RI ESG Briefing, October 27: Think tank looks at future of capital markets

Environmental

A report in CNN Money has hailed the Rockefeller Brothers Fund’s decision to exit fossil fuels just over a year ago as a “great move”. The foundation built on ‘Big Oil’ would now longer invest in fossil fuels, the report said – adding: “A year later, the move looks especially wise.” It quoted fund President Stephen Heintz as saying: “We are able to show it can be done without causing harm to the overall performance of your investment portfolio.”

A consultation on a new Low Carbon Transport Climate Bond Standard has opened. After a year of development, the Low Carbon Transport Technical Working Group under industry body the Climate Bonds Initiative, has released the world’s first proposed standard that will only certify investment in transport infrastructure that is compatible with a 2°C warming outcome. The Draft Standard is now open for a 60-day period of public consultation, investor and industry comment. Announcement

The European Investment Bank (EIB) will help finance the construction of the €655m, 165MW Nobelwind wind farm off the Belgian coast with a loan of €250m – largely from the new European Fund for Strategic Investments (EFSI). The Nobelwind project will become the fourth largest offshore wind farm in Belgian’s territorial waters.

Cambridge City Council has joined a handful of other U.K-based local authorities such as Oxford and Bristol in passing a motion committing to end investment in fossil fuels. The motion also called upon Cambridgeshire County Council and the Cambridgeshire Pension Fund to work towards divesting the £119m currently invested in fossil fuels. A reported £14bn is invested in companies such as Shell and BP by local council pension funds across the UK. Link

Social

Seventy-one percent of companies believe there is a likelihood of modern slavery occurring at some point within their supply chains, according to a new study from the Ashridge Centre for Business and Sustainability at Hult International Business School and the Ethical Trading Initiative. The aim was to get a snapshot of company perceptions and current responses as the new UK Modern Slavery Act comes into effect. It interviewed a cross-section of businesses from clothing, groceries, department stores, beverage, home and garden fresh produce and health and personal care sectors.

The Trades Union Congress, the UK’s union umbrella body, has responded to the government’s announcement that firms will be forced to include bonus payments when they publish details of the pay gap between male and female employees – calling it ‘just a start’. Link. Governance

Think tank Tomorrow’s Company has launched a new report looking the future of capital markets. Tomorrow’s Capital Markets: Investing in what we value brings to a formal conclusion research which began in 2010. The report calls for a wider view of value to be adopted and reflected in the information provided to support decision-making and savings to be channelled into investments which create wealth and secure well-being. “Strong investment performance is pursued over the long-term through a focus on stewardship, underpinned by collaboration and standards of integrity and transparency, and all the intermediaries in the system publicly declare the extent of their commitment to act in this way and explain how they fulfil these obligations,” it states. It also calls for an “appropriate balance” between long-term investments and the need for liquidity.

The Institutional Limited Partners Association (ILPA), the investor body for private equity, is reportedly seeking comments on a new draft guidelines for how the sector discloses fees and expenses. The Wall Street Journal, citing market sources, said the move would “intensify the battle” on transparency standards.

The University of California, Office of the President (UCOP) has announced that it was the first US pension plan and endowment fund to sign the Japan Stewardship Code. The code, comprised of seven guiding principles that should inform investors’ practices, is a non-binding agreement, which lends heavily from the UK’s similar Stewardship Code, encouraging investors to realise the importance of active stewardship and sustainability when overseeing investments.

Siri Terjesen, Assistant Professor of Management & Entrepreneurship at Indiana University, has taken stock of the state of gender representation on corporate boards around the world. Although women have increasingly achieved equality in some domains, there are vast differences in their participation at the highest echelons of the corporate world: boards of directors, she finds. Link

The Swedish central bank, the Riksbank, has reportedly warned that a planned reform of the country’s AP funds could hinder their ability to invest in infrastructure and real estate. Earlier, the four main AP funds claimed the proposed overhaul amounted to “political micromanagement” IPE.com reported.

Hermes Investment Management has published the fourth and final paper of its annual Responsible Capitalism Survey, which shows that 60% of the 109 UK and European institutional investors surveyed believe that the rising number of low-cost passive investment vehicles will undermine shareholder influence over companies through the creation of ‘distance’ between investor and investment.