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RI ESG Briefing, Oct. 22: Investor fiduciary duty consultation paper launched

The round-up of environmental, social and governance news

Environmental

Institutional investors including pension funds, insurance companies and foundations/endowments contributed just $.04bn towards global climate finance flows in 2012, largely to new renewable energy projects, according to a new report. “They invested directly into project debt or project equity, always accompanied by some form of public backing or support,” said the Climate Policy Initiative in its new Global Landscape of Climate Finance 2013 publication.

Legal & General Property, which has £11bn (€13bn) of UK real estate assets under management, says it has achieved a 5.9% carbon reduction compared to a 2010 baseline across its portfolio. It has set a 20% carbon and water reduction target, across its ‘like for like’ properties by 2020 – which will be challenging as the majority of “basic” energy efficiency measures are already in place.

Good Energy Group, the AIM-listed renewable electricity supplier, has raised in excess of its initial £5m target following the launch of its corporate bond on October 2. Applications for the four-year bonds, with a coupon (interest rate) of 7.25%, will remain open until 13 November 2013.

Social

Credit Suisse has launched what’s claimed to be the first ever LGBT [Lesbian, Gay, Bisexual and Transgender] Equality Index, to track the equity performance of companies with LGBT friendly policies. The initial concept for the index is the result of conversations between Credit Suisse and LGBT Capital, which is active in LGBT-related socially responsible investment. The Swiss bank is also launching an associated investable portfolio, the Credit Suisse LGBT Equality Portfolio, available to Credit Suisse Private Banking USA clients. Link

A new website has been launched to encourage companies to address human trafficking in their supply chains. KnowTheChain.org is sponsored by the Interfaith Center on Corporate Responsibility (ICCR) and a dozen anti-trafficking organizations. It was developed to support greater disclosure related to the California Transparency in Supply Chains Act as well as educate companies, investors, policymakers, and consumers about the existence of slavery in supply chains.

French bank Société Générale’s Cross Asset Research team has released the fourth edition of its SRI Beyond Integration report. The findings, based on a proprietary methodology, highlight the positive impact of ESG factors on financial performance of listed companies. On average and in one year, the share price of ESG leaders grew 3.1% higher than that of ESG laggards, it found. For the second consecutive year, SocGen partnered with Sustainalytics, a global ESG research firm, to provide the ESG data and analysis used in the publication.h6. Governance

The Law Commission, the UK body which reviews laws, has launched a consultation on investors’ fiduciary duty. It follows from the Kay Report on UK Equity Markets and Long Term Decision Making. The consultation paper uses pensions as the example, tracing a chain of intermediaries from the prospective pensioner/saver to the registered shareholder of a UK company. The Commission asks if the law is right to allow trustees to consider ethical issues only in limited circumstances and whether the legal obligations on trustees are conducive to investment strategies in the best interests of the ultimate beneficiaries? The closing date for responses is January 22 2013, with a report plan by June 2014.

UKSIF, the UK Sustainable Investment and Finance Association, welcomed the Law Commission’s launch and said it is seeking feedback from its members on the issues raised in the consultation. It will submit a response to the Law Commission for the deadline.

Swiss governance firm Ethos says it is not in favour of the “1:12” executive pay initiative, which goes to the vote on November 24. The initiative seeks to amend the Constitution so that the highest salary paid by a company shall not exceed twelve times the lowest salary in the same company. Pension fund-owned Ethos calls the gap “arbitrary” and added: “It is the responsibility of the shareholders and the board of directors of each company to ensure that the principles of proportionality and moderation are respected in the field of remuneration.”

The C$129.5bn (€91.4bn) Ontario Teachers Pension Plan is facing accusations that one of its portfolio companies, UK National Lottery operator Camelot, has exploited a loophole to avoiding at least £10m in corporation tax. Campaign group Corporate Watch and the Independent newspaper said Camelot took out high-interest loans from its parent company via the Channel Islands Stock Exchange. The Independent quoted an OTPP spokesman as saying the fund “abides by all regulatory, tax and legal requirements in the jurisdictions that it invests and operates in”. Teachers acquired Camelot for £389m in 2010.

The Florida State Board of Administration, the $165.8bn US investor, has selected MSCI for a new initiative to pair environmental, social and governance (ESG) data with financial risk factors. This will support its engagement with companies and “provide a more comprehensive view of total portfolio risk”. The SBA will use MSCI’s BarraOne and Barra Portfolio Manager platforms to scrutinize companies and manage portfolios for their exposure to ESG risks and opportunities, including energy efficiency, business supply chains, and data security and privacy.