RI ESG Briefing, Nov. 26: Exxon faces ‘stranded assets’ shareholder resolution

Environmental

Exxon could be challenged at its annual general meeting (AGM) next year to return capital to shareholders rather than invest in high-cost, high-carbon oil projects, which the shareholders say could be impacted by the risk of tighter carbon pricing in what is being touted as the first ‘stranded assets’ proxy resolution. The shareholder resolution which, if approved, will be put to an AGM vote, has been filed by Arjuna Capital/Baldwin Brothers Inc. and As You Sow. The resolution says: “In light of the climate change related risks of decreasing profitability and stranded asset risk associated with planned capital expenditures on high cost unconventional projects, Exxon Mobil commit to increasing the amount authorized for capital distributions to shareholders through dividends or share buy backs.”

Allianz hopes to invest another €1bn in renewable energy over the next three years, bringing its total investment in the sector to €3bn, according to David Jones, Head of Renewable Investments at the German insurance giant. Speaking to German business daily Handelsblatt, Jones also said Allianz was considering investing in its first offshore wind park in France. “The feed-in tariff that France is offering for its offshore parks seems to best fit our expectations,” he said. So far, Allianz has placed €1.7bn in onshore wind parks and another €300m in photovoltaic facilities.

Nearly 30 FTSE 350 companies improved their disclosure and management of greenhouse gas emissions after engagement with top management by the £15bn Church Investors Group (CIG), according to its annual report. Academics at the University of Edinburgh independent examined the effectiveness of the project, and found, to a 95% confidence rate, that the improvement would not have happened without the CIG’s engagement. The CIG, which represents 55 institutional church investors, celebrates its 10th anniversary this year.

The joint venture set up last year by PensionDanmark and BWSC, a Danish power plant specialist, has made its second investment in the UK biomass industry, putting up DKK1.6bn (€215m) to construct a new straw-fired plant. The plant is known as Snetterton and will be built in East Anglia. Completion of the facility is expected in the spring of 2017. Its power capacity was put at 44.2MW, which the venture says is enough to supply 82,000 households with power. PensionDanmark’s investment, which is being executed by the Copenhagen Infrastructure Fund I, totals DKK1.4bn. The remaining DKK200m for the project comes from BWSC. In August 2013, the venture’s partners committed €186m to build their first straw-fired biomass power plant in Lincolnshire. The facility, known as the Brigg Renewable Energy Plant, is set to be completed in early 2016 and have a power capacity of 40MW.

Oxford’s Diocesan Synod in southern England has passed a motion which commits it to divesting fossil fuels, making it the first diocese in the UK to divest. The motion was passed by a majority of 52 votes to 37 against; a resolution was also passed calling on the Church of England to follow suit. The motion was brought forward by Revd Dr Darrell Hannah. Mark Letcher, Vice Chair of church climate change charity Operation Noah, said: “This resolution demonstrates how seriously local churches and dioceses are taking the issue of disinvestment. Following recent commitments from the Rockefeller Brothers Fund, a national pension fund in Sweden, and the University of Glasgow, the decision today increases the pressure on the Church of England – which still has over £60m invested in fossil fuel companies.” Link

Canada’s Ontario Teachers Pension Plan and the Public Sector Pension Investment Board are reportedly interested in buying stakes in Tonopah Solar Energy, which is currently building a solar thermal power facility in Nevada, from Banco Santander. Citing a filing with the US energy regulator, the Wall Street Journal reported that the Spanish bank aimed to sell stakes equalling around one-third of Tonopah to the Canadian schemes. Financial details of the deal, which is subject to regulatory approval, were not disclosed, and Santander declined to comment. Once completed, the $1bn solar thermal facility in Nevada will have a capacity of 110MW.

There have been more green bonds issued, according to industry group the Climate Bonds Initiative. Martha’s Vineyard Land Bank has issued a $35m AA-rated muni bond whose proceeds go to purchase of properties and land. And Northland Power in Canada has put out a C$232m an asset-backed bond through a special purchase vehicle (SPV) called Northland Power Solar Finance One LP.

A group of Harvard University students have filed a lawsuit calling for a judge to force the Ivy League university’s governing body to divest from fossil fuel firms. The complaint asks the court to compel the Harvard Corporation to stop investing any of its $36.4bn endowment in gas, coal and oil companies. “The Harvard Corporation has a moral and legal duty to avoid investing in activities that cause such grave harms to its students and the public,” the students say. The students, the ‘Harvard Climate Justice Coalition’, also brought the suit on behalf of “individuals not yet born or too young to assert their rights but whose future health, safety, and welfare depends on current efforts to slow the pace of climate change”.

The Norwegian Government Pension Fund Global (GPF), Norway’s NOK 5,868bn (€690bn) sovereign wealth fund, has more exposure to coal than it states, three environmental groups have claimed. In a new report, “Dirty & Dangerous”, Germany’s Urgewald, Greenpeace and Norway’s Framtiden, assess that the fund has investments worth NOK 82.8bn (€9.7bn) in the coal industry, when the pension fund’s manager Norges Bank Investment Management says GPF’s exposure to coal is only NOK 2.5bn (€296m). The environmental groups argue that the fund does not count companies like BHP Bilton and Brazil Vale, when they are in fact big coal producers.

Social

Bank of America’s wealth management division (GWIM), which comprises Merrill Lynch Wealth Management and U.S. Trust, has become one of the latest signatories to the Principles for Responsible Investment (PRI). In a statement, GWIM said its involvement with responsible investment dates back to 2012, when it formed an ‘ESG Council’. It said $8.6bn of the assets it managed for clients were now invested with ESG (environmental, social and governance) factors in mind.The European Commission has released an in-depth study that outlines the main features of social enterprises in 28 EU Member States and Switzerland. The study gives an overview of the social enterprises ecosystem across countries, and national policy and legal frameworks. It finds that social investment markets are currently under-developed in most European countries, and at best nascent in the more ‘advanced’ ones like France and UK. It suggests governments can play a key role in designing dedicated financial instruments, such as using public funds to provide loans or investment.

The Global Impact Investing Network (GIIN), the not-for-profit body which promotes impact investment, has launched a fund manager training program to support impact investment skills development and increase the number of impact investment-ready vehicles supporting small and medium-sized enterprises with private equity, debt, and mezzanine capital. Applications for two courses – Strengthening Environmental, Social, and Governance (ESG) Management and Raising Impact Investment Capital – are currently available on the GIIN website. In 2015, fund managers will also be able to apply for training in Impact Measurement and Performance Management and Investment Management.

A new index of social investors has been launched in the UK. The Investor Index scores investors according to the transparency and impact of their approach and was created in partnership with RBS SE 100 and impact measurement firm Social Value International. Social Value CEO Jeremy Nicholls said: “Investors and their boards who welcome an environment where they can show the value they are creating and therefore draw in more finance, should be confident that the Investor Index will be a valuable tool for them to showcase their success.” RBS SE100 Index is open to any organisation delivering social, environmental or economic change. It is created by Matter&Co in partnership with the Royal Bank of Scotland and RBS Inspiring Enterprise, with the support of Buzzacott and the SROI Network. Link

Wespath Investment Managers, the fund manager of the US Methodist Church is launching the Equity Social Values Plus Fund (ESVPF) from January 2, 2015. The ESVPF will invest in publicly traded stocks of companies domiciled in the U.S. (60%) and other developed countries (40%). The fund will apply a passive investment strategy with a custom benchmark of companies with highly rated sustainable policies and practices.

Aviva Investors, the UK fund manager, has launched its second biennial survey of global asset managers on ESG issues. It received responses from 60 asset managers, with total assets of more than £5trn – and found that there is widespread acceptance that ESG factors are integral to the investment process, but that there is room for improvement “in several areas”. From a demand perspective, 88% of fund managers and analysts believe ESG factors to be important to their clients. From an investment perspective, 70% state that risk management is the top driver for integrating ESG into mainstream investment processes.

Adrian Orr, chief executive of the NZ Superannuation Fund, has said long-term and responsible investing has become a groundswell globally. Orr, who was speaking at this week’s Responsible Investment Association of Australasia conference in Auckland, said it had reach a tipping point where more asset owners were now having regard to ESG issues.

Governance

Members of the Interfaith Center on Corporate Responsibility (ICCR), the US faith investing body, have welcomed the new Access to Medicine Index (ATMI). ATMI is an independent initiative that ranks the world’s leading pharmaceutical companies on efforts to improve access to medicines and vaccines for the millions of people living in developing countries. David Schilling, senior program director of ICCR, said: “The Access to Medicine Index is a critical tool for investor engagement that identifies ‘best practices’ and a competitive benchmarking that encourages companies to continuously improve their performance.” ICCR members will participate in an investor briefing on the new ATMI on December 8 in New York. For more information please contact Lauren Compere.

US law firm Robbins Geller Rudman & Dowd has announced a class action lawsuit relating to the initial public offering (IPO) of residential solar energy firm Vivint Solar in the District Court for the Southern District of New York. The complaint charges that the IPO was “negligently prepared and, as a result, contained untrue statements of material facts” and that Vivint violated the Securities Act of 1933.

Three of Denmark largest pension schemes, including PensionDanmark, ATP and PFA, are considering suing marine fuel supplier OW Bunker for damages on the grounds that the now bankrupt firm misled them during an initial public offering (IPO) last March. In an interview with Danish public television, PensionDanmark CEO Torben Möger Pedersen said the lawsuit would be based on the fact that OW Bunker did not fully comply with reporting requirements at the time. Seven months after the IPO, OW Bunker declared bankruptcy on the back of hundreds of millions of Danish kroner in losses. Press reports said the losses were caused in part by fraudulent activities of the firm’s subsidiary in Singapore. OW Bunker denies the charges of fraud.The reports also said ATP, the DKK641bn(€86.1bn) pension giant, had invested DKK150m in OW Bunker. PensionDanmark’s exposure was put at around DKK50m.

The last of the OECD’s three annual corporate governance roundtables in Russia took place on November 19. It focused on related party transactions and corporate governance and business ethics and featured speeches from First Deputy Bank of Russia Governor Sergey Shvetsov, Moscow Exchange CEO Alexander Afanasiev, and OECD Head of Corporate Affairs Mats Isaksson. A new Corporate Governance Code was adopted by the government and Bank of Russia in early 2014 and its main provisions were included in Moscow Exchange’s new listing rules.

The latest update to the Norwegian Code of Practice for Corporate Governance has been launched. Changes relate mainly to a new recommendation on how boards of directors should handle additional dividends, which have been permitted since 1 July 2013 and how shareholders should be able to put forward their proposals for candidates for election to board appointments. There are also provisions around contacts the nomination committee should have with members of the board of directors, public disclosure of the statement on the remuneration of executive personnel and “consideration and approval” by the annual general meeting of the statement on the remuneration of executives. Link

Fiscal year 2014 marked a record year for the SEC’s Whistleblower Program, in terms of both the number and dollar amount of whistleblower awards, and the number of whistleblower tips received. In 2014, the SEC authorized awards for nine whistleblowers, including a record payout in September 2014 of more than $30m to a whistleblower overseas who had helped alert the SEC to what it described as an ongoing fraud. Link