RI ESG Briefing, October 21: Google, Natixis, Austria, Climate Bonds, Equator Principles

Environmental

Google has announced it is committing to invest in the 310MW Lake Turkana Wind Power Project in Northern Kenya, its second clean energy investment in Africa. The Internet giant says it will join a diverse group of international investors in Lake Turkana, including the Overseas Private Investment Corporation, the U.S. government’s development finance institution, and turbine maker Vestas. “We will purchase Vestas’ 12.5% stake in Lake Turkana once it comes online, becoming the first U.S. private investor to support the project,” said Rick Needham, Energy & Sustainability Director.

Natixis, the investment arm of France’s second largest bank, BPCE, has announced it will cease the financing of coal fired power stations and thermal coal mining projects worldwide. The new policy also commits not to finance companies that generate over 50% of their business from coal power or thermal coal mining. The announcement comes weeks after Crédit Agricole reportedly made further cuts to its coal financing in a new coal power policy, and one week after Citi announced it will reduce its lending exposure to coal mining.

There was $6.9bn of green bond issuance in the third quarter, according to industry group the Climate Bonds Initiative. It said JP Morgan topped the quarterly underwriters league table, with HSBC second and Bank of America Merrill Lynch in third slot. “The green bond market has slightly slowed from a high in the second quarter,” writes co-founder and CEO Sean Kidney. “But, it seems like the issuance is going up in size – the average in third-quarter bonds ($204m) is well above the second-quarter figure of $144m.

Social

Austria has launched its first social impact bond that will support women affected by domestic violence. The SIB has been commissioned by the Austrian Federal Ministry of Social Affairs and is backed by foundations. It will aim to deliver a 1% return per annum on the investment. Link

RSF Social Finance (RSF), a California-based financial services organization, has closed a loan to MCE Social Capital, the US non-profit impact investing firm, for additional financing. The MCE pools guarantees from individuals and foundations as collateral to finance loans to microfinance institutions that provide capital for micro businesses.

Annual research for the UK’s ‘Good Money Week’ has found that 54% of British investors want their investments to have a positive impact, beyond just making money – a record high since polling began in 2009. In a sign that the sustainable investment market has shed its image as a niche market, the top three issues for investors now include corporate governance matters such as ‘tax avoidance’ and ‘data protection’, rather than the traditional environmental causes usually associated with ethical investment.h6. Governance

Campaign group BankTrack has called on the Equator Principles Association, which oversees guidelines for managing environmental and social risk in project finance, “to step up its ambition level”. The Netherlands-based group has written to the Chair of the Steering committee, highlighting four steps it says the Association needs to take. These include increased transparency, alignment with the UN Guiding Principles on Business and Human rights, the establishment of a complaints mechanism, and moving away from financing fossil fuels.

The Center for Political Accountability, an US-based NGO, and the Zicklin Center for Business Ethics at the Wharton School, University of Pennsylvania have released their annual report (CPA-Zicklin Index), covering the entire Standard & Poor’s 500 Index for the first time, offering greater insight into how transparent major companies are when it comes to their political activity through benchmarking “the political disclosure and accountability policies and practices of leading U.S. public companies.” Link

Hermes Investment Management, one of the largest institutional asset managers in the UK, with over £29bn assets under management, has published
a survey of 109 institutional investors from the U.K. and Europe showing less than a quarter of those polled think gender diversity in the boardroom is important. Lack of boardroom diversity could inhibit performance according to a recent study by McKinsey & Company (Jan,2015), ‘Why Diversity Matters’, which found that companies in the top quartile for gender or racial and ethnic diversity are more likely to have financial returns above their national industry medians.

The Organisation for Economic Co-operation and Development (OECD) has launched its Automatic Exchange of Information (AEOI) portal. The portal aims to assist State administrations work together “to ensure that taxpayers pay the right amount of tax to the right jurisdiction” through offering a conduit for enhanced co-operation and the sharing of information between tax authorities.

Alquity, the UK-based emerging markets fund firm, and the London-based Cass Business School, have released research showing the effectiveness of ESG analysis in identifying good investments opportunities in emerging markets. Analysis of over 4,400 listed companies over the period 2011-2015, revealed companies with “strong and improving ESG disclosure” in emerging markets realised an annual return of 9.4%, (against the benchmark performance of 5.4%). Link

Fund firm Standard Life Investments has issued a White Paper
examining the rise of the so-called ‘millennials’ and their impact on values-based investing. It explores millennials’ potential impact on traditional financial management, as well as the many opportunities they create for the industry. The report highlights that millennials want to invest in companies that achieve positive social outcomes and new products will need to be created that reflect their attitudes and beliefs.