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RI ESG Briefing, November 13: Barclays and MSCI launch green bond index family

RI’s regular round-up of the most important environmental, social and governance news

Environmental

Barclays and MSCI have launched a green bond index family to track the growing market of bonds issued to fund projects with environmental benefits. It adds to the existing Barclays MSCI ESG Fixed Income Index family. Eligibility for the Green Bond Index family is based on assessment by MSCI ESG Research regarding green bond use of proceeds, project evaluation, management of proceeds, and reporting. The Green Bond Index family can be used for index-linked investment products such as Exchange Traded Funds, separately managed accounts, and structured products.

Environmental data body CDP, the former Carbon Disclosure Project, has released new data from its forests program, showing that nearly 90% of companies see opportunities in shifting to sustainably sourcing key commodities. Deforestation-free supply chains: From commitments to action, CDP’s global forests report, launched today (November 11) during the Asia Pacific Rainforest Summit in Sydney reveals the business case for disclosing exposure to forest-risk commodities. CDP now holds six years of corporate forest-risk data, compiled on behalf of 240 investors who together represent $15trn in assets.

PKA, the administrator of three Danish pension funds from the health care and social services sectors, says it has invested a total of DKK415m (€55m) in green bonds recently issued by German development bank KfW and the European Investment Bank (EIB). In a statement, PKA said the proceeds from KfW’s five-year bond, in which it had placed DKK265m, would go to finance renewable projects across Europe. The expected annual return is 1.65%. PKA has allocated another DKK150m to a 10-year issue from the EIB whose proceeds are to help the EU reach its climate goals. The annual return for that bond was put at 2.15%. PKA’s CEO Peter Damgaard Jensen said: “We expect to invest in more green bonds as it meets the expectations of our members and provides good returns for their pensions.” Link (Danish)

Copenhagen Infrastructure Partners (CIP), the Danish renewable energy investor backed by the DKK640bn (€86bn) pension fund PensionDanmark, says it has acquired a 25% stake in an offshore UK wind park. Financial details were not disclosed. The wind park, known as Beatrice, is to be built off the Scottish coast (Outer Moray Firth) and fully operational in 2019. Beyond CIP, the other owners of Beatrice are UK power utility SSE and energy firm Repsol, which will have equity stakes of 50% and 25%, respectively. Announcement

Social

A European pension fund has tendered a $200m (€160m) microfinance debt mandate using the IPE-Quest anonymous tender system. According to search QN1468, the client’s preference is for a segregated account or single investor fund. It says asset managers should have a three-year track record (preferably five) and at least $500m in assets under management (AUM). The closing date for applications is 28 November. Link

Australian ASX 200 boards are becoming “less male, and slightly less stale” according to research by the Australian Council of Super Investors (ACSI). The proportion of women directors on ASX 200 boards in 2013, rose from 10% in 2012 to 12% and the proportion of female directors rose from 10% to 11%.
However, absolute numbers remain low and smaller companies continue to lag behind the ASX 100 on the issue. Women accounted for 20% (18% in 2012) of all ASX100 board seats and 17% (16% in 2012) of ASX 100 directors. Link to ACSI

UK Local authority pension funds have nearly £2bn invested in the tobacco industry despite the county councils they represent being responsible for promoting public health, including anti-smoking campaigns, according to documents obtained under Freedom of Information rules by The Independent on Sunday newspaper. Link to story

The international activities of the SROI (Social Return on Investment) Network and the Social Impact Analysts Association (SIAA), the social impact organisations, are being combined to form Social Value International. The SROI Network in the UK will become Social Value UK and the SIAA will become Social Value International. Both the international and UK organisations will continue to be member-led and to offer training, accreditation and assurance on SROI and impact measurement. Jeremy Nicholls, CEO of the SROI Network and Chair of the SIAA, will remain as CEO of Social Value UK and also take on the role of CEO of Social Value International. Link

Impact investment company Resonance has become the first social investor in the UK to structure a deal using the new social investment tax relief that gives retail investors a tax relief of up to 30 per cent of the investment against their income tax bill if they make a qualifying investment. Bristol-based charity FareShare South West, which tackles food waste, has this week received an investment of £70,000 from a group of angel investors piloting a Bristol-based SITR fund set-up and managed by Resonance, which plans to set up a series of city-based SITR funds across the UK.PGGM, the Dutch pension fund manager, is to expanding its expert “veto” policy for the ESG quality of its investments across all its asset classes, reports IPE. Eloy Lindeijer, CIO at PGGM, said its current policy meant that ESG-dedicated investment staff sit on investment committees with the right to veto transactions that do not meet set standards. It will now extend this to responsible investment staff sitting in all asset class departments.

Governance

The current debate about corporate governance is too focused on boards and therefore “unable to address current concerns about company culture and behavior” – according to UK accountancy body the ICAEW (the Institute of Chartered Accountants in England and Wales). It has called for a shake-up of the corporate governance system and proposes “an overarching framework” for company behaviour that involves all groups with a stake in companies. The proposal has been put forward in a paper entitled Who should be covered by codes?, the fifth and the last in an ICAEW thought leadership series.

Japan has published the first draft of its Corporate Governance Code following a meeting of its FSA regulator. It proposes that companies set up appropriate channels for shareholder rights activity and constructive dialogue with shareholders, especially around sustainable mid- and long-term shareholder value creation. It says boards should also pay attention to so-called non-financial information for investors, and that boards have adequate independent director oversight. Link to documents

The Network for Sustainable Financial Markets (SFM) has launched a Japan Working Group. SFM has already submitted response for the country’s Ito Review and the Japan’s Stewardship Code. It said the Working Group would develop further engagement with the Japanese government and financial market. The details of the Working Group are available in English and Japanese.

US banking, asset management and custody giant State Street is reportedly responding to subpoenas from the Securities and Exchange Commission (SEC) and the US Department of Justice seeking information regarding its solicitation of asset servicing business of public pension funds. Reuters cited the firm as saying in a filing that it had “retained counsel” to review “including our use of consultants and lobbyists in our solicitation of business of public retirement plans and, in at least one instance, political contributions by one of our consultants during and after a public bidding process”.

New York City Comptroller Scott Stringer’s radical new “2015 Boardroom Accountability Project,” which is seeking to install proxy access (where shareholders can nominate directors) at 75 listed US firms, has been labeled a “one-size-fits-all” measure by law firm Wachtell, Lipton, Rosen & Katz. Writing in a blog, partner David Katz went said proxy access “is not an optimal or even necessary element of corporate governance”. He went on: “In our experience, many major institutional investors are willing to engage in a case-by-case, fact-specific assessment of a company’s circumstances in deciding how to vote on proxy access.”

Fund firm Newton Investment Management has released the findings of its first ever survey into the investment priorities of the largest charities in the UK, comprising 74 organisations with combined assets of nearly £6bn. It found that 65% of respondents opt for a purely active management approach and that 67% are either exclusively or mostly invested in pooled funds. Just over 25% invest in alternative assets, while 60% apply a socially responsible policy. But Newton found that the appetite for social-impact investment remains low; investment returns and income are the charities’ major concerns.

Two major US pension funds have reportedly asked Bank of America to allow shareholders to vote on the board’s decision to name CEO to the added role of chairman. The Charlotte Observer said the California State Teachers’ Retirement System and New York City Comptroller Scott Stringer wrote to the bank seeking a vote on the bylaw change that directors made last month to allow Moynihan to hold both titles. The report, citing CalSTRS spokesman Ricardo Duran, said Bank of America spokesman Lawrence Di Rita declined to comment.

The Financial Times reports that over 5,000 investors have joined a class action-style lawsuit against Lloyds Banking Group, the UK-based bank. The FT said they claim to have lost about £400m in the state-arranged takeover of HBOS in 2008. The report said Lloyds has said it does not consider there to be any legal basis to the claims and that it would “robustly contest” the action.