RI Global news round-up week 29/01/08

RI’s bite-sized round-up of the week’s responsible investment news.

Ninety-three US companies have been targeted with say-on-pay shareholder proposals for the 2008 proxy season by public and union pension funds and fund managers, according to a joint statement by the $850m American Federation of State, County and Municipal Employees’ Employees Pension Plan (AFSCME), and Walden Asset Management.
The proposals seek a non-binding advisory vote by shareholders on executive compensation at companies where investor proponents believe pay has been excessive or misaligned with corporate performance over the last three to five years, the statement says. US banks involved in recent billion dollar write-downs over sub-prime mortgage exposure, including Bear Stearns, Citigroup and Merrill Lynch, feature amongst the say-on-pay targets. AFSCME president Gerald McEntee, said: “Shareholders want CEOs to be paid for their long-term performance. We are in the middle of a sub-prime mortgage crisis where some failing CEOs are walking away with hundreds of millions of dollars. That makes no sense, and we think giving shareholders a vote on CEO pay will help to stop it.”
French institutional investors and fund managers including the €33.8bn ($49.5bn) French pensions reserve fund (FRR) are holding the inauguration meeting on January 30 of the world’s first university chair devoted to responsible investment and sustainable finance.
The university chair, which was announced last year, is jointly held by Christian Gollier of the French Institute ofIndustrial Economic Research (IDEI-R) and Jean-Pierre Ponssard from the economics department of l’Ecole Polytechnique. The investment chair was promoted by AFG, the French fund management association. One of its goals will be to bring together a global scientific research team for socially responsible investment.
The European Commission has released its proposal for a Directive on the promotion of the use of renewable energy. The Directive is designed to address all sectors of the renewable energy industry with the goal of helping them move toward the Commission’s target for 20 percent of Europe’s energy being producing from renewable sources by 2020. It includes measures to remove barriers to growth for renewables, including simplifying authorisation procedures for new projects as well as updates to the EU emissions trading system (EU ETS) and funding for research and development of next generation renewable energy sources. The Commission said it estimated the cost of the directive will be between €13-18 billion per year beginning in 2010. Click for EC Directive proposal
The UK Social Investment Forum (UKSIF) has launched a new website to promote the country’s first National Ethical Investment Week (NEIW), which runs from 18th – 24th May. The site includes support tools to help financial advisers and others raise awareness and understanding of green and ethical investments.
Penny Shepherd, UKSIF chief executive, said: “Behaving in ways that can help benefit the environment or society

is becoming increasingly mainstream. Choosing a green and ethical investment can be another way of acting responsibly but many people are still not aware of the wide range of green and ethical investment choices available today. We hope that independent financial advisers and other investment professionals will use National Ethical Investment Week to highlight how they can help.” www.neiw.org.
Hedge fund managers should not borrow stock to vote on shareholders’ resolutions at public companies, according to a final report issued by the UK Hedge Fund Working Group, chaired by Sir Andrew Large, former deputy governor of the Bank of England. The report, just published, followed consultation with about 300 investors, hedge fund managers and prime brokers, the banks that finance hedge funds’ trading positions. Critics of the report said some of its recommendations lacked definition. The German government and the European Central Bank have both been pushing strongly for greater hedge fund transparency.
Developments in environmental, social and governance (ESG) performance and portfolio investment opportunities in emerging markets is the theme of a forthcoming seminar on February 6 in Geneva hosted by The United Nations Conference on Trade and Development’s (UNCTAD) Corporate Transparency & Accounting Programme and the Principles for Responsible Investment (PRI) Emerging Markets Project. Interactive presentations will be made by experts from UNCTAD, PRI, and the institutional investment industry.
The first investable index of Indian companies based on environmental, social and governance issues hasbeen launched via a collaboration between Standard & Poor’s, the International Finance Corporation (IFC), a member of the World Bank group, Crisil, the Indian credit ratings company and US SRI research house, KLD. The S&P ESG India index comprises companies in India whose business strategies and performance demonstrate a high level of commitment to meeting environmental, social and governance (ESG) standards.
Former US treasury secretary Larry Summers last week reportedly told an audience of business and political leaders at the World Economic Forum in Davos, Switzerland, that sovereign wealth funds should sign up to a ‘responsible’ code of conduct. UK newspaper the Guardian reported that at the Davos event, Norwegian finance minister Kristin Halvorsen said her country’s $380bn fund, built on the country’s oil wealth, had a 5% limit on stakes in foreign companies and had an average holding of only 0.5%. Referring to wealth funds in general, she said: “They don’t like us, but they want our money.”
Innovest launched its fourth Global 100 list of the most sustainable corporations in the world at the World Economic Forum in Davos last week. The Global 100, initiated by Corporate Knights magazine with research from Innovest, includes companies from 16 countries in sectors ranging from oil and gas to wireless and telecoms evaluated according to how effectively they manage environmental, social and governance risks and opportunities, relative to industry peers. Matthew Kiernan, CEO of Innovest, “As global investors become increasingly concerned about economic prospects for 2008, we believe that the Global 100 will be particularly
well positioned to weather the storm and deliver superior value to investors.” Over a three-year performance period, the Global 100 as a group has outperformed the MSCI World Index benchmark by over 700 basis points per year and the Dow Jones Titans Index by 900 basis points per year. Thirty-two of last year’s list fell out of the index this year, including Google, HSBC, and Scottish and Southern Energy. Meanwhile, new additions included private equity firm 3i, Spanish construction and energy company Acciona and mining company Rio Tinto.
Click to link for Global 100 list
The debate about whether private equity activity is good for job creation was muddied further by two conflicting reports last week. A report issued by the World Economic Forum found that in the two years following a private equity buyout, average company employment was reduced by 7%. However, it found that four to five years after the transaction, employment at private equity-backed firms matched that of other companies.
A study sponsored by the US industry trade group Private Equity Council, said employment increased 13.3% at 26 post private equity deal US companies that provided three years of data, compared to an overall U.S. work force increase of 5.5% between 2002 and 2007. The study was conducted by Robert Shapiro, chairman of economic advisory firm Sonecon and a former adviser to President Clinton, and Nam Pham, founder of market research firm NDP Group. It asked private equity firms to submit data on transactions valued at more than $250 million between 2002 and 2005.Cowen Asset Management, the subsidiary of the US-listed investment bank, has launched the Cowen Climate Change Fund, targeted at pension funds and multi managers. The fund is benchmarked against the HSBC Global Climate Change Index and invests in a concentrated portfolio of the top 50 global companies focused on reacting and adapting to the effects of climate change, including reducing emissions. Malcolm Thomas, CEO and director at Cowen Asset Management Limited, said: “All investments in the fund are carefully screened to ensure that they are companies which are generating more than 50 per cent of their revenues from climate change related activities. All are liquid stocks currently capitalised in excess of US$1 billion.”
NYSE Euronext, the transatlantic exchange, has outlined details of BlueNext, its 60% owned carbon emissions trading market launched with La Caisse des Dépôts, the French treasury management group, who will own the remaining 40%. BlueNext will initially offer trading in carbon emissions allowances and credits. In the second quarter of this year, it plans to establish a futures market. Serge Harry, a member of NYSE Euronext’s management committee, has been appointed as BlueNext’s chairman. In October last year, US-based research consultancy Celent, issued research predicting a doubling of volume of emissions trading from about €25bn today to €40bn by 2012. The New York Mercantile Exchange is understood to be planning the launch of a carbon exchage and other environmental products as are a number of Asian exchanges.
The emirate city of Abu Dhabi has announced plans

to spend US$15bn in the first phase of an initiative to develop green energy and build the world’s largest hydrogen power plant. The spend accompanies the planned construction of Masdar city, the world’s first carbon-neutral city, where construction is scheduled to start next month. Abu Dhabi’s Crown Prince Sheikh Mohammed bin Zayed al-Nahayan said the investment would go into infrastructure, renewable energy projects such as solar power, and manufacturing to try and position Abu Dhabi as a leader in the global clean energy market.
Adair Turner, the former head of the UK Confederation of British Industry and vice-chairman of Merrill Lynch Europe, is to become chairman of a new high-powered UK committee to ensure central and localgovernment policies reduce carbon emissions, reports UK newspaper, The Observer.
A study commissioned by the Trades Union Congress, the UK union umbrella organisation, estimates that the UK Treasury annually misses out on approximately £13bn per annum of revenues because of tax avoidance by wealthy individuals.
The report claims £3.8bn is lost every year through the controversial non-domicile tax laws, which allow those with overseas connections to escape tax on their income. So called ‘income shifting’ by millionaires, which includes placing wealth in the name of a spouse or setting up a limited company to shield income, costs the UK £3.2bn. Tax planning and other loopholes account for the remaining £6bn.