Environmental
Finland’s insurance and pension giant ELO has become the first Finnish member of the Institutional Investor Group on Climate Change (IIGCC), the main European investor body focused on climate change. Hanna Hiidenpalo, ELO’s Chief Investment Officer said: “We recognise the importance of international collaboration with other investors and are proud to become the first Finnish investor to formally recognise the importance of IIGCC’s work”.
Climate finance ties between Luxembourg and China were strengthened with launch of several joint initiatives: The International Institute of Green Finance, China’s Central University of Finance and Economics, Luxembourg Stock Exchange and China Securities Index jointly launched the CSI 300 Green Leading Stock Index, which will assess the performance of green Chinese listed companies. And, the Luxembourg Stock Exchange (LuxSE) and Shanghai Stock Exchange (SSE) expanded their co-operation by signing an addendum to an existing Memorandum of Understanding (MoU) to launch the first ‘Green Bond Channel’ between them. Finally, the Industrial and Commercial Bank of China, Luxembourg, and the LuxSE jointly announced the bank’s inaugural issue of green bonds to be listed on Luxembourg LGX. The announcements come as Luxembourg’s Minister of Finance, Pierre Gramegna, led a delegation of more than 70 people from the Grand Duchy’s finance sector industry to China for talks with China’s Minister of Finance, Xiao Jie, and Governor Zhou Xiaochuan of the People’s Bank of China.
US investment management firm Sage Advisory Services has launched a new credit index to track highly liquid ESG securities. The Sage ESG Intermediate Credit Index will select between 100-120 investment grade securities – conforming to the firm’s propriety ESG assessment – with a minimum tranche size of $500m from the Barclay’s Intermediate Credit Bond Index. The securities must have been issued within the last three years.
Social
The UK House of Lords is hosting a screening of ‘COMPLICIT’, a documentary filmed undercover in China that examines the ubiquity of smartphones against the horror stories of chemically poisoned young Chinese workers in the factories that manufacture the world’s leading electronics brands. The screening on October 26 from 15.00-1800 is at the invite of Baroness Young of Hornsey OBE and Baroness Sue Miller of Chilthorne Domer OBE.
One of the producers of ‘COMPLICIT’ is Heather White, who was the founder of Verité, the award-winning non-profit organisation for responsible supply chain practices, which worked with a number of investors. To register for the event, contact Danielle Turkov (email). Responsible Investor’s Managing Editor Hugh Wheelan will join a Q&A panel with Björn Claeson, Electronics Watch Director, Gemma Swart, International Trade Union Congress UK Director, and Olga Martin-Ortega, London University’s Ethical Procurement Initiative.
The EU is set to launch a new food biodiversity index next year, Reuters reports. Funded by the European Commission, the Agrobiodiversity Index will offer investors a benchmark to assess the efforts of companies and governments to make food systems more resilient to climate change. According to a recent study by global research firm, Bioversity International, reliance on just a handful of species increases the risk of supply shocks as droughts, rising temperatures, and unpredictable weather events become more common.h6. Governance
Some members of the Philadelphia Board of Pensions reportedly want to exit the $1.2m worth of stock it owns of for-profit prison companies. The Philadelphia Inquirer quoted the city’s Human Resources Director and pension board member Pedro Rodriguez as saying the board was “one of the leading organizations in the country in having a social conscience”. But the paper said that a resolution to divest three private prison companies (GEO Group, CoreCivic and G4S) has been postponed.
US SRI firm Zevin Asset Management has filed a shareholder resolution at Starbucks, targeting the US coffee giant’s parental leave practices. The resolution challenges the disparity between mothers at the firm’s corporate headquarters who receive 18 weeks’ leave compared to those in retail stores who receive only six weeks – fathers and adoptive parents are entitled to no leave whatsoever. The resolution requests that the company produce a report evaluating the “risk of employment discrimination” resulting from Starbucks’s approach to paid family leave. Starbucks is one of fifteen major companies Zevin has targeted on this issue over the summer.
Engagement between asset owners and asset managers is having a “positive impact” on investment decisions and ultimately value, according to a recent report by the UK’s Investment Association and Pensions and Lifetime Savings Association. It found that of the UK asset managers with an in-house stewardship policy two thirds reported that engagement with UK companies resulted in “somewhat or considerably better investment decisions”. Some 77 asset managers responded to the report, holding £563bn of UK equities.
Forty three percent of respondents to ESG research firm Institutional Shareholder Services’ (ISS) annual global benchmark voting policy survey believes “unequal voting rights are never appropriate for a public company in any circumstances”. The survey, which received 602 responses, of which 129 were from institutional investors and their organisations, also found that more than two-thirds of investor respondents would find it problematic if there are no female directors on a public company board. And, three quarters of those asked also plan to compare pay ratio disclosures across companies/industry sectors, or assess year-on-year changes in the ratio at an individual company or use both of these methodologies.
Investors favour CEO honesty over financial returns, according to a report by Swiss Finance Institute. The paper Investing in Managerial Honesty found that 60% of participants chose to invest with CEOs who did not engage in “upwards earnings management” thus missing out on significantly higher bonuses. It found that this inclination towards managerial honesty was present in both socially sensitive investors and those seeking only financial returns.
“Overall, our results suggest that short-term incentives lead CEOs to take actions with negative long-term consequences.” That’s the conclusion of a new academic study by Alex Edmans and others. Edmans, Professor of Finance at London Business School, has teamed up with Vivian Fang of the University of Minnesota and the Hong Kong University of Science and Technology’s Allen Huang on the paper, The Long-Term Consequences of Short-Term Incentives, which shows how short-term stock price concerns induce CEOs to take value-reducing actions.
ESG research firm RepRisk has announced that it is opening an office in Toronto, Canada. It believes that the new Americas hub will allow the research and metrics provider to offer its clients a 24-hour service. RepRisk now has offices in Canada, Germany, the Philippines, and Switzerland.
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