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RI round-up June 20

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

China Investment Corporation (CIC), the $200bn sovereign wealth fund, says it intends to operate as a responsible investor by favouring clean energy and environmentally friendly companies and screening out sectors such as gambling, tobacco and arms. The announcement was made Gao Xiqing, the fund’s president, accompanies recent statements that CIC’s investments are not politically motivated, following accusations be western governments. CIC has so far taken large stakes in financial services companies, including a $3bn pre-flotation stake in US private equity firm Blackstone in May 2007 and a $5bn purchase of 10% of Morgan Stanley, the US bank in December 2007. Between $80-$90bn of CIC’s funds are invested outside China.
The Robin Cosgrove prize which awards $20,000 to a winning paper on promoting ethics in finance and banking, particularly in emerging markets, is now open for submissions.
The competition is open to entrants under 35 years of age and is held in memory of Robin Cosgrove, an investment banker with an interest in ethics and finance, who died at 31 years of age. The 2006-7 prize was shared by Clare Payne of Macquarie Bank in Australia who wrote on the theme: “Ethics or bust: beyond compliance” and Jonathan Wisebrod of Villari in Singapore who wrote about “Social impact ratings”. The prize is supervised by the Geneva-based International Finance Observatory. Further details can be found at www.robincosgroveprize.org*A group of five property investment firms with assets of $250bn* are devising an environmental rating system for property investments that will measure buildings on energy and water consumption alongside carbon emissions, transport links and health and safety. The Global Green Rating will be certified by Bureau Veritas, the inspection services company. Property fund managers behind the rating include ING Real Estate, General Electric Real Estate Europe and AXA REIM. The fund managers said forecasts from property analysts estimate that more energy efficient buildings could command a rental premium in the future.
What’s in a name? AQ Research, AXA Investment Managers and the Financial Times have launched a joint survey for investment professionals to attempt to bring some clarity to the often confusing terminology between socially responsible investment (SRI), environmental, social and governance investing (ESG) or social, environmental and ethical investment (SEE).
The survey seeks to understand why certain terms have taken off while others haven’t and to understand whether terminology is a barrier to the growth of responsible investment. Titled: “If it’s so important, how come we don’t agree on what to call it?”, the short survey is available at www.aqresearch.com/survey until July 14 and the results will be subsequently published in the Financial Times.
Global utilities stocks with the greenest credentials have outperformed the average by 0.5% since the start of 2006, according to figures compiled by Style

Research, the investment analysis company and Trucost, the environmental research firm, reports Financial News. Oil and gas stocks which polluted the least outperformed by 0.9%.Robert Schwob, chief executive of Style Research, said he believed that evidence would lead to a change in behaviour by consultants and pension scheme trustees in the selection of their mainstream portfolio constituents.
The $65bn California State Teachers Retirement System (CalSTRS) the second largest US pension fund, is debating whether to lift a ban on tobacco investments. Both CalSTRS and CalPERS, the Californian fund for state employees, dropped tobacco company investments in 2000 as a result of lawsuits aimed at the industry. Tobacco stocks represent just short of 2% of the Russell 3000, the fund’s benchmark. Separately, CalPERS expects to search for a group of commodities, infrastructure and forestry consultants by the end of June, with hires planned for September. CalPERS targets 1.5% each of its total portfolio in commodities and infrastructure, and 1% in forestry.
Triodos Renewables Energy Fund, the UK clean energy company, has raised £5m in investment from retail and institutional investors in the first month of a new share issue. The fund has returned 22.9% in the past three years or an average of over 7% per year. The current share issue aims to raise £8.5m, net of costs, which will be invested directly in renewable energy projects and companies.
Lord Stern, author of the UK government-backed Stern report on climate change, is to launch the world’s first credit rating system for carbon offset projects in the developing world this month.The system will award debt-style ‘AAA’ ratings for the best and most expensive projects – and ‘junk’ ratings for the riskiest. The aim is to help investors wanting to buy carbon credits from projects to judge which ones to invest in and which to avoid. According to the World Bank, trading in UN-approved carbon offset credits (or CERs). which are used to meet emissions targets under the Kyoto protocol, totalled $13bn (around £6.6bn) last year.
A lack of standardised and reliable industry reporting on existing CO2 emissions is limiting the ability of investors to assess vehicle manufacturers’ exposure to carbon risk, according to a report by Trucost, the environmental research organisation. The report, titled Vehicle Manufacturers: Carbon Risk Exposure, analyses the effect on the sector of proposed EU legislation that from 2012, manufacturers that fail to reach a new 130g CO2/km target will be obliged to pay an “excess emissions premium” for every year of non-compliance. Trucost calculates that if all manufacturers missed the targets, it result in €10bn worth of extra costs for the sector.
Innovest, the sustainability research house, has introduced a new Sustainability Value at Risk analytic model to rank banks by the ESG performance of the companies they finance. According to Innovest, the top sustainable investment banks have beaten the bottom banks by 11% over three years, and 4% over the past 12 months. Innovest rated Bear Stearns below investment grade, or “BB” nine months before it collapsed and forecasted that the subprime sector would collapse in October of 2006.

Inadequate retirement income from Defined Contribution (DC) plans is the most feared outcome from a list of ten undesirable scenarios that could occur in the next ten years according to a survey of institutional investors conducted by global consultants Watson Wyatt. Paul Trickett, European head of Investment Consulting at Watson Wyatt said: “The pensions industry’s attention has remained largely focused on Defined Benefit (DB) schemes, even though global assets invested in DC schemes are likely to exceed those in DB plans within the next five to six years.”
ERAFP, the €5.4bn French pension fund for civil servants, which runs assets on a 100% RI basis, has appointed Philippe Desfossés as its chief executive. He joins from pharmaceutical company Lilly France. The fund has also appointed Jean-François Rocchi to head up its trustee board.
A coalition of socially responsible investors led by the US Social Investment Forum (SIF), has written to the United Nations Human Rights Council supporting business responsibility for human rights and asking it to extend the mandate of John Ruggie, its special representative on the subject. Ruggie’s latest report, titled “Protect, Respect and Remedy: a Framework for Business and Human Rights,” his third on the subject, provides a framework for corporations to be held responsible for global human rights.
Institutional investors and a group of 4,000 savers who both lost money in the December 2003 collapse of Parmalat are reportedly suing the company’s former auditors and a number of banks, including UBS, Morgan Stanley, Deutsche Bank and Nextra according to Deminor, the corporate governance consultancy advising the savers.Thomson Investment Management News reports that the legal action will be launched in the Milan court and is seeking damages of at least €40m.
SRI fund offerings within the €2.8bn French company employee savings industry look likely to develop strongly within the next five to ten years, according to a survey of French companies by Novethic, the Paris-based SRI research group and Altedia, the French management consultancy group. The survey of a panel of 27% of the 120 largest French companies, found that two-thirds believe SRI funds could become systematised or even obligatory. However, only half said they currently offer an SRI fund to their employees for the tax-advantaged savings plans.
Some of the world’s largest passive asset managers rarely challenge the management of companies they invest in, despite their votes being increasingly important on governance issues, according to US voting data analyst ProxyDemocracy. The company reports that Barclays Global Investors’ S&P 500 fund voted against 13% of proposals made at annual meetings last year, while Vanguard’s 500 Index fund voted against management on 14% of proposals.
The £4.3bn Merseyside Pension Fund will reportedly vote in favour of a resolution by UK TV chef Hugh Fearnley-Whittingstall, to push Tesco, the UK supermarket group, to improve its animal welfare policy at the company’s annual general meeting later this month, according to Thomson Investment Management News. The fund’s support came after Pirc, the UK proxy voting company, which advises Merseyside and other pension funds, said it considered the resolution to be in line with Tesco’s stated animal welfare policy commitment