The German state of Hessen is to invest up to 20% of €428m in civil servant pension money in stocks that make up the Dow Jones Euro Stoxx Sustainability Index in its first move towards ecological and social investment, reports German magazine Portfolio Institutionell. German investors are gradually increasing their allocations to SRI investment despite a recent report by Axel Hesse, consultant for Germany-based S-DM, Sustainable Development Management, in conjunction with Swisscanto, the Swiss fund manager, which found they had some way to “catch up” on knowledge levels about responsible investment shown in other European countries.
The report said it did not detect any major change from a 2005 report, which found that only one out of 20 German pension funds said they had a “very good” understanding of sustainable investments and six were “rather poorly” informed. Notable exceptions include the €260m Gothaer Pension fund, the €134m Gerling pension fund, the €49m Hannoversich pension fund, the Hamburg Mannheimer pension fund, Victoria Pension fund and Metallrente, the €1bn pension fund for the German metal industry, which also bases its investments on Dow Jones sustainability indices.
Harrington Investments, the US socially responsible investment advisory firm, is targeting Monsanto, the US agricultural company with a shareholder resolution that could make company directors directly responsible in the event of activities that cause “harm to the natural environment, public health, or human rights.” Harrington will present the binding amendment to change Monsanto’s corporate bylaws for vote at the company’s annual general meeting on January 16.
John Harrington, President and CEO of Harrington Investments, said: “We chose Monsanto as our target for this new approach, because we view this company as facing significant legal and reputational liabilities that might have been prevented with better board oversight. These include allegations of selling potentially dangerous products abroad, bribing foreign government officials, and releasing genetically engineered products that have not been proven safe for human consumption or the natural environment. Such activities are bad for our company’s reputation, and could lead to substantial liabilities. The idea behind this resolution is that by increasing the personal accountability of corporate directors, our proposed bylaw amendment would encourage these fiduciaries to better represent the shareholders of the corporation – and to serve as better guardians of the public interest.” Harrington is urging other shareholders to support its resolution.
The €9.3bn ($13.1bn) AP7 Swedish pensions buffer fund is to use the FTSE ET50 index as the benchmark for a new commitment of $500m to the clean technology sector, for which the fund will select fund managers during 2008.Christian Ragnartz, chief analyst at AP7 said: “We chose the FTSE ET50 Index as a benchmark because of its broad range of pure-play and global clean technology companies and because the FTSE ET50
index also includes efficiency, water, and waste technologies.”
Dutch pension funds are thinking hard about responsible investment strategies but have yet to make great strides in implementation, according to a survey by the Dutch organisation of investors for durable development, (VBDO), reports ipe.com. The report said pension funds had “a long way to go in terms of implementation, transparency and communication” of SRI policy, although it said many were reviewing their policy. It said 40% of the respondents engaged in dialogue with the companies they invest in, while only 20% said social responsibility affected voting behaviour. One in 10 responding Dutch funds said they screen their equity selection based on SRI criteria. VBDO found that PGGM, PME, ABP and PMT, the largest funds in the Netherlands, were the most advanced in terms of SRI implementation.
Rupert Clarke has been appointed chief executive of Hermes Pensions Management, the UK £52bn fund manager owned by the BT Pension Fund, which has a specialist activist investment arm. The fund manager is also injecting £50m into the business to promote it as a specialist boutique manager in commodities, hedge funds, real estate and private equity. Clarke was previously head of Hermes Real Estate Investment Management. Separately, Rod Kent, former chief executive of Close Brothers, the London-base investment bank, was named chairman of the BT pension fund, replacing Tim Chessells, who is retiring.
*Zurich, the Swiss financial services group, has signed *up to the United Nations Principles for Responsible Investment (UNPRI). Zurich announced it had introduced a corporate responsibility program across all its businesses. David Smith, chief executive said: “For companies operating within our community it is not a matter of corporate responsibility being ‘nice to do’. It is now a business imperative.”
Global banking groups should stop funding new coal, oil and gas extraction and the most harmful practices in
other greenhouse gas intensive sectors if they are serious about combating climate change, according to BankTrack, the international network of NGOs. The call comes in a paper, ‘A challenging climate; what international banks should do to combat climate change’. The report can be found at: www.banktrack.org
Investors should consider prospects in the water infrastructure sector because of likely future scarcity in water supplies, according to a Merrill Lynch analyst report. The report said economic and population growth combined with higher living standards had created more demand for water that could lead to regional shortages. Unlike other commodities, water compared is difficult to distribute and trade. Zoe Knight and Robert Miller-Bakewell, analysts at Merrill Lynch said the UK is spending around £4bn ($8bn) a year on water services networks, and that the EU, pro rata, would be spending approximately €50bn ($73 billion), providing investment opportunity in municipal water suppliers, water service providers and water treatment technology firms.
Investors in Asian equities face higher levels of climate risk than investors in other regions because
of their greater exposure to the resources sector, according to research commissioned by the International Finance Corporation (IFC). The research carried out by Trucost, the London-based environmental research company, found that the carbon footprint of Asian equities portfolios could be reduced by 30% without any loss of performance. Trucost examined the carbon intensity – the volume of greenhouse gas emitted for each million dollars of turnover – for the MSCI Asia ex-Japan index, and 90 individual investment funds. It constructed a “carbon-optimised” portfolio, maintaining the same sector weighting of the index, but emitting 31% less carbon. When back-tested from 31 December 2006 to 20 November 2007, the portfolio underperformed by just -0.045% with a tracking error of 0.23%. The report said Asian countries were coming under greater pressure to control their emissions growth, with emissions trading schemes planned in Taiwan and South Korea.
Just 28 out of 557 companies in the FTSE all-share index say they aim to become carbon neutral with only 11 out of the 28 planning to do so for their entire operations, according to a report written by Trucost, the environmental research agency, for Standard Life Investments in association with the Environment Agency Pension Fund.
The number of companies seeking carbon neutrality is, however, up from just 15 in 2004.The report found that majority of carbon offset by FTSE All-Share companies occurs via the voluntary offset market, with only 5 of the 12 companies currently offsetting using the UN regulated clean development mechanism.
It said the shortage and costs of verified credits to offset carbon emissions was leading companies to choose voluntary schemes that are more easily located often at lower cost. It added that some voluntary carbon offsetting schemes claims had been subject to scrutiny, including by the Advertising Standards Authority, as to their efficacy and credibility. Julie McDowell, head of SRI at Standard Life Investments, said: “Negative media scrutiny of offsetting mechanisms may have slowed the adoption of carbon neutrality. On the plus side it has also spurred efforts by Government and others to develop credible standards for voluntary carbon offset programmes which are urgently needed.” Howard Pearce, head of environmental finance and pension fund management at the Environment Agency, said:
“As the financial materiality of climate change is becoming more evident to everyone and the need for carbon management is becoming increasingly urgent, it is hoped this report will stimulate further action by businesses to establish credible carbon management programmes and to provide improved disclosure on these in their annual reports and accounts to help the investment community reduce their carbon risks”