The International Trade Union Confederation (ITUC) the European Trade Union Confederation (ETUC) the Committee on Workers’ Capital (CWC) and Euresa Institute, have signed a memorandum of understanding to promote environmental, social and governance criteria (ESG) in the companies in which they hold shares. The organisations are shareholders via involvement in pension and savings fund as well as cooperative, mutual and non-profit insurance companies or asset managers. The four said they would develop cooperation between their respective shareholding networks to share analysis and voting recommendations with respect to given companies prior to annual general meetings. They said they could also join forces for collaborations on responsible investment issues.
Alastair Ross Goobey, the renowned UK fund manager and leading corporate governance supporter has died at the age of 62.
Goobey was chief executive of Hermes Pension Management 1993 until 2001 and instigator of the shareholder engagement funds at Hermes Focus Asset Management. He remained chairman of Hermes into his retirement. Ross Goobey was also chairman of the International Corporate Governance Network.
Obituary of Alistair Ross Goobey in The Times newspaper
Institutional investors are increasingly turning to securities class actions (SCAs) in the US to recoup investment losses and tackle white-collar crime, according to a report by The Corporate Library, aUS governance research house. The study found that new securities class action filings rose 43% in 2007, notably in newer areas such as sub-prime mortgage and related real estate cases, as well as failed IPOs and mergers. It said 2008 was likely to be “another year of increased litigation” featuring the “growing involvement” of institutional investors. The study, titled: “Predicting Securities Litigation,” said: “This may prove particularly true in 2008, not because there is any more such crime to tackle, but rather because of a growing willingness by these institutions to go after whatever white-collar crime exists at public corporations.” The Corporate Library said institutional investors hold more than 60% of the traded stock at nearly all companies subject to SCAs. Public pension funds were assigned lead-plaintiff status in 14 out of 25 cases filed in 2007. The study noted that “public pension funds in particular have grown increasingly comfortable with the use of (securities class-action litigation) not only to recoup very real investment losses, but also to signal to their political constituencies a willingness to tackle head-on the spectre of white-collar crime.”
Ethos, the Geneva-based foundation which looks after CHF2.3bn (€1.4bn) in assets run on a socially responsible basis on behalf of Swiss pension funds, has renewed its call for shareholder support to force UBS, the Swiss banking group, to bring in external investigators to carry out a special audit explaining how it lost $13.7bn (€9.6bn) as a result of the US sub-prime mortgage crisis. UBS is expected to communicate its
response to shareholders’ demands on 18 February, a week prior to its extraordinary general meeting of shareholders scheduled for 27 February 2008. Ethos is also calling on shareholders to vote in favour of a proposal by Swiss pension fund Profond to proceed to a capital increase at UBS with pre-emptive rights. This counters a proposal by the UBS board, which is proposing to issue mandatory convertible notes (to the Government of Singapore Investment Corporation (GIC) and an anonymous investor from the Middle East to plug its balance sheet. Ethos says the board proposal would suppress pre-emptive rights for existing shareholders: Ethos said: “It is legitimate that current shareholders benefit from their right to subscribe in priority to the capital issue, in order to avoid dilution of their rights. Ethos therefore recommends to oppose this proposal.
The Carbon Disclosure Project (CDP) a collaboration of 385 institutional investors, with assets under management of $57 trillion, has issued its 2008 information request to the world’s largest corporations. The CDP asks companies to measure and disclose their greenhouse gas emissions and report on their strategy for dealing with risks and opportunities associated with climate change. For the first time ever CDP will write to China’s 100 largest companies, by market capitalisation.
CDP will also launch new operations in Korea, Latin America, Spain and the Netherlands. The resulting company responses will be held free of charge on the CDP website along with analysis of the responses in September 2008: Carbon Disclosure Project website*Citigroup, Morgan Stanley and JP Morgan Chase* have launched The Carbon Principles, to evaluate and act on carbon risks in the financing of electric power projects. The principles were developed in consultation with seven US power companies as well as non-governmental organizations. Under the principles, power companies seeking finance for the building of new coal-fired plants will have to outline how they plan to address carbon dioxide pollution levels.
Friends Provident is looking to sell its 52% stake in F&C Asset Management, one of the UK’s biggest SRI fund managers after it concluded the firm does not fit into its revised strategy, reports IPE.com. Friends Provident said it wanted to concentrate on the protection and group pension markets in the UK, and intends to further develop its overseas business through Friends Provident International (FPI). It said it would sell the stake in F&C and “intends to explore opportunities for these businesses with a view to maximising value for shareholders” while working with the respective management teams to “establish strategies for achieving this while minimising disruption to the businesses”.
PGGM, the €88bn Dutch pension fund, has placed responsible business practices at the heart of a new deal under which it will be paid to take on part of the credit risk of loans on the books of Banco Real, the Brazilian subsidiary of ABN AMRO, the Dutch banking group. ABN AMRO is selling the risk on its loan book using a collateralized loan obligation structure. The CLO references a loan portfolio of $850m (€585m) notional.
Under the transaction, the credit risk is shared by participating in the first and second loss tranches of the CLO. It is the second such risk structure that PGGM has taken on. Raymond van Wersch, senior portfolio manager structured credit at PGGM, said: “Similar to the previous transactions, including those with ABN AMRO and other partners, it was important for us that Banco Real was prepared to really share the risk – instead of an outright transfer – so the interests are well aligned. Furthermore Banco Real applies high environmental and social standards throughout all its business processes, which is in line with our responsible investment policy.”
Vigeo, the Paris-based SRI research company has signed a strategic partnership with OWW Consulting, the Kuala Lumpur-based CSR and SRI consultant, to extend its coverage into the Asia-Pacific region. Under the partnership, Vigeo will access research carried out by OWW on the companies in the DJ Stoxx 600 Asia-Pacific while OWW will access Vigeo’s research on the DJ Stoxx 600 Europe.
Swiss fund manager and index provider, SAM Group has launched its fourth annual Sustainability Yearbook, a reference document on the sustainability performance of public companies. SAM assess over 1,000 companies from the 57 industry sectors which make up the Dow Jones Sustainability Index and includes the top 15% in the yearbook. SAM Group website
Ian Greenwood has been appointed as chairman of the UK Local Authority Pension Fund Forum, one of the country’s most active responsible investment groups. He takes over as chair from Darrell Pulk. Greenwood said: The Forum is now the natural home for localgovernment funds which want to be active and responsible investors. I hope to build on Darrell’s excellent work over the past two years and further develop the Forum’s reputation as a leading investor body.”
The LAPFF was set up in 1991 as a voluntary association of 46 UK public sector pension funds based in the UK. It exists ‘to promote the investment interests of local authority pension funds, and to maximise their influence as shareholders to promote corporate social responsibility and high standards of corporate governance amongst the companies in which they invest.’ The Forum’s members currently have combined assets of over £85bn.
ING, the Dutch banking group, has said it will not finance a controversial nuclear power project in Slovakia. The bank had faced pressure from non-governmental organisations including Greenpeace who say the plant will not meet modern safety and environmental standards. Greenpeace claimed that Slovenské Elektrárne (SE), the Slovakian energy company that was bought by Enel in 2005, had raised an initial $800m in financing from nine banks, including ING, Calyon, Mizuho Corporate Bank, Intesa Sanpaolo, KBC, Dexia, Slovenská Sporiteľňa, Komerční Banka Praha and Komerční Banka Bratislava.
Performance-based pay for UK executive directors is not tied closely enough to management of non-financial business issues, according to research by the Local Authority Pension Fund Forum (LAPFF). The study found that only seven of the FTSE 100 companies surveyed considered non-financial performance
measures important enough to build them into long-term incentive plans (LTIP), the main tool used to motivate executive directors. It found that the situation was more positive relating to annual bonus schemes where approximately half of the companies in the FTSE 100 apply non-financial performance measures alongside more traditional financial targets. The UK Companies Act 2006 requires firms to identify key performance indicators (KPI) that the company uses to measure its non-financial issues such as health and safety, employee relations and environmental management.
Standard Life Investments’ £588.5m ethical funds range will no longer invest in airline stocks following feedback from investors in which 30% said they would prefer a complete exclusion. Julie McDowell, head of SRI at the fund manager, said: “The Standard Life Ethical Committee, which is comprised of senior Standard Life managers and three individual investors in the ethical funds, has considered the results of our 2007 ethical investor survey. In light of the sizeable percentage of our investors wishing to avoid investment in airlines, the Ethical Committee has decided that our ethical policy should be adapted to reflect these views.” Standard Life has also launched an ethical investing micro-site featuring fund manager interviews, ethical stock stories, ethical guidelines and literature of interest to the ethically minded investor: Click here for website.
Shares in ASM International, the Dutch semi-conductor have jumped amid speculation of a takeover approach from two activist fund managers. UK newspaper, The Sunday Express, reported thatFursa Alternative Strategies and Hermes Euro Focus Asset Management Europe planned to offer more than €700m for the company, according to sources. In January, Fursa wrote to ASM with an ultimatum to change its corporate structure or risk splitting the company.
Cumulus, the London-based alternative investment manager has launched a long-short equity hedge fund seeking to profit from the financial impacts of climate change. It reflects a growing number of hedge funds moving into the climate change sector. Cumulus said the fund had delivered annualised returns of over 15% to the end of December, 2007 on a ‘paper trading’ basis over 16 months. It said it was targeting15-20% future returns on 10% volatility. Cumulus already manages a fund investing energy commodities and the Cumulus Weather Fund which trades a variety of assets based on weather events.
Franklin Mutual Advisers has gone public with criticism of Generali, the Italian insurer, by writing to the company attacking its plans for overseas acquisitions and backing calls for board changes including the removal of Antoine Bernheim, Generali’s chairman.
Canada’s Scotia Securities has launched the Scotia Global Climate Change Fund. The fund is advised by State Street Global Advisors’ environmental, social and governance investment team led by Bill Page.
The fund’s investment strategy is long-term and designed to benefit from companies adopting technological and environmental practices that mitigate and address the implications of climate change.
Hiring and firing asset managers at the wrong time is costing US pension schemes an average $20bn (€13.5bn) every year, according to research by the University of Boston. The report’s findings, published in US investment journal Advisor Perspectives last week and reported by Pensions & Investments, the US newspaper, examined $6.5 trillion (€4.4 trillion) worth of pension scheme data between 1989 and 2000. It found that asset managers most commonly fired outperformed those most commonly hired by 300 basis points, or 0.3%, over one year and by 100 basis points over five years.
French chief executives have the highest total compensation packages – including bonus and long-term incentives – in Europe, albeit well below the average compensation for US CEOs, according to a study of the 50 largest European companies by the Hay Group, a human resources firm.The survey, titled: “How chief executives are paid,” said German companies paid the highest bonuses, with a median payment of 185 percent of salary. UK firms came second with a median bonus payment of 160% of salary. By comparison, the median U.S. executive receives bonuses of 300% of base pay, the survey noted. The Netherlands had the lowest rates of total CEO compensation. Median total pay for European CEOs was about €3.3m with total direct annual pay – total cash plus the fair value at the award date of any long-term incentive bonuses – averaging about €5m.
Frankfurt-based investment boutique Caudex Capital has joined forces with Futuro Forestal, a Panamanian forestry management group to launch Caudex Capital Timber Investments. The joint-venture will set up private equity vehicle to manage diversified timber projects such as sustainable plantations and forest concessions.