RI round-up Nov 17

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

Triodos, the Dutch sustainable bank, has raised more than €40m in capital from Dutch institutional investors. The total sale raised €102m, above the €90m target. Triodos said new investors included the Dutch graphics industry pension fund PGB, with 5.4%. Existing investors Delta Lloyd, Rabobank and ABP also participated.
The Norwegian Global Pension Fund says it sees exclusion as a “last resort”, Roger Scherva, State Secretary at the Ministry of Finance, told a meeting in London. The €260bn fund has made waves with some high-profile divestments. Scherva said the fund would only exclude when there is an unacceptable risk of contributing to unethical acts in the future through the fund’s investments and if there is reason to believe that it is impossible for to change a company’s unethical behaviour.
Mining firms BHP Billiton and Barrick Gold and oil giant Shell are among 23 additions to a Nasdaq index for sustainability performance reporting. The Nasdaq OMX CRD Global Sustainability 50 Index was launched this summer and underwent its twice-yearly evaluation at the start of November. Among the removals were Bristol-Myers Squibb, Cisco, GE, ING, Coca-Cola, Microsoft, Oracle and UBS. British Sky Broadcasting, Credit Suisse and Deutsche Bank were among the additions. The index comprises firms “that are most comprehensively disclosing their carbon footprint, energy usage, water consumption, hazardous and non-hazardous waste, employee safety, workforce diversity, management composition and community investing”.
The 2009 Moskowitz Prize for Socially Responsible Investing has been awarded to David Baron, Professor of Political Economy and Strategy at Stanford University. The award, which recognises outstanding quantitative research in SRI, was announced at the SRI in the Rockies event. Baron won for a paper, co-authored by Maretno Harjoto and Hoje Jo, called ‘The Economics and Politics of Corporate Social Performance’.The UK’s main opposition Conservative Party says it plans to introduce an ethical fund to the forthcoming personal accounts pension system. “A Conservative government would ensure that was swiftly dealt with,” said shadow pensions minister Nigel Waterson at an event organised by Fair Pensions. He pointed to the success of retail ethical funds such as those provided by the Co-Operative Bank. The Conservatives are favourites to win the upcoming general election.
The World Federation of Exchanges has published a report on sustainable investment initiatives to accompany a recent New York meeting between investors and exchanges. The body said “Exchanges and Sustainable Investment” is a follow-up to 2004 research. It provides an update on the growth of sustainable investments as mainstream products accessible to investors, regulators and companies. The interactive report was produced by consultancy Delsus.
Link to report
EIRIS, the SRI research group, has called for ESG disclosure requirements to be incorporated into stock exchange listing rules and corporate governance standards. Eiris presented a series of recommendations at the recent gathering of exchanges and investors at the United Nations in New York. It also called on bourses to implement disclosure requirements on a ‘comply or explain’ basis, support the requirement for resolution on a CSR or sustainability report and measures such as sustainable indices.
The $110bn (€74bn) Florida State Retirement System has outlined how it could invest in renewable energy via its new FRS Florida Growth Fund. The fund was announced in June this year under legislation which allows the State Board of Administration “to prudently invest” up to 1.5% of its assets in state technology and growth enterprises such as IT, aerospace and renewable energy. The fund said investments available to it included “include venture capital funds, growth capital, mezzanine debt and co-investments”. The new fund will be run by private equity firm Hamilton Lane.

RCM, the global equity subsidiary of Allianz Global Investors, has appointed Vipin Ahuja as senior research analyst to their Sustainability Research team. Vipin, who joins from Credit Suisse Asset Management where he was portfolio manager for the Global Energy and Renewable Energy Funds, will be responsible for stock picking and analysis with a focus on clean technology.
The European Investment Bank has launched new “Climate Awareness Bonds” in Swedish krona for the first time – with the proceeds to be used for renewable energy and energy efficiency projects. It issued a total of SEK2.25bn (€216m) via Swedbank. The bonds are aimed at Swedish investors because of the high priority given to climate matters by the Swedish EU Presidency – and the SRI credentials of Swedish investors. The move follows the 2007 launch of the EIB’s first euro denominated climate bond. Buyers included AP2, Länsförsäkringar, AFA Försäkring, Nordea and Swedbank Robur.
Major global asset owners such as CalPERS and Temasek have been named and shamed by Dutch activists over their financial relationships with cluster bomb producers. A report by IKV Pax Christi and Netwerk Vlaanderen found 138 financial institutions still provide over $20bn (€13.5bn) worth of investments and financial services to eight producers of cluster bombs – almost a year after the Oslo Convention on Cluster Munitions. Among asset owners named were the Alaska Permanent Fund, Caisse de Dépôt et Placement du Québec, CalPERS, the Canada Pension Plan Investment Board, Korea’s National Pension Service, Temasek and TIAACREF. They were included in the ‘Hall of Shame’ for various shareholdings in Alliant Techsystems, Hanwha, L-3 Communications, Lockheed Martin, Poongsan, Roketsan, Singapore Technologies and Textron. Asset managers and banks were also named by the report. They include firms such as Aberdeen, BlackRock, Capital Group, Goldman Sachs, Fidelity, Henderson, Janus, Legal & General, Legg Mason, Merrill Lynch, Natixis, Russell, Schroders, State Street, T. Rowe Price, UBS and Vanguard.
Roos Boer at IKV Pax Christi, said: “We are calling on states that have signed the Convention on Cluster Munitions to draw up legislation to ban investments in cluster munitions and to provide clear guidelines for financial institutions,” she added.
On the plus side, the group also listed a ‘Hall of Fame’. Prominent here were the Norwegian Government Pension, Ireland’s National Pensions Reserve Fund, the New Zealand Superannuation Fund and the Swedish Pension Funds.The €1.6bn Environment Agency Active Pension Fund has topped up an environmental mandate with specialist fund manager Impax Asset Management. Impax said it has been awarded an extra £15m in an existing global equities mandate. The mandate was initially awarded in 2008, when Impax was selected to manage £35m in global equities.
The ethical council of Sweden’s AP government buffer pension funds has appointed John Howchin, senior analyst at Norges Bank Investment Management (NBIM), as its Secretary-General. The funds said Houchin’s primary role would be to coordinate the ethical council’s corporate dialogues and investor initiatives. Houchin previously spent five years at GES Investment Services as deputy CEO, head of research, and environmental analyst and has worked in socially responsible investment since 1998. He takes up his new position during the first quarter of 2010.
Bridges Ventures, the London-based social venture capital firm, has announced a first closing of £26m for its Bridges Sustainable Property Fund. Bridges said that with borrowing the commitments would give the fund an immediate investment capacity of over £50m. Investors in the fund included the West Midlands Pension Fund, Merseyside Pension Fund and Co-operative Financial Services. Among its sustainability aims, the fund said it would look to acquire and renovate older buildings to bring them to higher environmental standards and to invest in regeneration areas.
The UK National Association of Pension Funds (NAPF) has written to the chairmen of Britain’s top 350 companies urging executive pay restraint and an alignment of company remuneration with the long-term interests of shareholders, including pension funds. In the letter, David Paterson, NAPF head of corporate governance, said: “While we appreciate the restraint shown by many companies in remuneration policy during 2009, it is important that in the coming year there is a clear focus on linking pay to results.” The lobby group has also called for a review of ‘best practice’ on executive pay to answer questions as to whether current remuneration structures serve both management and shareholders well. Notably, the NAPF said corporate boards should pay close attention to how profits are apportioned between capital, remuneration and dividends to shareholders. This follows a year in which many companies have raised capital and many dividends have been cut. It said it also supported the growing trend of deferring parts of bonus payments into shares.

RBS, the UK banking group, has reportedly launched an Emerging Markets Socially Responsible Investment (SRI) index, a long-only equity benchmark tracking 30 best-in-class companies in 26 developing countries, including Brazil, Russia, India and China. Environmental Finance Magazine said the bank plans to launch two related products based on the index: an investment certificate listed on the Euronext Amsterdam exchange and targeted at Dutch investors, and a call option based on a risk stabilised version of the index which is aimed at Nordic investors. From a universe of about 1,000 stocks with a minimum market capitalisation of $1bn, the companies are given a sustainability rating developed by RiskMetrics.
Two reports have been issued examining trends in corporate measurement and reporting on human rights performance.
The reports have been issued as part of a collaborative project: “Human Rights: A Call to Action” launched last year to mark the 60th anniversary of the Universal Declaration of Human Rights. The studies were commissioned by the Ethical Globalization Initiative. The first, a survey of recent sustainability reports by over 50 leading companies, examines trends in disclosure and highlights good practice examples as well as ongoing shortcomings. The second offers a practical guide for companies on steps they can take to improve their coverage of human rights as part of their sustainability reports. A third report by Harvard Law School Pensions Project and ASSET4, funded by the not-for-profit IRRC Institute, found that 28% of 2,500 global companies have labour and human rights (LHR) policies covering their global supply chains. However, it found that far fewer had established follow-up monitoring and enforcement procedures, notably among US and Asian companies.
Link to EGI studies
Link to Harvard Law School report
A survey of just over 2000 retail investors carried out for the UK’s National Ethical Investment Week found that half want the government to do more to stimulate green and ethical investments. A further 47% of investors said the government should introduce education in schools so that people know about the likely impact of their investments from an early age. Just under half (44%) of investors said the financial services industry needs to work much harder to provide clearer evidence of the green and ethical impacts of investments to attract more money. And longer term, 2 in 5 (40%) believe that the Government should ensure people fully understand and are offered green and ethical investments as part of their overall pension saving.A coalition of 17 investors including five New York pension funds holding over 24 million shares of Cisco Systems worth $580m is urging the company to better manage human rights related risks in its global operations. In a shareholder proposal led by Boston Common Asset Management, the investors say they are concerned about increasingly aggressive tactics implemented by IT companies to curb internet freedom and violate privacy. They are asking Cisco to take steps to mitigate such human rights related risks, which they argue could ultimately stifle long-term demand for the networks it builds. RiskMetrics Group, the leading proxy voting agency is supporting the resolution for all of its clients.
Human rights organisations in the Democratic Republic of Congo have criticised plans by Eni, the Italian oil and gas company to develop tar sands and oil palm in the Congo Basin, claiming it risks irreversible damage to biodiversity, local communities and breaks the company´s own environmental guidelines. In a report titled: “Energy Futures? Eni´s Investments in tar sands and palm oil in the Congo Basin,” the groups argue that because of their huge carbon footprint, such investments should be considered too high risk for Eni or any other energy company. Eni’s CEO Paolo Scaroni recently urged delegates at the UN Leadership Forum in New York to take action on climate change.
Hermes, the UK pension fund manager, has reportedly criticised Volkswagen’s plan to take over Porsche and threatened further action if demands for transparency are not met. The Financial Times reports that in a letter to Ferdinand Piëch, chairman of VW’s supervisory board, Hans-Christoph Hirt, head of European corporate governance at Hermes said the manager was concerned about a lack of information to minority shareholders and possible conflicts of interest surrounding the takeover. In a separate letter to Mr Piëch, the Association of British Insurers last week also demanded information on how the stakes to be acquired in Porsche AG were valued and the economic rationale for the transaction.
Sustainable Capital, the Mauritius-based African sustainable investment manager has started a sales tie-up with Sanlam Investments, the US$40bn South African fund manager, to sell its products into South Africa. Sustainable Capital has also launch the Africa Sustainability Fund, which invests in listed companies with the majority of their economic benefit derived from the African continent,
excluding South Africa. The fund is Mauritius exchange, a member of the World Federation of Stock Exchanges.