RI round-up May 15th

RI’s regular round-up of the most important responsible investment news.

Carl Rosén, head of corporate governance and communications at the Second Swedish National Pension Fund (AP2), has been appointed executive director of the International Corporate Governance Network (ICGN). Rosen has been a board member of ICGN since 2008 and chairs the membership committee.
Proxinvest, the French proxy advisory company has recommended shareholders vote against the reappointment of Daniel Bouton, the chairman of Société Générale, as a director at Total, the French oil group, at its May 15th AGM. Bouton recently announced that he would be stepping down as chair of Société Générale, citing excessive criticism. Proxinvest said it had concerns over Bouton’s governance of the Kerviel affair and risk management at the French bank and said this raised question marks over his Total directorship.

The Bank of New York Mellon has launched a universal custody and trade settlement platform for carbon credits, Global Environmental Markets, which will enable management of credits through a single web site.
SAM, the Swiss sustainable asset manager, has teamed up with Gatehouse Bank, a London-based Islamic banks to sell what it says is the first ever Shariah-compliant investment strategy in the area of water.
Sander van Eijkern, CEO of SAM, said: “This partnership enables us to gain access to the promising segment of Islamic finance, which is expected to grow substantially in the years ahead.”
Shareholders at Goldman Sachs have voted to amend the requirement for a vote of 80% of outstanding shares to take action such as removing directors or amending by-laws. The proposal won support from 75% of sharesvoted and 54.7% of outstanding shares and will require an amendment to the company’s charter to be put to investor approval at next year’s shareholder meeting. It was the first time shareholders have rejected a board proposal since Goldman Sachs went public a decade ago. Two proxy advisory firms, RiskMetrics and Glass Lewis, advised shareholders to support the proposal. A “say on pay” vote included on the proxy also won an overwhelming 98% approval of shares voted and had the support of Goldman Sachs management.
Sales of UK ethical retail funds remained positive in the first quarter of 2009 with sales of £45.2m, in contrast to sales of mainstream index tracker funds which recorded net outflows of £31.7m, according to figures from the Investment Management Association. Penny Shepherd, chief executive of the UK Sustainable Investment and Finance Association (UKSIF) said the latest numbers added more weight to the argument that green and ethical investors are ‘sticky’: “They are typically long-term investors who look beyond short-term market fluctuations and want to benefit from sustainable wealth creation. Retail inflows into ethical funds have now exceeded outflows for each of the fourteen months since February 2008.”
Manifest, the UK proxy-voting agency, has launched a campaign of say on pay shareholder resolutions at Irish companies after noting that none had done so voluntarily despite the adoption of corporate governance codes. The resolutions will be posited at Bank of Ireland and four more leading Irish listed companies: DCC, Elan, C&C Group and Independent News & Media. Manifest’s research manager, Alan Brett, said: “We are disappointed
that five years after the EU’s recommendation on directors’ pay, Irish companies have not taken this issue up on a voluntary basis. Remuneration policy resolutions are common in The Netherlands and Sweden as well as being standard items of AGM business in the United Kingdom and Australia.”
The California State Teachers’ Retirement System (CalSTRS) is asking 300 of its portfolio companies to develop comprehensive executive compensation policies and allow shareholders advisory votes on those policies. The fund says its goal is to reward long-term thinking and improve pay-for-performance practices while deterring excessive risk taking. Anne Sheehan, CalSTRS director of corporate governance. “We see our efforts as key to improving long-term returns and meeting our fiduciary duty to California’s teachers and their families.”
Link to guidelines
The UK Local Authority Pension Fund Forum (LAPFF), which speaks for 49 local authority pension funds running £75bn (€84bn) in assets has added UK broker Tullett Prebon to a 15-strong hit list of financial groups where it says it is unhappy with remuneration. LAPFF claims director salaries at the broker are high compared to peers and that bonuses are uncapped. It added: “The company’s disclosure on maximum awards and specific performance targets for incentive plans is opaque.” The broker has refuted the claims.Kohlberg Kravis Roberts (KKR), the US private equity giant, has signed up to the United Nations Principles for Responsible Investment, making it the biggest buyout house to do so to date.
Chief executives from some of the world’s leading companies have called on governments to more effectively and robustly implement the United Nations Convention against Corruption. In a letter to UN Secretary-General, Ban Ki-moon, the CEOs said the convention “holds the promise of curbing corruption and creates a level playing field for all participants in the global economy” and called for the establishment of an implementation review mechanism at the next Conference of States Parties to be held in Doha in November 2009.
Massachusetts Pension Reserves Investment Management Board (“PRIM”) and Mississippi Public Employees’ Retirement System (“PERS”) have been named as lead plaintiffs for shareholders in a class action suit against Royal Bank of Scotland (RBS). The suit alleges that RBS falsely reassured investors that the bank was well capitalized while it was effectively insolvent as a result of impaired assets, bad loans, and its partial acquisition of ABN AMRO. The US law firm acting for the investors is Labaton Sucharow.
Hendrik van Riel, former managing director of JPMorgan Asset Management in New York and London, has joined ESG-research and indices company, ECPI, as executive chairman. Van Riel said: “ESG-backed products
were looked at by asset managers with curiosity in their infancy but have grown in acceptance over the last decade. It has become clear to mainstream fund managers that ESG-linked products are not simply a means to ‘green’ or ‘ethicise’ portfolio offerings but also a way to improve the financial efficiency of their investment strategies.”
A survey of unlisted UK and continental European property funds by Aviva Investors and the Environment Agency Pension Fund, has found that a significant majority of respondents (95%) believe there is a link between environmental practice and financial returns, although most felt this was difficult to quantify at the current time.
The survey, carried out by Innovest, contacted 81 property funds of which 22 provided complete answers. Of these respondents, 95% said their parent companies had a broad social responsibility policy. However, only 23% said such policies were also targeted at the fund level. Just under 60% of responding funds said they did not collect CO2 emissions data on their buildings while 64% gave no answer or said that they did not have water management programmes. Richard Jones, managing director of UK real estate at Aviva Investors, said: “Buildings are responsible for almost 50% of the UK’s energy and carbon emissions, and with the introduction of increasingly stringent and ambitious targets for carbon reduction by governments in both the UK and Europe, it is essential that real estate companies do their part to actively manage and reduce carbon emissions. Furthermore, pension fund trustees have an important role to play by challenging their property managers toensure environmental issues are considered in managing their portfolios.”
ASSET4, the Swiss ESG research house has hired Andrew White, former UK managing director for Innovest Strategic Value Advisors, as senior sales director in the United Kingdom. The group has also hired James Murphy as director of Client Services and André Chanavat as a client services executive.
Robert Jenkins, chairman of the UK Investment Management Association, the trade body for the UK’s £3.4 trillion asset management industry, has encouraged fund managers to use their power as shareholders to call companies to account, saying that there is no alternative: “Boards don’t own the companies in which we invest. Our clients own the companies in which we invest. It is not the boards’ money. It is our clients’ money. I would encourage active managers who hold the shares to engage. And I would encourage all shareholders who engage to vote down directors of Companies they judge to be poorly run. Hold them accountable. Who else will?” In the speech to the CFA Society of the UK, Jenkins said company boards should listen to the agents of their owners: “Alas, many will not do so unless they believe there will be consequences if they do not. And they will not believe there will be consequences until they have seen that there could be. Let us put a body on the street when engagement fails so that future engagement might better succeed. Voting directors down is likely to do more for governance than all the Code revisions in the realm.”
TDAM USA has launched the Global Sustainability Fund investing in companies selected from the Dow Jones Sustainability World Index.

Vestas Wind Systems, the Danish wind turbine producer, has raised €800m ($1.1bn) in equity capital, the second largest equity deal in Europe this year, after investors including ATP, the Danish pension fund and Blackrock, the US fund manager took up 100% of the equity offering. The new shares were priced at DKr323, a 2% discount to the company’s average share price during the book build.
Signatories to the UN Principles for Responsible Investment (UNPRI) have launched a collaborative engagement via the PRI’s Clearinghouse asking institutional investors to endorse lobbying pressure for US companies to adopt the Employee Free Choice Act. The investors are writing to U.S. lawmakers for their endorsement and to S&P 100 companies asking them to disclose policies on workers’ rights to form unions and collectively bargain with their employers under the Act.
A study conducted by Union Investment, the German fund manager, has reportedly found that 64% of 256 professional investors polled had committed to sustainable strategies, although around a third felt themselves to be ‘poorly’ or ‘very poorly’ informed on the subject. IPE reports that the study of banks, insurers and major corporations by Schleus Marktforschung, a Hanover-based research company, found just 4% were aware of the United Nations Principles for Responsible Investment (UNPRI) and that investors were not sure what constituted a sustainable investment and how it fitted into asset management. The research found that 48% thought there was an economic rationale to making ESG decisions. However, three quarters of those investors who said they did not consider sustainable investments said they believed costs would be higher, while 73% said returns would be decreased by ESG-based investing.The total of broadly measured SRI assets in Canada in 2008 reached C$609.23bn, a 21% increase from C$503.61 billion in 2006, according to the country’s Social Investment Organization (SIO). In its latest Canadian Socially Responsible Investment Review, SIO said the rise had taken the total market share of SRI assets in Canada to 19.9%, up from 19.5% in 2006. The SIO said ‘broad’ SRI assets, which incorporate assets run using investment analysis of ESG issues represented C$555.06bn of the total. The findings also include $54.17bn in assets invested according to ‘core’ SRI strategies such as values-based screening, which was down slightly from $57.39bn in 2006. The report said that sustainable venture capital, while representing a small part of total SRI assets, enjoyed substantial growth between 2006 and 2008. Eugene Ellmen, executive director of the SIO, said: “Socially responsible investors have maintained their confidence in SRI over the past two years, and there is growing interest in finding solutions to global social and environmental issues through investment.”
Link to report
Dutch fund manager Robeco will integrate environmental, social and corporate governance (ESG) research into its entire €110bn portfolio by the end of 2010. George Möller, executive chairman, said the move would help the fund manager achieve more sustainable returns as well as a better risk-return profile.
The European parliament has voted in favour of plans to invest about €4bn in new energy infrastructure including offshore wind parks and carbon capture and storage (CCS) projects. Just over half will got towards the development of a new European super-grid and improved gas infrastructure, while €565m will fund offshore wind energy projects and just over €1bn used for carbon capture and storage projects.

The UK Confederation of British Industry (CBI) has set out a blueprint for a single, common standard on how firms report greenhouse gas emissions. The standard is based upon a refinement of the Greenhouse Gas Protocol (GHG Protocol), a global structure for emissions measurement and disclosure that has secured support from a large number of multinationals and environmental groups. The CBI said the current use of six competing standards could undermine businesses efforts to cut carbon emissions. The CBI’s report is based on the findings of its Carbon Reporting Working Group, chaired by Rory Sullivan, head of responsible investment at Insight Investment: Link to standard*The US Securities & Exchange Commission* (SEC) is to consider proposals this month to remove barriers that make it costly and difficult for shareholders to nominate company directors via the proxy. Outlining the SEC’s new enforcement agenda, Mary Schapiro, SEC chair, said: “I believe such proxy access is in no small measure about making boards more accountable for the risks undertaken by the companies they manage.” Scahpiro said the SC was also looking at expanding the pay-to-play rules, better disclosure of municipal securities, regulation of hedge funds and whistleblower authority.