Two Australian superannuation funds, HESTA and VicSuper, have launched the ESG Research Australia initiative (ESG RA) to promote ESG research in the country’s financial industry. ESG RA says it seeks to pick up the work of the Enhanced Analytics Initiative (EAI) by maintaining the impetus for investment research into ESG factors at Australian brokers and fund managers. The EAI has since been amalgamated into the United Nations Principles for Responsible Investment and ESG RA says it will link into PRI. David St. John, chief investment officer at UniSuper, the Aus$21bn superannuation fund for employees of Australian universities, which has also signed up to the initiative, said: “The ESG RA is appealing because it provides five key practical commitments within an Australian context. And, rather than imposing prescriptive requirements, it allows fund managers more flexibility in their approach to ESG research. In this current volatile investment environment, some funds might be tempted to scale back their ESG activities. However, we remain committed to acknowledging and supporting the important role of ESG research.”
For further info e-mail link
PharmaFutures, the investor-led initiative looking at corporate profitability in the pharmaceutical sector based on improved access to innovative and affordable healthcare in emerging markets has launched its third report. GSK, the global healthcare company, won plaudits earlier this month when it announced voluntary moves to improve access to medicines in developing countries. The report, produced by SustainAbility, the think-tank and research company, is co-sponsored by USS and APG. Link to PharmaFutures*The UNPRI* has launched a tender for the initial stage of the Universal Owner Project, a project researching the financial and economic rationale for collective shareholder engagement and aiming to develop future strategies to address them. The deadline for proposals submission is 17 March 2009.
Link to RFP doc
Companies lack awareness of water-related risks or their risk of exacerbation under the effects of climate change, according to Ceres, the US environmental investment coalition. In a report, titled: Water Scarcity & Climate Change: Growing Risks for Businesses and Investors, Ceres calls on businesses to report their water ‘footprint’. Link to Ceres
Mike Musuraca, a board member of the UNPRI and member of the investment and proxy committees of the New York City Employees’ Retirement System (NYCERS) has joined Blue Wolf Capital, the New York-based private equity house, as managing director. Musuraca said Blue Wolf was a leader in corporate social responsibility and constructive labour relations among private equity firms.
TIAA–CREF and APG have each allocated $40m to the $82m (€64.15m) closing of the Developing World Markets Microfinance Equity Fund I. Other investors include SNS Asset Management in the Netherlands.
Triodos Bank has raised £20m in the first close of the Triodos Microfinance Fund. The fund is the company’s fourth microfinance fund and brings its assets under management in the sector to close to £190m. It plans to offer the latest fund to individual investors in the UK later this year.
A survey of corporate suppliers involved in fields such as processing, packaging and transportation by the Carbon Disclosure Project has found that 58% of 634 respondents believe climate change poses a risk to their operations. One third said it posed no risk. CDP said this showed a lack of understanding from suppliers of the relevant business threats.
It said between 40-60% of organisations’ total greenhouse gas emissions is recognised as residing outside their direct control and are found within supply chain activities
Just under half (49%) of 106 institutional investors surveyed say they plan to increase their funding of clean energy compared with 12 months ago, according to New Energy Finance (NEF), the renewables research group. Global investment in clean energy fell in the second half of 2008 and first three months of 2009. Total investment in 2008 was about $150bn, said NEF.
Responses to corporate responsibility issues are improving in developing countries, according to a review of ESG practices in 40 large companies by Sustainable Investment Research Analyst Network (SIRAN), a working group of the Social Investment Forum (SIF), in conjunction with EIRIS. The survey found South African and Brazilian companies stood out as consistently having the highest assessments, with one suggested reason being the existence of domestic responsible investment indices. Nonetheless, 93% of companies assessed on human rights received only a ‘limited’ grade for their human rights policies. While most companies publicly disclosed some kind of anti-bribery policy, a majority had no clear anti-bribery system nor showed evidence of relevant reporting. Board governanceresponses were more positive. More than 80% of companies disclose their remuneration to directors and 70% separate the positions of board chair and CEO. However, fewer than half had boards where one-third of the directors were independent. The SIF has been behind the Emerging Markets Disclosure Project (EMDP), surveying the state of sustainability reporting with a sign-on statement for investors.
Link to report
The Responsible Investment Association Australasia (RIAA) has called for a wider debate on executive remuneration that includes a focus on the link between the remuneration of senior executives and the long-term sustainable performance of companies. Louise O’Halloran, executive director of RIAA, said: “Investment houses such as AMP Capital Investors, Goldman Sachs and Aviva have estimated that between 77% and 86% of a company’s value is tied up in environmental, social and governance issues that are not captured by traditional financial reporting. It is therefore the duty of boards to manage those issues and to identify any associated risk that may impact the long-term sustainability and profitability of the company.”
The UK Local Authority Pension Fund Forum (LAPFF) is urging companies to link pay under long-term incentive plans to the achievement of both financial and non-financial performance targets. LAPFF chairman Ian Greenwood said: “The use of traditional financial metrics does not link pay tightly enough to performance. Investors in particular are in the hot seat on this one as they need to integrate environmental, social and governance considerations into their investment decisions to safeguard long-term returns – it does not
make sense to then insist solely on financial metrics when it comes to long-term pay schemes. We need to address this worrying lack of long-term focus in pay schemes. Investors, remuneration committees and their consultants need to work together towards a reform of market practices in this area.”
The UK National Association of Pension Funds has urged investors to insist that corporate executive pay policies are clearly aligned with pay policies in the company as a whole. The call comes in a revised policy on corporate governance and voting to prompt institutional investors to take a stronger stance on companies’ application of the Combined Code on corporate governance ahead of the 2009 AGM season. Amendments include combined chairman/chief executive officer guidelines and guidance on the role of the chairman in maintaining corporate governance standards. Link to Policy
UKSIF, the sustainable investment and finance association, has launched the Sustainable Capital Markets Library. It brings together documents on the impact of capital market structures and incentives on long-term responsible investment within the UK and worldwide. UKSIF link
A report by the United Nations Environment Programme says that if nothing is done to improve worldwide agricultural techniques and practices up to 25% of the world’s food production could be lost due to environmental breakdown by 2050. The report estimates that a 50% increase in food production is required to meet world demand by 2050. But it says that environmental factors, including land degradation, urban expansion, climate change, water scarcity, species infestations and the conversion of croplands to bio-fuel will cause a 30-50% increase in food prices.SAM and Dow Jones Indexes have launched the Dow Jones Sustainability Asia Pacific and the Dow Jones Sustainability Asia Pacific 40 indexes. A first license for the DJSI Asia Pacific has been signed by Theodoor Gilissen, a leading Dutch private bank, to manage a sustainability-driven separate account.
GovernanceMetrics International (GMI) has published statistics comparing the percentage of women on company boards in various companies and sectors. The research found that in Japan women comprise less than 1% of the average board. Scandinavia, on the other hand, has the highest average representation by far as a region, with women representing 12.1% of the average board in Denmark, 21% in Finland, 35.9% in Norway and 23% in Sweden. Looking at industry sectors, it found that 4.9% of directors serving on the average board in the automobile & parts sector worldwide are women, compared to 13.5% for retail. The average for all companies rated by GMI worldwide is 8.9%. It also found a clear market cap effect with women represent 15.1% of the average board on the S&P500 compared to 11.9% of the S&P MidCap 400 Index and 9.1% within the S&P SmallCap 600.
The UK’s Co-op banking and investment group is reportedly paying £50,000 ($71,000) to fund a legal action in Canada that could block the development of the country’s oil sands by oil companies, according to the Financial Times. Co-operative Asset Management last year urged British companies to abandon plans for further oil sands developments.
The Marathon Club, the UK institutional investor group for long-term investing has issued a new briefing paper for pension funds on responsible ownership:
Link to report
Jupiter, the UK fund manager, is launching the China
Sustainable Growth fund, which it says aims to benefit from sustainable environmental, social and economic growth trends. The fund, closed-ended, Jersey domiciled and listed in London will be run by Jupiter’s China fund manager, Philip Ehrmann.
Shareholder pressure has pushed Royal Bank of Canada, Canadian Imperial Bank of Commerce, National Bank, Bank of Montreal and Bank of Nova Scotia to commit to instituting the first ever shareholder advisory votes in Canadian public companies on executive compensation in 2010. The decisions came after shareholder proposals filed by Meritas Mutual Funds advised by the Canadian Shareholder Research & Education Service (SHARE). Meritas has filed similar resolutions at Toronto Dominion Bank which will vote in early April. SHARE has also put the proposal on the ballot at Sun Life Financial, Potash and the Toronto Stock Exchange (TMX).
Ceres, the US environmental investment coalition has placed nine companies on a Climate Watch List that identifies companies that lag their peers in relation to environmental practices and which it says represent long-term investment risks. The list includes Chevron and Canadian Natural Resources for their investment in oil sands extraction and Southern Company, the largest electric power producer in the US, which refuses to set GHG reduction targets, despite shareholder resolutions. The other listed companies are CONSOL energy, Massey Energy, Ultra Petroleum, Canadian Natural Resources, General Motors and Standard Pacific. The £75 billion UK Local Authority Pension Fund Forum (LAPFF) has also said it will support related shareholder resolutions lodged with the companies.
Research by DB Advisors has counted 250 new climate change-related policy developments sinceJuly 2008, including 54 in the US 106 in the EU, and 24 in China. The report said the largest recipients of green economic stimulus in the US were investment in mass transit ($17.7bn), energy efficiency ($16.4bn), and water ($13bn) and in the EU, clean autos ($18.9bn), energy efficiency ($17.2bn), and mass transit ($13.6). In China, the main recipients are smart grid technology ($70bn est.), renewables ($29bn est.) for power generation, and water ($2.9bn est.). DB Advisors said the largest barrier to investment in new technologies would be constraints in the credit markets and called on governments to develop loan guarantee programmes to scale up proven technologies.
Investors in shipping companies are exposed to profit risks from air pollution costs, according to a report by the European Sustainable Investment Forum (Eurosif). The research, carried out by Trucost, the environmental research company, found that six out of 11 shipping companies in the MSCI All World Developed Index could face a loss if they had to pay for the health and environmental damages associated with air pollution from their operations under plans by the European Commission to include them in the EU emissions cap-and-trade system. The report said a lack of environmental disclosure by shipping companies in Europe made it difficult for investors to assess which companies presented the greatest carbon risks or opportunities. Eurosif will be issuing similar reports during 2009 on issues including biodiversity, remuneration and long-term compensation and sectors (banks, infrastructure). Link to report.
Just short of a third (31%) of Novartis shareholders supported a say-on-pay resolution submitted by Ethos and eight Swiss pension funds requesting an advisory vote of the remuneration report. Several large Swiss
listed companies such as Roche, Credit Suisse Group, Nestlé, Schindler and UBS have already decided to give their shareholders a say on pay at their next general meeting.
F&C, the UK fund manager, recorded a sharp rise in votes against company management in the US in 2008, rising from 16% in 2007 to 24% in 2008, notably regarding contentious board elections and ‘say on pay’ resolutions. In its annual Responsible Investment Report, which details its full global voting record, the manager said the global economic crisis and outrage at excessive risk-taking in the banking system had pushed governance issues firmly centre-stage and would result in tougher scrutiny by investors on issues such as executive pay. Link to site
Insight Investment has published its full quarterly report summary of its voting recommendations and governance and corporate responsibility activity:
Link to site
Björk, the Icelandic singer has teamed up with Halla Tómasdóttir and Kristin Petursdóttir, founders of Audur Capital, to launch an investment fund to invest in green technology.
Unigestion, the Geneva-based fund manager plans to launch an environmental sustainability fund of funds focusing on alternative energies, efficient use of resources and pollution control across investment stages including venture capital, growth capital, and infrastructure. The fund will seek to invest in the best 10-12 underlying managers in the sustainability sector.
Companies with diverse boards perform better than those that have members with similar ethnic, gender andskill sets profiles, according to a report by the California Public Employees’ Retirement System (CalPERS). The report – The Board Diversification Strategy: Realising Competitive Advantage and Shareowner Value, written by Vircom Consulting, said performance, creativity and innovation were all boosted by mixed boards. CalPERS board president Rob Feckner, said: “These findings validate our ongoing efforts to diversify boards and improve portfolio companies’ operating performance and stock returns.” CalPERS has written diversity guidelines into its Principles of Accountable Corporate Governance, to help companies take into account “historically under-represented groups on the board, including women and minorities.”
Swiss private bank, Pictet & Cie, has launched the PF (Lux) Global Megatrends Selection Fund. The fund will invest on an equally-weighted basis across Pictet’s existing themed funds in water, timber, clean energy, security, biotech, digital communications, generics and premium brands, which it believes have the potential for long-term growth.
The Network for Sustainable Financial Markets has released a blueprint recommending 10 fundamental changes to the credit derivatives market. The Network says proposed changes would bring fairness and sustainability to what has been a dangerously opaque and, as a result, mispriced sector of the financial system. The paper was written by corporate governance and insolvency expert Dr. Janis Sarra, of Canada’s University of British Columbia Faculty of Law.
Link to site