RI ESG Briefing, Nov. 5: Fossil fuel divestment ‘not the answer’ say Serafeim and Fulton

Environmental

“Divestment alone is not the answer” in the fossil fuel debate write George Serafeim and Mark Fulton in a new article in the Harvard Business Review on climate change. Serafeim, Associate Professor of Business Administration at Harvard, and Fulton, an advisor to Tracker and a senior fellow at CERES, argue: “Fossil fuels will have to be part of the transition to a clean-energy future. Ultimately, the goal should be limiting new business development by fossil fuel companies.” They advocate “parallel engagement efforts by shareholders and stakeholders”. The article prompted this response from Leslie Samuelrich, President of SRI firm Green Century Capital Management: “No one claims that divestment alone is the answer. But, it is the single most powerful force in the climate change movement today – extending beyond the markets and into politics. In fact, the call for divestment is a strong force behind the increased shareholder action. But, to believe that climate deniers like ExxonMobil, Chevron and Shell are going to lead us into a cleaner future has no basis in fact.”

Bill McKibben, founder of climate change movement 350.org, has said Rockefeller Brothers Fund’s pledge to sell its investments in fossil fuels and reinvest in clean energy, marks “the beginning of the end for the fossil fuel era”. McKibben was speaking at the London School of Economics last night (November 4), where he expounded his view on fossil fuel divestment and global activism on climate change. He said the world was running out of time before the effects of climate change were devastating. “We need a World War Two mobilization for renewable energy,” he said. “But the problem is not a lack of good plans, it is a lack of political will.”

Mark Campanale, founder of the Carbon Tracker Initiative, which analyses carbon investment risk, has said listing authorities need to create a requirement on companies to disclose climate risk. Campanale was speaking at an event on stranded assets organised by UKSIF and the all-party parliamentary climate change group. Campanale said Carbon Tracker was calling for a new international commission, to look at the disclosure around climate risk of fossil fuel companies. He also said financial regulators should be looking at future carbon emissions, and how much fossil fuels companies had in reserve.

Social

The Global Unions Committee on Workers Capital (CWC) is currently working with its partners including union-nominated pension trustees, pension funds and capital stewardship practitioners) and in collaboration with the International Trade Union Confederation and the Buildings and Woodworkers International, to monitor the performance of construction companies with regards to their rights and responsibilities in relation to human and labour rights issues in Qatar. To raise awareness around the issue, the CWC has published a 32-page investor brief called Investing in decent work: Human capital risks in the Qatari construction sector. It comes as contract awarding ramps up in 2015 for projects directly related to 2022 soccer World Cup.h6. Governance

US federal judge Loretta Preska has given final approval to a $275m cash settlement in the mortgage-backed (MBS) class action litigation against Royal Bank of Scotland (RBS) and others. The action was led by New Jersey Carpenters Health Fund and the Boilermaker Blacksmith Pension Trust, along with additional class representatives Iowa Public Employees’ Retirement System and Midwest Operating Engineers Pension Trust Fund. The plaintiffs are represented by specialist law firm Cohen Milstein Sellers & Toll. It brings to a close the consolidated class action lawsuit brought in 2008 by the pension funds against RBS and other defendants for securities violations involving the packaging and sale of 14 public offerings of “Harborview” series MBS. Link

Hermes Equity Ownership Services, the engagement arm of the BT Pension Scheme-owned Hermes fund management business, is reportedly considering further engagement on corporate taxation. It was not just an issue of business risk but also of the scheme’s reputation, Hermes’ Executive Director Leon Kamhi was quoted as saying by the Financial Times. He told the paper the firm would “probably increase the level of engagement on this issue going forward”.

With just over 12 months left to reach the 25% target set by the UK government, the number of women on FTSE 100 boards has reached 22.8% (FTSE250: 17.4%), according to the latest progress report from the Cranfield School of Management. “With only 28 out of the FTSE 250 boards remaining all male, we are beginning to see what we hope is lasting change when it comes to gender diversity in Britain’s boardrooms,” said Professor Susan Vinnicombe, Director of the Cranfield International Centre for Women Leaders and a member of Lord Davies’ steering group.

Major US stock exchanges have reportedly sought to dismiss a lawsuit brought by pension fund plaintiffs that accuses them of rigging markets to benefit high-frequency traders. The investor plaintiffs are led by the city of Providence, Rhode Island and represented by class action law firm Robbins Geller Rudman & Dowd, Reuters reported. The exchanges involved include Nasdaq and the New York Stock Exchange as well as trading firms such as Barclays, the report added.

RepRisk, the Switzerland-based ESG business intelligence provider, has announced a new partnership with the UN-backed Principles for Responsible Investment (PRI) which will see RepRisk provide ESG research to financial professionals enrolled in the PRI Academy, the PRI’s online training initiative. “Access to RepRisk’s dynamic data will be an invaluable tool for those enrolled in PRI Academy courses,” said Fiona Reynolds, Managing Director of the PRI. RepRisk already provides ESG data to the PRI Clearinghouse, the organisation’s engagement platform.

The $108.2bn (€86.7bn) New York State Teachers’ Retirement System has reportedly been approved as lead plaintiff in a class-action lawsuit against automotive giant General Motors. Pensions & Investments said the case claims GM misled investors about the safety of ignition switches. P&I cited a fund spokesman as confirming the decision but declining to comment further. The report added that Judge Linda Parker of the US District Court in Detroit ruled that NYSTRS had suffered the greatest losses of the four potential lead plaintiffs.