RI ESG Briefing, November 19: Bank of NY Mellon facing proposal on proxy voting and ESG

Environmental

The United Nations Joint Staff Pension Fund (UNJSPF) has calculated the fossil fuel exposure of its equity holdings – and found that its carbon exposure is 8.3% less than that of the fund’s MSCI All Country World Index (ACWI) benchmark, Responsible Investor has learned. Recently, UN Secretary General Ban Ki-moon called on pension funds to invest in climate-friendly renewable energy to help move away from fossil fuels. A spokesman told RI that it currently can only quantify the fossil fuel exposure of its equity holdings, which represent 61% of the fund. But, guided by Ban’s vision about the role that pension funds play in fighting climate change, it is exploring opportunities to make environmentally responsible investments, while focusing on its four criteria of safety, profitability, liquidity and convertibility.

Yale School of Management’s inaugural National Low Carbon Case Competition has awarded its first prize to a team from New York University’s Stern School of Business who formulated an investment plan that divested from companies that owned or extracted fossil fuels, while pursuing shareholder engagement with other energy-intensive companies. The judges were lead by Bob Litterman, former head of risk management at Goldman Sachs and the winner was awarded $10,000 (€7,977).

Social

Cornerstone Capital, the new firm set up by former UBS research chief Erika Karp, has launched a ‘human capital assessment check-list’ that is aimed at helping investors estimate the consequences of their investments in terms of income inequality. The tool is included in a new report from Cornerstone entitled “Income inequality: Market Mechanism or Market Failure”, which looks at the investment implications of the socio-economic phenomenon. The check-list includes indicators and questions which Cornerstone say will help to assess a company’s human capital strategies in the perspective of high inequality.

Larry Brown, Treasurer of the National Union of Public and General Employees (NUPGE) in Canada, has launched a ‘Five Point Public Services Protection Plan’ to ensure proper scrutiny of what it calls “new forms of privatization” such as social impact bonds. Brown launched the guide at a UN meeting in New York to discuss social finance, attended by one of the pioneers of social impact bonds, Sir Ronald Cohen. Brown said: “These new forms of privatization, like social impact bonds, are the evolution of a bad movie, the sequel, Privatization II.”

South Carolina plans to launch a social impact bond to reduce the state’s high rate of premature births. John Supra, a deputy director of the state’s Department of Health and Human Services said: “If we achieve the results we hope for, the state wins by getting an innovative programme that works and the investors get a payback.” And in Fresno, California, the city is expected to use a social impact bond in a project aimed at reducing the number of emergency room visits and hospitalization resulting from childhood asthma. Link. Governance

Bank of New York Mellon, the US financial services giant, is facing a shareholder proposal calling on it to review its proxy voting policies so that they meet with its stated ESG principles. The proposal, for the 2015 AGM, has been filed by journalist and activist Daniel Altschuler, who has often worked with SRI firm Walden Asset Management on shareholder proposals in the past. The proposal claims the company’s proxy voting record “seems to ignore its environmental positions and the impact of key environmental factors on shareholder value”. Bank of New York Mellon said it had no comment, adding: “We are in the early stages of assessing it as we would with any other shareholder proposals that we receive.” Link

Zevin Asset Management, the US SRI firm, is lead filer on a similar proposal at Franklin Resources. The motion calls for the company to review its voting policies taking into account its own corporate responsibility and environmental positions and “economic case for the shareholder resolutions presented”. “We remain concerned about Franklin Resources’ proxy voting record on environmental issues, specifically on climate change,” said Zevin’s Sonia Kowal in a letter to the company, known as Franklin Templeton Investments. Kowal adds it is “especially concerning because Franklin Templeton is a signatory to the Principles for Responsible Investment”. Franklin Resources is trying to exclude the proposal in a letter to the Securities and Exchange Commission (SEC), pointing out that it is a holding company that does not vote proxies and that the investment advisers that do vote proxies must act in a fiduciary capacity for their clients.

John Oliphant, the recently-dismissed principal executive officer of South Africa’s R1.43trn (€102bn) Government Employees’ Pension Fund (GEPF), will remain chair and a member of the Code for Responsible Investing in South Africa (CRISA), while an appeal process is under way. Oliphant plans to challenge GEPF’s dismissal and the CRISA Committee has decided to let the appeal process run its course before a decision is made on his membership and chairmanship of the body.

Broadridge Financial Solutions says its board will have a “different composition” in terms of diversity in the near term. Chairman Les Brun, responding to a shareholder question at the financial services firm’s annual meeting on November 13, said: “Great efforts are being made by our corporate Governance Committee to expand the pool of nominees that we might have as we expand our Board, and I suspect you’ll see a different composition as we go forward in the near term.” AGM transcript

Proxy advisory firm Institutional Shareholder Services (ISS) has reportedly recommend that its clients reject the pay package of new Microsoft CEO Satya Nadella. The Wall Street Journal said ISS is critical of a “mega” stock grant to him, put at $65m.