The JCA Group has released a report on shareholder engagement written as part of a research exercise for the UK’s the Financial Reporting Council (FRC), which is currently reviewing key aspects of the UK Combined Code on Corporate Governance including shareholder engagement. The research focuses primarily on shareholder engagement with FTSE companies.
Link to report
KBC Asset Management has launched a new Global Environmental Solutions Fund investing across seven broad sectors – water, renewable energy, clean energy, energy efficiency, agribusiness, recycling and new materials, and carbon trading companies.
The Marathon Club, a collaboration of UK investors lobbying on long-term investment issues with combined assets of £170bn, has called for
industry dialogue on what it says is the increased and unnecessary threat of defined benefit (DB) scheme closure created by IAS19 accounting standards. In a paper submitted to the International Accounting Standards Board, it said two requirements under current UK and European accounting standards created unnecessary short-term behaviour amongst investors: the marking of all assets to market value on the balance sheet date unless they are intended to be held to maturity, and the fact that the net present value of all future liabilities, actual and contingent, must be discounted at a single rate determined by the yield at the balance sheet date of AA corporate bonds with the same maturity as the duration of the pension fund’s liabilities. Roger Emerson, chair of the Marathon Club, said: “Prescribing a valuation approach for pension funds in company accounts on a basis more appropriate to termination is becoming self-fulfilling. We recognise that changing IAS19 will not be easy. However, if we are to stem the kind of short-termism which the current standard creates, significant change is necessary. We are, therefore, urging the accounting profession to enter into a constructive dialogue with the end- users of company accounts to produce accounting rules which are fit for purpose.” The Marathon Club said appropriate accounting should result in assets being shown at fair long-term values, and liabilities calculated as the net present value of future benefit commitments and other outgoings, discounted at a rate consistent with the valuation of the assets. The Marathon Club is seeking feedback on the issues highlighted by its paper:
Link to paper*UK institutional investors* representing local councils and the Church of England pension fund have come under fire for holding shares in UK-listed mining group Vedanta by activists including Bianca Jagger, the human rights campaigner, who say a new mine in eastern India, threatens the cultural and economic rights of the Dongria Kondh people who live in the Niyamgiri hills. Jagger and supporters from Action Aid, the NGO, petitioned investors at Vedanta’s AGM last week. Vedanta has been blacklisted by the Norwegian Government Pension Fund because of environment and human rights concerns and is currently an engagement target on these same issues by a number of institutional investors.
Barclays Global Investors has hired Michelle Edkins as head of its European corporate governance team. For the past four years Edkins was a partner at Governance for Owners, the London-based activist fund manager.
The Securities and Exchange Commission (SEC) has voted unanimously to propose rules that would bar investment advisers from managing public pension programmes for two years if they make political contributions. The proposal aims to curb so-called pay-to-play practices.
Sir Mark Moody-Stuart, soon-to-retire chairman of Anglo American, is taking up the position of chairman at Hermes Equity Ownership Services, the fund manager’s corporate governance arm. Colin Melvin, chief executive of Hermes EOS, said: “Sir Mark’s senior industry experience will provide EOS with further credibility in its engagements with companies on behalf of some of the world’s largest investors.”
New York City Retirement Systems, the body that oversees the city’s combined $77bn five public pension funds, says it could divest a further $141m in holdings in 10 companies because of ties to Iran, adding to $10.8m in holdings of Oil and Natural Gas Corp. Ltd. and PetroChina Co. Ltd., which the funds have already said they will sell. A statement by William C. Thompson Jr., New York City comptroller, said it was asking trustees of the pension systems to adopt resolutions authorizing liquidation of investments in eight other companies because of “significant ties to Iran”. It said: “The decision to divest holdings in the two companies and my recommendation to divest in an additional eight companies were made after careful consideration of numerous events and factors, including the Iranian government’s recent efforts to strengthen its nuclear weapons program and steal its presidential election.
However, some companies repeatedly ignored efforts by the comptroller’s office to obtain any information and have failed to respond to the city’s inquiries. The unresponsiveness and lack of accountability of such companies creates an unacceptable barrier to the ability of the pension funds’ trustees to protect shareholder value by engaging the companies’ boards and managements on important matters of corporate governance and corporate social responsibility.” The five pension funds are the New York City Employees’ Retirement System, New York City Teachers’ Retirement System, New York City Police Pension Fund, New York City Fire Department Pension Fund, and the New York City Board of Education Retirement System. Separately, New York State Comptroller Thomas P. DiNapoli announced that the New York State Common Retirement Fund was pulling $86.2m in investments in companies doing business in Sudan and Iran. DiNapoli said the fund was also monitoring and engage other companies with Sudan-related operations.
Crédit Agricole Asset Management Group (CAAM Group) says it has passed the €10bn mark in the level of responsible investment assets managed making it the biggest French SRI manager. The French fund manager said it had adapted funds such as its cash fund CAAM Tréso Monétaire to include SRI analysis. Yves Perrier, chief executive officer of CAAM Group, said: “This confirms our determination to be an engaged financial investor contributing to direct savings to the service of sustainable development.”
Just under half (46%) of asset owners surveyed by the International Finance Corporation, part of the World Bank Group, said they strongly agreed with the statement “ESG issues are an important part of our research, portfolio management and manager selection,” up from 36% in 2007. The majority of asset owners (78%) said they also thought the importance of ESG factors had been amplified by the financial crisis and would result in greater use of ESG criteria over time. The survey interviewed 48 representatives of asset owners, including pension funds, endowments and government investment bodies, with significant overlap between respondents in 2007 and 2009. The report also poses questions to a further 66 fund managers and 49 public emerging-markets companies and finds that environmental, social, and governance investment criteria in emerging markets continue to be embraced by asubstantial segment of the asset management community despite the economic crisis.
Link to report
The Green Century Balanced mutual fund has become the first U.S.-based mutual fund to disclose its own carbon footprint, which is 66% less than the carbon intensity of the S&P 500 Index. It attributed the low carbon intensity to underweighting or avoidance of the utilities, oil, gas, and basic resources sectors. The fund’s carbon footprint analysis was carried out by Trucost.
The Norwegian Ministry of Finance has hired UK-based Livingstone & Company, to research companies in the €264bn Government Pension Fund – Global that may conflict with its ethical guidelines following a tender issued in February. The firm beat 23 other research providers to the contract.
ECOFACT, the Swiss environmental, social and reputational data and risk consultancy, has won a separate tender for the ethical screening of companies in the Norwegian Government Pension Fund – Global’s portfolio. Amongst other issues, ECOFACT will screen the fund’s portfolios for serious or systematic human rights violations, labour standards and severe environmental damage.
The Centre for the Study of Financial Innovation has published a report analysing the systemic causes of the financial crisis and suggesting potential reforms. The report: In The Road to Long Finance: A systems view of the credit crunch, has been co-authored by Michael Mainelli, co-founder of Z/Yen, a commercial think-tank based in London and Bob Giffords, an independent analyst and consultant in the European banking sector. The report is sponsored by the City of London Corporation has sponsored the report.
The UK government has outlined plans to reduce greenhouse gas emissions by 34% by 2020 and 80% by 2050. The Low Carbon Transition Plan pledges amongst other measures that 40% of electricity will come from low carbon sources, including nuclear power by 2020. The White Paper is expected to become law by the end of the year.
The Access to Medicine Index has received a $1m grant from The Bill & Melinda Gates Foundation. The funding will support an independent evaluation of major pharmaceutical companies’ efforts to enhance access to vital medicines in order to promote global health.
Link to site
The number of pension scheme member signatories to the Institutional Investors Group on Climate Change (IIGCC) Investor Statement on Climate Change that asking investment advisers to consider climate change in their manager recommendations has increased significantly from 10% in 2008 to 40% this year, according to research published in the IIGCC’s annual report. It said the number of investors integrating climate change when appointing a manager was also significantly higher at 60%, and noted that 70% of investors are now monitoring their respective managers’ climate performance.
At the end of 2008 the Investor Statement had been signed by 22 institutional investors, pension funds and asset managers.
Link to IIGCC
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 won the 2009 International Corporate Governance Network (ICGN) Award. The ICGN Awards Committee said Ethos had helped bring about significant improvements in corporate governance and had a major positive impact in its region. The ICGN is a global, not-for-profit organization of mostly institutional investors who collectively represent funds under management of around $9 trillion.
Sarasin & Partners, the London-based fund manager and part of the Swiss private banking group, has launched a sustainable real estate equities fund. The Sarasin Sustainable Equity – Real Estate Global Fund repositions the former Sarasin Real Estate Equity – IIID (EUR), fund to take into consideration environmental and social criteria and will invest in a broad spread of listed companies active in real estate and in Real Estate Investment Trusts (REITS).
A new global study by Maplecroft, the specialist risk consultancy, ranking countries with the most hazardous business environments, has labelled Somalia, Sudan, DR Congo, Chad, Afghanistan, Ethiopia, Myanmar, Nigeria and Burundi as “extreme risk”. It said the mostchallenging nations for the business community included, Pakistan (16th riskiest), India (27) Indonesia (32), Iran (35) and the Philippines (41). The study compares risks across 10 key areas: energy security, corporate governance and corruption, emerging powers, terrorism and conflict, macroeconomics, government risk and geopolitics, climate change and environment, health, safety and pandemics, natural hazards and societal and human rights risk.
Link to site
The £687m Church of England Pensions Board has awarded a £100m sustainability-driven global equity mandate to RCM, the specialist global equity manager, part of Allianz Global Investors. The Church of England said RCM would engage with portfolio companies to ensure that responsible business practices and high standards of corporate behaviour are encouraged and supported.
The 16 accounting firm members of The Prince of Wales’ Accounting for Sustainability Forum have signed a set of five sustainability principles on issues such as environmental and social impacts of the companies they audit.
Some UK institutional equity portfolios have carbon footprints up to seven times bigger than their peers, according to research by Mercer and Trucost, on behalf of WWF. The study found that greenhouse gas emissions from UK equity portfolios ranged from 209 to 1,487 tonnes per million pounds invested.
Link to report
PGGM Investments, the Dutch pensions asset manager, has said it will now scrutinise all real estate investments for environmental, social and governance (ESG) factors. IPE.com reports that the pensions manager has initiated a research project, split into six sections to assess the ESG status of every listed and private equity real estate company and fund in Europe, the US and Asia, so the company can decide which investments they see opportunities in.