RI ESG Briefing, September 17: Malaysian government pension fund ‘plans ESG mandates’

The round-up of environmental, social and governance news


The World Bank’s IFC says it will lend $50m (€38.6m) to two subsidiaries of Continuum Wind Energy to expand access to clean energy, and help reduce greenhouse gas emissions in India. IFC also helped mobilize a loan of $100m for the project from YES Bank. The financing will be used to construct a 170MW wind power plant in Madhya Pradesh. Continuum is backed by Morgan Stanley Infrastructure Partners. Announcement

So-called YieldCo’s could be one way of promoting investment into low-carbon projects, according to the ‘Better Growth, Better Climate’ report from the high-level Global Commission on the Economy and Climate, chaired by former Mexican President Felipe Calderón. “In high income countries, where there are deep pools of institutional capital in pension and insurance funds, new vehicles for low-carbon investment have been developed in recent years – including so-called ‘YieldCos’, municipal finance, crowd-sourcing and ‘green bonds’,” the report says. “When structured appropriately, these instruments could reduce the financing costs for low-carbon electricity by up to 20%.” YieldCo’s are publicly traded companies formed to own operating assets that produce predictable cash flows.

Emerging market private equity firm Actis is to invest $250m to establish a Mexican energy platform, Zuma Energia, that develops, constructs and operates wind, solar and thermal generation projects in Mexico. Zuma Energia 1 recently completed its first acquisition and closed the financing of a 50 MW wind farm located in the state of Oaxaca. Once in operation the wind farm is expected to produce enough clean energy to power over 125,000 Mexican households, reducing CO2 emissions from conventional generation by over 200,000 tons. Link


A new study by Swiss microfinance asset manager responsAbility Investments examines current developments in India’s financial sector and shows how microfinance institutions are using innovative models to close the “massive supply gap” for financial services. “After suffering a politically-motivated setback in 2010, the microfinance sector is now thriving again and grew by 35% in 2013 alone,” the firm says. The report, called ‘The rise, fall and dynamic revival of India’s microfinance market’ is available here.

The Impact Measurement Working Group, which is part of the G8 Social Impact Investing Taskforce, has released a report making seven practical guidelines for good impact measurement The guidelines include: setting goals, developing a framework and selecting metrics; collecting and storing data; validating data; analyzing data; reporting data; and making data-driven investment management decisions. The report was launched in conjunction with the Social Impact Investment Taskforce report launched on September 15. Link. Governance

Malaysia’s Kumpulan Wang Persaraan (Diperbadankan) (KWAP), the country’s second largest pension manager with assets of 99.9bn ringgit (€24bn), is reportedly set to issue mandates focused on sharia-compliant and ESG investments. Speaking at an Asia Asset Management event, Wan Kamaruzaman Bin Wan Ahmad, CEO of the civil servants’ fund was quoted saying it wants to increase exposure to these assets as part of its diversification strategy. “We’re coming out with a couple of mandates; maybe a domestic one and maybe a regional one, on SRI investments, in particular in the equity space,” he told audience members.

Harvard Law School Corporate Director Lucian Bebchuk has raised concerns about the forthcoming public offering of Chinese Internet retailer Alibaba. In a New York Times column, Bebchuk argues the company’s ownership structure does not provide adequate protections to public investors. “In particular, such investors should worry that, over time, a significant amount of the value created by Alibaba would not be shared with them. Investors participating in the IPO, I conclude, should recognize the significant governance risks they will be taking.”

Proxy firm PIRC has advised investors to vote against remuneration policy at drinks firm Diageo at its annual meeting in London on September 18. “Rewards made to the Executive Directors for the year are considered excessive in comparison with their base salaries,” PIRC said. PIRC is also advising voting against the annual report and remuneration report at Irish airline Ryanair on September 25, citing weak disclosure and board composition.

A director of Dutch central bank and pensions regulator De Nederlandsche Bank (DNB) has reportedly said that pension funds should ask their members to get more involved in the ethics of investment decision-making. Joanne Kellermann was speaking at DNB’s annual congress for pension funds, IPE.com reported. Kellermann regretted the fact that Dutch funds rarely consult beneficiaries on sustainable investments, the report added.

UK trade body the National Association of Pension Funds (NAPF) has published its second Annual General Meeting (AGM) Season Report. The NAPF saw a “number of flash points” at high profile companies and a significant variation in the voting approaches adopted by different asset managers. It looked in particular at those companies which received successive years of dissent on remuneration, identifying eight in particular. They are: Capital & Counties Properties; easyJet; FirstGroup; Lonmin; Mitie Group; Ocando; Ophir Energy; and SVG Capital.