RI ESG Briefing, September 14: Dodd-Frank replacement bill clears committee

The round-up of the latest ESG news

Environmental

Plans by BP and Shell to expand their North Americas tar sands projects are likely to drill a hole in the oil majors’ balance sheets even if oil prices rebound, new analysis shows. Greenpeace and Oil Change International warn the oil giants’ investors that obstacles such as lack of infrastructure and growing political support for climate action would likely make tar sands expansions unprofitable even if oil prices recover.

KKR has reportedly pulled out of the race to acquire the UK’s Green Investment Bank. The private equity heavyweight is understood to have been selected earlier this year as one of three shortlisted bidders for the bank, which is undergoing part-privatisation. Final bids were submitted last week, and reports say that KKR dropped out of the running. That leaves Macquarie and a consortium led by Sustainable Development Capital Ltd as the two contenders for ownership.

Canadian pension fund Caisse de dépôt et placement du Québec has reportedly made an investment commitment to a new Indian power investment platform launched by Tata Power and the ICICI Venture arm of leading Indian bank ICICI. The platform, Resurgent Power Ventures, also has commitments from the Kuwait Investment Authority and Oman’s State General Reserve Fund, according to media reports.

Social

A Dutch venture philanthropy fund Start Foundation is launching the first cross-border social impact bond in partnership with Enschede local authority and co-investor Dutch bank ABN AMRO. The social impact bond seeks to match jobseekers in Enschede with German employers. NGO BOAS Werkt will provide intensive support to 138 Dutch jobseekers to this end to find work in the German North Rhine-Wesphalia region. The SIB is being finance with €1.1m from the Start Foundation, ABN AMRO Social Impact Fund and BOAS Werkt which is financing 5%. If job seekers find permanent employment in German, the local authority of Enschede will repay investors.

Brazil-based ESG think-tank SITAWI is working with the government of the Brazilian state of Ceará on launching a social impact bond around health. RI understands it is developing viability studies around different models such as moving chronic patients from hospital to home care.

Swedish real estate firm Hemsö – which is 70% owned by state-owned pension fund AP3 – has issued the first bond under its new euro mid-term notes programme. The €3bn programme was launched last month, and this week the firm – which develops, owns and manages community-focused buildings such as schools and nursing homes – sold €500m of 10-year notes. The deal was seven-times oversubscribed, according to Hemsö, and settled with a coupon of 1%.h6. Governance

The House Financial Services Committee in Washington has approved legislation to replace the 2010 Dodd-Frank financial overhaul law that was put in place in the wake of the financial crisis. The committee, according to the Wall Street Journal, voted 30-26, largely along party lines, for a bill pushed by Chairman Jeb Hensarling, a Texas Republican. The WSJ said the Hensarling bill, which has been denounced by Democrats, would now go to a vote by the full chamber.

The Interfaith Center on Corporate Responsibility (ICCR), the US faith investment coalition, has commended drugs firm Allergan for its recent pledge to cap its branded price increases to no more than single digit annual increases or slightly above the annual rate of inflation. ICCR and others have been pressing the industry for greater disclosures on pricing structures for decades as a way to promote greater access to medicines; the ICCR said the announcement was a “public acknowledgement from within the industry that the current pricing system is deeply flawed and unsustainable”. The body hopes other drug makers will follow Allergan’s lead. It said: “As the 2017 proxy season begins, ICCR members will continue to pressure pharmaceutical companies for greater drug price transparency and for board oversight over excessive drug pricing.”

Californian pension fund CalSTRS has revealed the results of its recent proxy voting efforts, drawing attention in particular to its efforts to encourage a majority vote standard in board elections at listed companies. The $193bn pension fund engaged 106 companies, of which 94 adopted the standard before the matter went to vote. CalSTRS also focused on encouraging oil and gas companies to report on the risks associated with methane emission leaks, engaging with 14 companies, fielding six proposals of which four went to vote. Anne Sheehan, the fund’s Director of Corporate Governance, said: “We consider it part of our fiduciary responsibility to exercise our corporate governance rights to address issues — like risk mitigation and costs — with corporations held in our portfolio to ensure we maximize returns for the benefit of our members.”

A report published by the organizers of the UN’s Sustainable Stock Exchanges (SSE) initiative says that it has 58 stock exchanges, representing over 70% of listed equity markets, committed to advancing sustainability in their regions and providing some of the $5-7tn of financing needed to achieve the sustainable development goals (SDGs). Though the report notes that more action is needed, it asserts that “stock exchanges are well position to contribute to the SDGs”. In other news, the Singapore Exchange has become the latest signee to the initiative as a partner exchange. Link