay votes, shareholder proposals and voting results. The insights come from the CBM proprietary corporate governance database, which collects and analyzes data for more than 3,000 US public companies, and it will be updated on a monthly basis.