RI global news round-up: week end 14/09/07

The week’s RI news you might have missed

Insurance companies should take urgent measures to develop business strategies based on climate change, or risk significant drops in profit as well as dangers over capital adequacy for meeting claims, according to a report by F&C Asset Management.
The report, called: “In the Front Line: The Insurance Industry’s Response to Climate Change” said the size and frequency of extreme weather events such as hurricanes, floods and wildfires could rise. It said this had already put insurers under pressure who were slow to gauge the implications of climate change.
Traditional insurer risk models have relied on historic claims data to price forward-looking risk and determine underwriting requirements. F&C said that rising temperatures and changing weather patterns as a result of change meant that the past was increasingly an unreliable guide to the future. As a result, it said insurance risk may be under priced. The impact would be felt primarily on property cover, although health and life insurance may also be impacted by climate change increasing mortality and morbidity rates. Liability and professional indemnity insurance could also suffer as companies face lawsuits under changing legal regimes and customers sue property developers for damages not covered by policies.The report said one response of climate change had been for insurers to withdraw from high risk areas forcing governments to step in. Separately, a group of 37 UK insurers has launched ClimateWise, an initiative to tackle climate change and encourage responsible environmental behaviour by their clients. Launching the inititiative, HRH Prince Charles, said: “We have to think of this as if we were in a wartime situation. If you don’t believe it, just watch Al Gore’s film.”

Employees at Countrywide Financial Corp, the ailing US mortgages company, have lost millions of dollars in 401(k) pension assets as the value of the company’s stock has plummeted due to alleged illegal actions, according to law firm Hagens Berman Sobol Shapiro, which has filed a class-action suit against Countrywide, reports US financial newspaper, Pensions & Investments.

BNP Paribas Assurance has become the first insurance group in France to have its domestic assets measured for social responsibility. French ESG agency Vigeo judged the assets according to six criteria: human rights, human resources, social engagement, market behaviour, corporate governance and environment. Vigeo gave the insurer a score of 65.4 out of 100 for its €21.8bn government bond portfolio, 50.2 for its €13.7bn corporate bond portfolio and 50.2 for its €5.3bn European equities portfolio.
CalPERS and CalSTRS, the two largest pension funds in the US, could be forced to divest from companies with ties to the energy and defence sectors in Iran if state governor Arnold Schwarzenegger signs new legislation, reports US newspaper Pensions & Investments.
The proposed bill in California would require CalPERS and CalSTRS to divest stocks worth about $2bn and $1.4bn, respectively. Schwarzenegger has until October 14 to sign the bill.

French economy minister, Christine Lagarde, has suggested she could cut back on executive stock options in a forthcoming legal overhaul unless companies open up the same options to their employees.
Stock options in France are mostly employed by companies with more than 50 employees where workers already enjoy some form of employee stock participation. However, the move could impact heavily on smaller companies, particularly start-ups. The French government is also currently considering a proposed law on class action lawsuits.

French president Nicolas Sarkozy and German chancellor Angela Markel, have called for a international code of conduct for leveraged private equity buy-out funds as part of a bid to introduce more ‘clarity’ into the financial markets. At the recent Franco-German summit, Sarkozy said capitalism should be “for entrepreneurs, not speculators”. He added: “We cannot let a few hundred speculators bring down the international financial system.”
In a report on the impact of biofuels, the Organisation for Economic Cooperation and Development (OECD) said they may offer a “cure that is worse than the disease they seek to heal”.“The current push to expand the use of biofuels is creating unsustainable tensions that will disrupt markets without generating significant environmental benefits,” the OECD said.
“When acidification, fertiliser use, biodiversity loss and toxicity of agricultural pesticides are taken into account, the overall environmental impacts of ethanol and biodiesel can very easily exceed those of petrol and mineral diesel,” it added.
The OECD called on governments to cut their subsidies for the sector and instead encourage research into technologies that would avoid competing for land use with food production.

The Dutch regulator, AFM, is investigating allegations that hundreds of millions of euros invested in so-called sustainable teakwood investment funds in Latin America may be the result of a huge deception, reports Dutch financial daily Het Financieele Dagblad.

Paul Grimes, chief operating officer at FTSE, and a key figure in the development of FTSE’s socially responsible investment index series, FTSE4Good, is to leave the company at the end of the year. It is not known if he has taken up a position elsewhere.

The UK Trades Union Council has hit out at directors of the UK’s top companies, which it says have an aggregate pensions pot worth £1bn (€1.5bn). In its analysis of boardroom pensions, the TUC found that the average executive is able to retire at 60 on a final salary scheme worth £3m.
TUC general secretary Brendan Barber said: “Britain’s boardroom bonanza does not stop on retirement. Too many top directors have gone on closing or cutting schemes for their workforce, while keeping gold-plated pensions for themselves.”

France’s Forum for Responsible Investment has launched its European Research Award for 2008
for papers on finance and sustainable development. The award is supported by the European Social Investment Forum (Eurosif).The competition gives out three awards of €5,000 and three research grants of €3,000 in categories including: Best master’s thesis, best PhD thesis and best published academic article.
More information can be found at www.frenchsif.org