RI ESG Briefing, Sept. 24: Credit Suisse sees “striking evidence” of impact of gender diversity

The round-up of environmental, social and governance news


Bank of America has announced what it termed a ‘Catalytic Finance Initiative’ to stimulate at least $10bn of new investment into high-impact clean energy projects. The initiative will focus on developing or advancing innovative financing structures that reduce investment risk, thereby attracting a broader range of institutional investors. As part of the initiative, the bank will commit $1bn to investment structures that employ a “range of de-risking tools”, developed in conjunction with development finance institutions (DFIs), insurance providers, foundations and institutional investors. Announcement

The Church of Sweden has announced that it has removed gas companies from its portfolio, making its $691m of assets fossil free. Gunnela Hahn, head of responsible investment, said: “We see a financial risk in owning fossil fuel companies. Their value consists to a large extent of fossil fuel reserves that risk losing value since they cannot be extracted if we are to have a liveable planet.”

UN Secretary-General Ban Ki-moon has welcomed the “billions of dollars” pledged by countries to the Green Climate Fund. Donors include the Republic of Korea ($100m), Mexico ($10m), France and Germany ($1bn each). The fund sits within the United Nations Framework Convention on Climate Change (UNFCCC) as a mechanism to transfer money from the developed to the developing world to help mitigate climate change.

The Mind the Science, Mind the Gap initiative, a partnership of CDP [the former Carbon Disclosure Project], the UN Global Compact, the World Resources Institute and the WWF, has released a draft methodology for public comment to set science-based emissions reduction targets that are in line with the global goal of staying under a 2°C temperature increase from pre-industrial levels. The public consultation period is open until October 23. Link


RepRisk, which provides business intelligence on ESG risks, has released its latest Special Report on Indigenous Communities and the ESG issues that are affecting them around the world. The report looks at six countries where indigenous communities have been impacted by industrial activity. In particular, the case studies analyze the effects of hydropower in Brazil, tar sands in Canada, forestry in the Democratic Republic of Congo, mining in Guatemala, palm oil in Indonesia, and transgenic crop production in Paraguay.

The Law Commission, a body that reviews UK law, has said government should give charity trustees an explicit statutory power to make social investments. In a new paper, it says although charities are generally permitted to make social investments, there is some uncertainty among trustees about the subject. The report will pass to government department the Cabinet Office who asked the Law Commission to look at the matter and will decide whether to take its recommendations forward. Link. Governance

Greater gender diversity in companies’ management improves their financial performance, according to new research from the Credit Suisse Research Institute. “The research, which expands on an initial 2012 study, provides striking evidence: higher returns on equity, higher price/book valuations and higher payout ratios,” said Stefano Natella, Head of Global Equity Research at Credit Suisse’s Investment Banking division. “We also found that greater diversity, along with female CEOs, tend to mean higher leverage, in stark contrast to the generally accepted association of women and financial conservatism.”

GES, the Sweden-based ESG engagement provider, has launched two new services. They are Stewardship and Risk Engagement and Extended Business Conduct Engagement. It follows the integration of the Governance for Owners’ UK-based stewardship team led by Josiane Fanguinovény earlier this year and comes “in response to client demand”. ‘Stewardship and Risk Engagement’ caters for the needs of investors whose ESG perspective is driven primarily by the consideration of “risk and opportunity”, rather than compliance with “normative standards” of business conduct. ‘Extended Business Conduct Engagement’ caters for the needs of investors whose ESG perspective is driven primarily by concerns about business conduct exceptions based on internationally accepted norms and conventions. It extends GES long-standing engagement activities initiated from exceptions to accepted business conduct based on the UN Global Compact principles, to include additional OECD guidelines.

The International Integrated Reporting Council has pointed to two studies which it says demonstrate the significant changes to behaviour triggered by Integrated Reporting. “They reveal strong evidence of positive impacts on business engagement with external stakeholders, strategic benefits including better decision-making, and the importance of Integrated Reporting in helping to meet the needs of investors.” The first research was conducted in partnership with corporate communications specialists Black Sun and revealed that 91% of all respondents have seen a positive impact on external engagement with stakeholders, including investors. And further research released by PwC shows that 63% of investment professionals who responded believe that the quality of a company’s reporting could have a direct impact on its cost of capital. The research was launched at the fourth annual IIRC Pilot Programme Conference.

Trillium Asset Management, the US SRI specialist, has set out its approach to engaging companies on privacy and data security issues in a brief note available here. “Privacy and data security have quickly become one of the most critical business and social issues of our time,” the firm says; the document highlights examples of its engagement with companies such as Apple, Verizon and Comcast.