Russell Investment Group has told Australian superannuation scheme trustees, which collectively run approximately $1.3 trillion, that incorporating sustainability factors into their investment decisions should not lose them money.
The consultant said superannuation funds should embrace a more positive approach to sustainable investing. In a paper reviewing an ‘exhausting but not exhaustive’ list of more than 40 empirical studies into the performance of ethical, SRI and sustainable investing approaches, Russell concluded that: “There is no necessary performance penalty from pursuing a sustainable approach; and there is unlikely to be a performance premium from pursuing a sustainable investing approach when account is taken of appropriate risk and style effects.” The consultant also said new research and evolving market practices had removed the traditional impediment of fiduciary duty from responsible investment.
Watson Wyatt says it has found a clear link between superior performance and strong governance within the world’s leading institutional investors. Research conducted by Roger Urwin, its global head of investment and Professor Gordon Clark of Oxford University, entitled Best-practice investment management: lessons for asset owners, involved case studies on ten funds across the world cherry-picked for their exceptional reputation and strong sustained performance. The ten comprised six pension funds, two endowments and twosovereign funds, located in North America (5 funds), Europe (3) and Asia-Pacific (2). The funds ranged from around US$5bn to over US$50bn inassets.
The study identified five main areas where the ten funds excel: risk management, time-horizon focus on the long term, innovative capabilities, clarity of mission and effective management of external fund managers and other agents. Professor Clark said: “Institutional investment has huge significance for a society with aging demographics, because literally billions of individuals have large stakes in these funds and the consequences of their investment programmes. The governance of these funds should be a first order priority and poses a terrific opportunity for wealth creation.”
The International Corporate Governance Network (ICGN), a global group of institutional and private investors with assets of $15
trillion, has written to Peer Steinbrück, German finance minister, over fears that a proposed German law aimed at stopping hedge funds collaborating to break up companies could also affect shareholders discussing corporate governance issues ahead of company general meetings. The proposed new law, the Risikobegrenzungsgesetz, aims to stop shareholders acting in concert as occurred in the takeover battle for Deutsche Börse in 2006. ICGN said the current uncertainty was likely to lead to shareholders taking a cautious approach and either not engaging with one another or only discussing governance concerns that have been aired in the press.
Sustainable Asset Management (SAM), the Zurich-based subsidiary of Robeco, the Dutch fund manager is planning to launch a sustainable hedge fund early next year based on a valuation method developed in-house, reports Thomson Investment Management News
The fund, based on a discounted cash flow model that assesses companies’ sustainability levels, will be launched as part of a new range of alternative products, including a sustainable 130/30 fund, according to Christian Werner, chief investment officer at SAM.
Werner said SAM would be hiring staff for the fund’s administration.
A New York court has allowed the pension fund for the UK local authority of Avon to lead litigation against GlaxoSmith-Kline over its diabetes drug Avandia. The fund alleges that GSK mislead the stock market about the safety of Avandia, and says this led to a significant drop in the share price of GSK and the subsequent returns on the fund’s investments.
US sustainable investment research firm KLD Research and Analytics has launched the KLD Global Sustainability Index (GSI) and index series. The index includes the top performing companies in terms of environmental, social and governance (ESG) issues in North America, Europe and Asia Pacific. KLD said it was the first sector-neutral index available to institutional investors.
Merrill Lynch, the US investment bank has joinedforces with Trucost, the London-based carbon emissions research company to launch the ML Carbon Leaders Europe index. Using the index investors can select companies based on how environmental factors may affect their future business earnings.
Deutsche Asset Management (DeAM), has thrown its weight behind climate change as an investment theme by saying it will drive returns over the next ten years.
Kevin Parker, chief executive of DeAM said the fund manager now had nearly €6bn ($9bn) of assets in climate change related strategies and was looking for new product ideas for investors in the area.
Mark Fulton, DeAM’s New York-based global head of strategic planning has broadened his role to become the manager’s climate change strategist. He will head a climate change investment committee within the company.
A group of multinationals has formed the Supply Chain Leadership Coalition to campaign to encourage suppliers to report greenhouse-gas emissions.
The firms in the coalition, which include Procter & Gamble Co, Unilever, Tesco, Nestlé and Cadbury Schweppes will work together to create one standardized system for requesting disclosure of suppliers’ carbon footprints.
A report on the CAC 40 AGM season by HQB Partners, the proxy solicitors, found that investors, particularly from the US and UK, increasingly exercised their voting rights in France during the 2007 proxy season, according to In-Focus, the magazine of Governance Metrics International.
This year was the first that investors were not required to block their shares in order to vote. As a result, shareholders rejected 14 resolutions put forward by management. In 2006 only three such resolutions were rejected.
China is considering an environmental tax on polluters to cut emissions. China is the world’s top emitter of sulphur dioxide, which causes acid rain and will shortly overtake the United States as the biggest producer of greenhouse gas carbon dioxide. The Chinese government has said it would take environmental costs into account in electricity pricing to encourage power generation using clean and renewable resources.
Plans by China and India to raise biofuels production from irrigated maize and sugarcane could aggravate water shortages and undermine food output, according to a report to the Colombo-based International Water Management Institute (IWMI).
“China and India, the world’s two largest producers and consumers of many agricultural commodities, already face severe water limitations in agricultural production,” it said.
Standard and Poor’s (S&P), the ratings agency has proposed adoption of standardised terminology for the disclosure of environmental records and decommissioning costs for mining, chemicals and oil and gas companies. S&P said European companies in these sectors currently had poor standards of disclosure on these issues.It said obligations for decommissioning and environmental liabilities accounted for about 50% of oil and gas companies’ debt obligations in 2006.
France is unlikely to meet its target of a fourfold reduction in emissions of carbon dioxide by 2050, according to a report by a government-appointed commission. The report said the best that could be expected is a reduction by 2.1 or 2.4 times, according to French newspaper, La Tribune. The report comes ahead of a major meeting of representatives from government, industry, environmental associations, agriculture and the public later this month, known in France as the le Grenelle de l’environnement. Under a 2005 energy law, France committed to a fourfold reduction in emissions of greenhouse gases by 2050. The commission has recommended taxes on products, which consume large amounts of energy and auctioning carbon dioxide quotas.
Brazil’s President Luiz Inacio Lula da Silva has called on Africa to join the “biofuel revolution”, saying it would help strengthen the world’s poorest economies and fight global warming, reports Reuters. Lula said Brazil’s experience with biofuels showed the environmental and economic benefits of mass producing ethanol and bio-diesel: “By planting crops in Africa, Latin America and Asia to produce ethanol and biodiesel on a large scale, we will be able to democratise access to sustainable energy and at the same time fight the impact of global warming which hits the world’s poorest countries disproportionately hard,” he said.
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