RI round-up: Nov 28

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

A new consortium of European ESG research houses has come together under the Sustainalytics brand. The group comprises the former entities of Dutch Sustainability Research (DSR), Scoris (Germany) and Analistas Internacionales en Sostenibilidad – AIS (Spain). The move follows the disbanding in September of SiRi Company, the former alliance of global ESG providers, which included Centre Info in Switzerland, KLD Research & Analytics in the US, Jantzi Research in Canada and PIRC in the UK, which will remain as stand-alone research houses. Sustainalytics said it would still source company research within the Americas and Asia-Pacific is in partnership with Jantzi, KLD and SIRIS in Australia. Sustainalytics, which is backed by Triodos Bank, Fortis MeesPierson and PGGM, said it was developing a new online ESG research platform.
Mistra, the Swedish environmental foundation, has extended funding for a programme of research into sustainable investments. It has awarded grants of SEK18 and SEK40m respectively for four-year research into behavioral impediments to sustainable investments (BISI) at the University of Gothenburg and the Sustainable Investment Research Programme (SIRP) at Umeå University. The latter will include study on how the
Swedish National Pension Funds and other institutional investors implement sustainable investment concepts, and how such investors influence corporations.
Forty three per cent of people answering a survey by the HSBC Climate Partnership, said they chose climate change ahead of the global economy as their biggest current concern, despite the turmoil in the financial markets.The survey said that 77% of respondents to the global poll said they wanted to see their government cutting carbon by their national ‘fair share’ or more to allow less developed economies to grow. Twice as many said that governments should invest in renewable energy (55%) than participate in international negotiations on climate change (27%). Lord Nicholas Stern adviser to HSBC on economic development and climate change said: “This research demonstrates the need for decisive action on climate change. The urgent challenge is to build a framework for a global deal so that consensus can be reached in Copenhagen next year and the discussions in Poznan are a critical stepping stone to achieving this. Now is the time to lay the foundations of a new form of growth that can transform our economies and societies.”
The £1.5bn UK Environment Agency Active Pension Fund picked up the gong for best SRI/Corporate Governance pension fund in Europe at last week’s Investment & Pensions Europe Magazine Awards.
The European Parliament will vote on December 15 on a series of measures for the EU’s climate change package. Member states have broadly said they support agreed targets to cut CO2 emissions by 20% and generate a fifth of the EU’s energy from renewables by 2020. Divisions remain, however, over how the targets should be met. Eastern European states are lobbying for western states to take on more of the burden, while other countries including Italy are calling for more protection for carbon-intensive industries in the current economic downturn. Other contentious issues include the extent to which carbon credits from outside the EU should count towards emission reduction targets and emissions penalties for car manufacturers.

The US Senate is reportedly preparing two new climate bills, with the first scheduled for as early as January, following US President-elect’s campaign commitment to invest $15bn a year in clean tech over 10 years. The second bill is expected to direct the US Environmental Protection Agency to set up a national carbon cap-and-trade scheme. Obama has pledged support for a federal cap-and-trade emissions scheme to return carbon emissions to 1990 levels by 2020 and deliver 80% cuts by 2050.
A new paper titled: “Women in the Boardroom and Their Impact on Governance and Performance”, issued by Renee Adams of the University of Queensland and Daniel Ferrara of the London School, says the presence of women on boards can improve the attendance behaviour of male board members. The report, cited in the Harvard Law School Corporate Governance blog, also finds direct evidence that more diverse boards are more likely to hold chief executives accountable for poor stock price performance. The survey sample consists of director-level data for S&P 500, S&P MidCaps, and S&P SmallCap companies collected by the Investor Responsibility Research Center (IRRC) for the period 1996-2003. See downloads
Impax Group, the London-based specialist environmental fund manager has hired Victor Juttmann and Caroline Barraclough as Investment Manager and Marketing Manager, respectively.
Juttman, a former tax lawyer at De Brauw Blackstone Westbroek joins Impax’sprivate equity team responsible for commercial, legal and tax work related to solar and wind investments. Barraclough, formerly investor communications manager at Carbon International, will co-ordinate the marketing strategy for Impax’s listed equity funds.
Rory Sullivan, head of responsible investment at Insight Investment in London, has published a new book, titled: “Corporate Responses to Climate Change: Achieving Emissions Reductions through Regulation, Self-regulation and Economic Incentives”. Link to site
UniSuper, the AU$23bn industry superannuation fund, is extending its proxy voting policy to include Asian investments. The fund invests about AU$1bn currently invested in Asia and will use UK-based PIRC as its proxy voting advisor in Asia. David St. John, UniSuper’s chief investment officer, said an increase in the number of foreign holdings combined with an improvement in voting services to the region, meant that investors could now vote in Asian markets with greater confidence.
Australian companies have improved reporting on greenhouse gas emissions during the last year, according to the VicSuper Carbon Count 2008. The report, supported by Environment Protection Authority Victoria and carried out by Trucost, said the number of companies publicly disclosing adequate emissions data had increased from 25% to 30% between 2007-2008, with sectors including textiles, apparel & luxury goods, airlines, electric utilities and media, reporting for the first time. www.vicsuper.com.au

Half of new green buildings recover their higher construction costs within five years through savings in energy and water costs compared to their non-green counterparts – with the number rising to 90% when health and productivity benefits are added – according to a report by Good Energies, the clean-tech investment house. The report, based on financial and technical analysis of 150 buildings in the US and ten other countries, is titled: Greening Buildings and Communities: Costs and Benefits study. The report said green buildings cost roughly 2% more to build than conventional non-green buildings, but reduced energy use by an average of 33%, resulting in significant cost savings. Link to report
Food prices could rise next year, prompting a revival of protectionism from food-growing nations and risking a renewed bout of rioting, according to a research note published last week by Jochen Hitzfled, an analyst at UniCredit in Munich, reports Bloomberg. Hitzfeld said: “Agricultural commodities will outperform the broad commodity indices in 2009. If key crop-producing countries then impose export bans again and speculators drive up prices via physical stockpiling and futures contracts, new food unrest is even conceivable in the second half of 2009.”
China’s efforts to improve the sustainability of its financial sector could provide regulators in other parts of the world with fresh ideas for how to approach the global financial crisis, according to BankTrack, the international NGO network that monitors commercial and investment banks. The report, “The Green Evolution: Environmental Policies and Practice in China’s Banking Sector,”welcomes China’s ‘Green Credit Policy,’ which has led to the inclusion of 38 firms on a “credit blacklist” due to environmental violations, and has resulted in at least RMB 2 billion (Euro 235 million) in loans being denied or recalled. It also details China’s new “Green IPO” policy, which requires companies in polluting or energy-intensive industries to disclose environmental information and face a public comment period before stock is sold to the public. It said 20 out of 38 companies reviewed had their IPOs rejected or subjected to further assessment by the Environment Ministry since the policy began in February 2008. However, the report said Chinese banks still lag behind international best practice for environmental credit risk management systems, public reporting, and stakeholder engagement.” The report can be found at: Link to report site
The Guardians of the New Zealand Superannuation Fund have released an annual report card showing how the fund is incorporating the six principles of the United Nations Principles for Responsible Investment. The fund also announced an increase in resources for responsible investment with the hire of an additional specialist analyst. The Guardians’ head of responsible investment, Anne-Maree O’Connor, said: “It is encouraging that we are generally doing well across all of the principles and against our global and regional peer group. The annual review shows we are one of the top performing funds in the region and in the upper half or quartile globally across the majority of principles. Looking ahead, given that we employ specialist investment managers to carry out our investment strategies, we are assessing how we can better incorporate responsible investment
issues into their decision making. This is a challenge for most funds of our size and diversification.”
The Dow Jones Sustainability World Index – co-published by SAM, the Swiss sustainability investment group specialist, has been selected as benchmark for the first exchange-traded sustainability futures worldwide. The new products are listed on the Chicago Climate Futures Exchange.
F&C, the UK fund manager, has thrown its support behind calls by the UK Law Commission for new anti-corruption legislation in Britain. The fund manager said an anti-bribery working group of the OECD had sharply criticised the current positioning of the UK’s anti-corruption legislation in a report released last month. Karina Litvack, head of governance & sustainable investment at F&C, said: “The current legal regime is no good for companies trying to adopt a consistent and credible anti-corruption stance, because it makes room for companies to bend the rules and get away with it – and therefore does not reward good behaviour. But it is even worse for investors, who benefit from the efficient investment decisions that come from open and fair competition. We are hopeful the Commission’s recommendations will deliver the consistent enforcement we need to achieve this.”
KLD Indexes in the US has added companies including Google, Q-Cells, Linde, General Mills and Hess today to its Global Sustainability Index, following a constituent review of the benchmark, which includes a broadbase of strong environmental, social and governance (ESG) performers across all sectors in North America, Europe and the Asia-Pacific region.
Ceres, the US investor coalition has joined forces with five of the biggest US corporations, Levi Strauss, Nike, Starbucks, Sun Microsystems and The Timberland Company, to launch a new coalition – Business for Innovative Climate and Energy Policy (BICEP) – calling for strong climate and energy legislation in early 2009 to spur the clean energy economy and reduce global warming pollution. The group’s key principles include stimulating renewable energy, promoting energy efficiency and green jobs, requiring 100% auction of carbon allowances, and limiting new coal-fired power plants to those that capture and store carbon emissions.
Link to site
A minority of Swiss companies has put in place convincing climate change strategies or set concrete carbon reduction targets, although awareness of the issue is rising, according to the Swiss Carbon Disclosure Project survey for 2008 carried out by Pictet and Ethos. The survey of the fifty largest Swiss listed companies, with a 70 per cent response rate, revealed that 23 have a concrete plan to reduce greenhouse gas emissions, but only four have set absolute targets. The survey said many smaller companies were not able to provide the information requested, as they do not have the structures and processes in place to incorporate climate change into their business strategy.

The European Corporate Governance Service (ECGS) has raised a number of concerns ahead of the December 2 annual general meeting of Fortis, the Belgo-Dutch bank that was recently rescued with an €11.2bn bailout by the governments of the Netherlands, Belgium and Luxembourg. The ECGS said it had recommended to client shareholders to oppose the election of Etienne Davignon as chair of the board of directors due to the fact that the candidate is intrinsically linked with the Fortis business strategy, as well as his age – which exceeds Fortis’ governance retirement limit of 70 (Davignon retired from Fortis in 2004), and the fact he holds no Fortis shares. ECGS said it would prefer a fully independent chair who was not implicated in recent events.
The remuneration of CEOs at the top 120 French listed companies increased by 3.4% in 2007, according to research by Proxinvest, the French proxy voting agency. CAC40 CEOs received on average total a of €4.7m, the equivalent of 275 times the French minimum wage (SMIC). Proxinvest said remuneration disclosure at French firms was improving but that 7% of the listed companies still produce no information at all on directors’ pension benefits and a majority of companies did not disclose their individual cost.S&P 500 index companies spent an average of more than $2m on board compensation during the last year – up by 11% from 2007 levels, with a median total compensation for individual directors of just under $200,000 – a rise of 12%, according to a preliminary annual survey by US corporate governance group, The Corporate Library
The number of directorships held by women on UK FTSE 100 corporate boards has risen by just 5% in the ten years since the first Female FTSE Report by the Cranfield School of Management. The 2008 report said the total number of female directorships in 2008 was 131 (12%) against 79 (7%) ten years ago.
The Economist Intelligence Unit has released a new report titled: “Corporate Citizenship: profiting from a sustainable business” which looks at the business case for sustainability practice: Link to report