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RI round-up July 11

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

Workers at Liverpool City Council have voted unanimously to pressure the £4.2bn (€5.8bn) Merseyside Pension Fund to which they belong to ballot participants on introducing an ethical investment policy. The proposal, tabled by Liberal Democrat councillor Richard Oglethorpe, says the fund should ask members whether to including an “ethical dimension” to its Statement of Investment Principles (SIP). Owen Thorne, investment officer at Merseyside Pension Fund said the fund took the vote seriously, but added that Liverpool City Council had no power to force the fund to review its SIP. He said that as a signatory to the United Nations Principles for Responsible Investment (UNPRI), the fund already considered ethical questions as part of investment process. Liverpool City Council workers make up about one third of the Merseyside fund’s members.
RImetrics, the UK-based research company, has launched the first Responsible Investment benchmark where asset owners and investment consultants can compare peer fund managers on their implementation of environmental, social and governance (ESG) issues. The Responsible Investment Benchmark (RIB) measures average industry performance across five key themes: strategy, engagement, integration, voting, and transparency & accountability. The data is compiled from global asset managers representing assets of over $12 trillion, including over half of the world’s leading 20 managers. Aled Jones, responsible investment manager at the UK Pension Protection Fund, said, “The ability to compare and contrast managers, on a range of factors regarding their responsible investment capabilities, is a welcome addition to the manager research market.”The Carbon Trust, the UK government funded body for transitioning to a low-carbon economy, is understood to be working with McKinsey, the management consultancy, on a report into the materiality of climate change issues for investors. The report is expected to be published later this year.
Richard Burrett, managing director for sustainable development at ABN Amro, the Dutch bank, is understood to have left the bank. ABN was bought out at the end of 2007 by a consortium of Royal Bank of Scotland, Belgo-Dutch Fortis and Santander of Spain. Burrett launched ABN’s sustainable development initiative 2004, prior to which he was the bank’s global head of project finance.
Hermes, the fund manager owned by the BT Pension Scheme, the UK’s largest, is to merge its two main activist funds into a single partnership structure with more than ten Hermes executives expected to receive equity stakes as a result. Hermes will merge Focus Asset Management and Focus Asset Management Europe into a combined £2.3bn manager called Hermes Focus Asset Management LLP, comprising one pan-European Focus Fund covering the UK and Continental Europe and one single fund dedicated to the UK. The new structure will be jointly owned by Hermes and its executives and be led by Stephan Howaldt, Wouter Rosingh and Paul Harrison. Hermes chief executive, Rupert Clarke, said the partnership would ensure that executives are well incentivised to deliver strong performance: “The new LLP is consistent with our overall strategy to have a multi-boutique structure working alongside specialist investment management teams.”

CalPERS’ director of corporate governance, Dennis Johnson, is leaving the fund to become managing director of Shamrock Activist Value Fund. Johnson also intends to step down from his post as Chair of the Council of Institutional Investors Board of Directors. The Corporate Governance Office of CalPERS oversees a $7bn corporate governance investment program and manages CalPERS Focus List programme, governance policy development, and corporate engagements.
The International Monetary Fund’s 23-country international working group of sovereign wealth funds (SWFs) is reportedly hoping to issue a voluntary set of investment principles and practices by October, according to Thomson Investment Management News. The SWFs are seeking to allay Western fears that their investments are politically motivated.
KLD Research & Analytics, the US SRI indices company has launched two new sub-indices and two composite indices based on its KLD Broad Market Social SM Index. The new indices range from small to mid and large cap coverage. Thomas Kuh, managing director at KLD Indexes, said: “By offering a broader range of indexes, the BMSI series now enables more flexible asset allocation.” The series draws its constituent companies from the 3,000 largest U.S. equities.
The Group of Governmental Experts on Cluster Munitions has said it will “negotiate a proposal” on the definition of cluster bombs ahead of an international treaty expected in December this year. Global pension funds, particularly government sponsored schemes, have started scouring their investments for companies linked to the manufacture of cluster bombs after 111 states signed a treaty in Dublin in May to ban their production.Dow Jones has launched the Africa Titans 50 Index, a pan-African index that measures the stock performance of 50 companies that are headquartered in or generate the majority of their revenues in Africa. The index has been licensed to Van Eck Global, a provider of global investment products, to serve as the basis for the first exchange-traded fund based on pan-African index.
Impax Asset Management has added an institutional share class to its Impax Environment Leaders Fund (IEL). The fund, which is a wholly owned subsidiary of BNP Paribas, a shareholder in Impax, was launched earlier this year to invest in companies developing products and services that deal with environmental problems.
UK cross-industry union Unite says company executives’ pay and bonuses should be linked to meeting environmental targets. The suggestions are detailed in a new report published by Unite: “How Green Is My Workplace?” which surveys 10,000 Unite members in the electronics and IT sector.
Action Aid, the relief charity, has called for all biofuel subsidies to be removed and a five-year moratorium imposed on the diversion of arable land to biofuel crops. In a report, titled, Cereal Offenders, it estimates that the 82% rise in food prices since 2006 has put 760 million people at risk of hunger, while biofuel subsidies to US and EU farmers are worth between $16bn (£8bn) and $18bn a year.
Pension funds will be challenged as the largest pools of global capital within five years by collective growth from Petro-dollar foreign wealth, Asian sovereign investors, hedge funds and private equity, according to McKinsey & Co, the management consultant, reports Financial News. McKinsey said it expected the four groups, dubbed as

the new “power brokers” to treble their assets from $12 trillion at the end of last year to $32.3 trillion (€20.5 trillion) in five years.
Phaunos Timber Fund, the closed-ended investment company established to invest in global timberland and timber related assets has successfully raised approximately $33m before expenses through a placing with institutional investors.
AXess ATS (Alternative Trading System), a broker neutral electronic marketplace for private placement offerings and secondary trading of restricted and illiquid securities in the responsible investment arena is scheduled to launch later this year. The US-based exchange aims to give buy and sell-side clients a centralized marketplace in which to raise capital, source deal flow and anonymously transact in areas such as carbon offset project finance, block trading liquidity of environmental and SRI public equities and global microfinance offerings.
US federal courts have said a class-action lawsuit filed by the $15.2bn Louisiana Teachers’ Retirement System against Pfizer, the US pharmaceutical giant can proceed, but without charges of market manipulation, reports Pensions & Investments. The suit claims that Pfizer concealed the results of three medical studies concerning its Celebrex and Bextra drugs to protect its share price.
Renaissance Capital, the US IPO specialist, has reportedly launched an index to measure the performance of companies just taken public that offer solutions to environmental problems. Renaissance told Pensions & Investments that the impetus for the index came Renaissance noticed high returns for newly public alternative energy companies. The Green IPO Index segments include alternative energy, recycling, conservation, clean transport, energy efficiency and green enabling technologies.Jay Powell, a former partner of Carlyle Group, the US private equity house, and founder of Severn Capital Partners, has joined the Global Environment Fund as a managing director. Powell will be one of four managing directors working on a $350m (€223m) fund currently in the fundraising stage that will invest in post start-up clean technology companies based in North America.
EIRIS, the ethical research advisory group, says over a third (35.6%) of the world’s 300 largest companies in the FTSE All World Index bear high or very high impact concerns over direct and indirect carbon emissions. In a report, title: “The state we’re in: global corporate response to climate change and the implications for investors,” Eiris finds that only 25% of the index publish long-term strategic targets to reduce emissions and only 14% link board remuneration to climate change strategies.
Maplecroft, the risk mapping company, has published a new report looking at climate change risks in every country around the world. The report includes a unique risk index, which measures vulnerability to climate change at a sub-national level. The report shows that the highest levels of climate change vulnerability are located in middle and eastern Africa and southern Asia.
Crédit Agricole Asset Management (CAAM) has launched CAAM Funds Global Agriculture, which invests at least two thirds of its assets in a selection of international equities issued by companies active in the farming sectors. Nicolas Fragneau, the fund’s manager, said: “We believe that the situation of imbalance between supply and demand is likely to last as it is mainly driven by demographic trends. This is why we try to identify innovative companies which aim at improving long-term agricultural productivity.”

The top ten most environmentally and socially controversial companies in the first half of 2008 were Samsung, Total, Wal-Mart, China National Petroleum Corporation (CNPC), Shell, ExxonMobil, Citigroup, Nestlé, ArcelorMittal, and Chevron, according to the Reputational Risk Index (RRI), issued by Zurich-based ECOFACT.The ranking measures the level of criticism of companies by the world’s media and NGOs for issues including human rights abuses, severe environmental violations, corruption and bribery and breaches of labour, health and safety standards.