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RI ESG Briefing, Nov. 24: CDP, South Yorkshire, AIMCo, BlackRock, overboarding

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

Environmental

Environmental data body CDP has released its latest sector report, this time on the mining industry. It found the largest metal and mining companies, with combined market capitalization of $329bn, “are failing to adequately manage carbon and water risks, with most unsupportive of new climate regulation”. Collectively, the 11 companies analysed account for around 85% of emissions among large, listed miners in one of the highest emitting sectors. None achieved the top tier of grade (A or B) for all five criteria. All except two had a ‘D’ grade or below in at least one area.

South Yorkshire Pension Fund will divest its portfolio from ‘pure’ coal and tar sand companies as it decides that “there should be a long term tilt towards a low carbon economy within its portfolios”. In minutes from a September meeting, the fund’s investment board also agrees to monitor carbon risk within its portfolio and engage with pressure groups on the subject. It also affirmed its policy of active engagement and reiterated that it would not divest from investments solely on ESG grounds.

The Alberta Investment Management Corporation (AIMCo) has bought an 8% stake in TransAlta Renewables, the Toronto-listed, Alberta-based clean power generation company, for C$200m (€140.7m). AIMCo becomes the second largest shareholder in TransAlta and the deal adds to AIMCo’s existing $4bn investments in utilities, energy and power, and transportation.

The global accountancy profession has urged world leaders to demonstrate “determination and political will” in order to achieve a low carbon, sustainable future, ahead of the COP 21 Climate Change meeting in Paris. In an open letter, chief executives of the accounting bodies asked governments to commit to an agreement that provides a clear signal that governments will act to achieve a low carbon, sustainable future. The accountancy bodies are all members of Prince Charles’ A4S Accounting Bodies Network.

Social

The Investment Association, the UK’s fund management trade body, is launching a project focusing on the long-term value brought by people to businesses. The project will highlight the benefits to investors of considering human capital in their day-to-day decision-making about companies. To facilitate this, it will also urge UK-listed businesses to start reporting on how they nurture and develop their employees. The move is the latest initiative of The Investment Association’s corporate governance and engagement division.

Big Issue Invest, the social investment arm of The Big Issue magazine, has revealed the social businesses that have successfully secured investment through its Corporate Social Venturing (CSV) Programme, run with Barclays. This year, a total of 12 initial investments have been agreed. The programme is supported by the Social Incubator Fund of the government’s Cabinet Office.h6. Governance

BlackRock, the world’s largest asset manager, reportedly met European Union officials to discuss financial market matters more times than any other company in the year to July. The Financial Times, citing figures from EU Integrity Watch, said the firm had more meetings with European Commission officials in the first seven months of 2015 than Goldman Sachs, HSBC and Deutsche Bank. The paper quoted a BlackRock spokesperson as saying it advocates for public policies it believes are in its investors’ long-term best interests.

Starting in 2017, proxy advisory giants Institutional Shareholder Services (ISS) and Glass Lewis will recommend shareholders vote against a non-executive director at US firms if that director serves on more than five corporate boards. This is down from a current threshold of six, and the firms said they would maintain the threshold next year to allow time for adjustment to their new recommendation. Glass Lewis also will recommend from 2017 that shareholders vote down Chief Executives who serve on more than two corporate boards outside of their own firm. That recommendation is already part of ISS’ voting policy.

Northwestern University, which has an endowment of nearly $10bn (€9.4bn), has become the third US-based university to embrace the Principles for Responsible Investment (PRI). The other two are Harvard University and the University of California at Berkeley. Northwestern said it would begin publicising some details on how its endowment is invested. “However, the reporting is high level and does not disclose individual investments or external investment managers,” it added. Northwestern, based in the Chicago suburb of Evanston, also said its embrace of the PRI was in part spurred by recent meetings with students who are pressing the university to divest from fossil fuels. Announcement

Toronto-based financial communications firm Bayfield Strategy has reportedly spun off an arm – Evolution Proxy – to offer proxy solicitation services to companies and activist hedge funds. Reuters reported that both Evolution and Bayfield are headed up by Riyaz Lalani, a former top executive at proxy solicitation firm Kingsdale Shareholder Services.

The European Commission’s Directorate-General for Financial Stability, Financial Services and Capital Markets Union is reviewing the covered bonds market as part of the wider Capital Markets Union project. “The European Commission is looking to assess whether there is merit in developing an integrated pan-European framework for covered bonds as a means to reduce fragmentation between national covered bonds markets, restore investor confidence where needed and facilitate issuance and investment where it may be facing difficulties,” it says in a new tender document. Covered bonds are debt securities backed by cash flows from mortgages or public sector loans.

The European Investment Bank and BNP Paribas have confirmed the launch of a new sustainable investment solution called Tera Neva. First reported by RI earlier this month, the €500m equity index-linked bond initiative is supported by a group of institutional investors including: ACMN VIE, AVIVA FRANCE, CARAC, BNP Paribas Cardif, CNP Assurances, ERAFP, GENERALI, GROUPAMA, HSBC Assurances, NATIXIS Assurances, PREVOIR and SURAVENIR.