RI Europe 2015: ‘Blue bonds’; impact investing mythbusting; Strathclyde eyes offshore wind

Further coverage of RI Europe’s ‘Matrix’ panel sessions.

The £15.6bn (€21.4bn) Strathclyde Pension Fund has approved a £50m investment in principle in the UK Green Investment Bank Offshore Wind Fund LP, said George Finnie, Investment Manager, New opportunities at Strathclyde. There has also been an investment of £30m in Temporis Onshore Wind Fund LP and an investment of US$50m in Markham Rae Trade Capital Partners. This will provide regulatory capital relief to international banks to cut the cost of their capital in trade finance operations in return for a share of the operations’ income. And another £20m has gone into the Muzinich UK Private Debt Fund which will lend directly to SMEs across the UK. The fund is making a staged movement away from equities towards different asset classes via its ‘new opportunities portfolio’.

In a ‘mythbusting’ session on impact investing, Tomas Carruthers, CEO of the UK’s Social Stock Exchange, said the benefit of companies doing impact reporting was that it led to an improvement in employee engagement as it reminded them of the purpose of business. Michele Giddens of social investor Bridges Ventures said it is a myth that there is no ‘scale’ in impact investment. She noted that online platform Etsy was the first certified ‘BCorp’ (where companies pledge to benefit society) to float on Nasdaq. With uncorrelated returns, social impact bonds could become institutionally exciting once there is a track record. Carruthers said he believed ESG would be common in mandates of large-cap and mid-cap equities in the future. “If you integrate ESG how do you distinguish yourself?” he said, suggesting impact investment could be a way.So-called ‘blue bonds’ are “pretty simple and pretty compelling” as an investment thesis and similarly have a really strong sustainability thesis, according to Larry Band, who is a consultant to Prince Charles’ International Sustainability Unit. The nascent bonds would be linked to the likes of sustainable fisheries, marine conservation and fishing fleet upgrades, though there is no track record as yet. He went on to say that the World Bank is probably the only organisation that has enough eligible projects on its balance sheet at the moment.

Human capital was the focus of a separate Matrix session. Andy Howard, Managing Director of consultancy Didas Research, unveiled the results of a study showing that companies with high employee productivity outperform those with less. “We found that the share outperformance of those companies against others was an average of 4%,” said Howard. According to him, the study shows how important it was for companies to keep employees satisfied. Howard also cited US tech giant Apple as a company known for its high employee satisfaction.

Ryan Brightwell, Researcher at BankTrack, told RI on the sidelines of the event that the NGO has still not received a formal response from the International Capital Market Association (ICMA) about its detailed letter in April which set out some of its misgivings about the Green Bond Principles, in particular a GDF Suez (now Engie) issue linked to a controversial Brazilian dam project. ICMA acts as secretariat for the principles and BankTrack – an official observer of the principles – is keen to engage with ICMA and the principles’ signatories on the topic, he added. Sean Kidney of the Climate Bonds Initiative said it is working with the Chinese government on a green bonds framework which may be published later this year.