RI round-up July 4

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

Some of Europe’s largest pension fund managers including, APG in the Netherlands ATP in Denmark and USS in the UK are reportedly considering their investments in mining company Anglo American because of its presence in Zimbabwe. APG, the fund management arm of the €217bn ABP scheme, told Thomson IM News: “We are in discussion with Anglo American about a range of sustainability and corporate responsibility issues, including its investment in Zimbabwe.” Both ATP and USS reportedly said they were in discussion with the company. A report by Innovest, the ESG research house, said the controversial re-election of Robert Mugabe as president of Zimbabwe has pushed the nation into a deeper political and civil crisis that is likely to impact on mining companies operating in the country. It said companies including Rio Tinto, Anglo American and Aquarius Platinum held significant assets in the country and were likely to attract reputational risks from negative publicity but also could lose their investments in the country because of the political instability. Rio Tinto told Innovest that the company had been in the country for over 50 years and owed a duty of responsibility to its 250 employees and the local community.
Liverpool city council is planning to give a vote to tens of thousands of council workers over whether their pensions funds should be invested ethically. The employees are members of the £4.2bn (€5.8bn) Merseyside pension fund, whose trustee board recently voted against a resolution to halt investments incompanies involved in the arms trade. UK pension funds, notably in the public sector, are coming up increasing pressure from members to be open about the companies they invest in.
The Australian Capital Territory (ACT) government based in Canberra, has become one of the first governmental authorities in the world to sign up to United Nations Principles for Responsible Investment (UN PRI). The territory’s Aus$1.4bn investment portfolio, which includes territory cash reserves and pension commitments, came in for heavy criticism last year when newspapers revealed that its portfolio included tobacco firms, weapons manufacturers and poker machine companies.
The UN PRI says it is prepared to expel fund managers that do not take concrete steps to integrate its six principles for the integration of environmental, social and governance issues into investment.
Donald MacDonald, chairman of the PRI, told IPE.com the PRI does not want to be a ‘brand image’ to signatories who are not serious, and is preparing to expel a small number of fund managers who failed to respond to a survey evaluating their environmental, social and governance (ESG) credentials for the second year in a row. MacDonald said that in future all signatories will need to comply with the reporting and assessment framework within their second year of membership. He said the issue has come up for a “very small number of fund managers”.

The European Commission has set up a project with European business groups to identify best international practices on responsible corporate supply chain management at the international level. The project was announced by Vladimir Spidla, European Commissioner for Employment, Social Affairs and Equal Opportunities at a meeting with business leaders from member companies of CSR Europe and the Business Social Compliance Initiative.
Most Canadian mutual funds use their proxy votes in nearly unwavering support of director nominees and vote against the vast majority of shareholder resolutions, according to a report by Canada’s Shareholder Association for Research and Education (SHARE), in association with FundVotes.com. SHARE said the findings raised serious questions about ‘auto-pilot’ proxy voting and whether mutual funds are actively considering investors’ interests when they vote proxies. The report assessed the 2006 and 2007 legally required proxy voting records of 175 funds from 21 Canadian mutual fund families. The report found that a small group of fund companies took a more critical stance on board elections. The five were The Ethical Funds Company, Inhance Investment Management, McLean Budden, Meritas Mutual Funds and Phillips Hager & North. By contrast, the report said, Fidelity Investments Canada’s 2006 and 2007 voting reports indicated that the company’s funds did not support a single Canadian shareholder proposal.
Ceres, the US environmental investor coalition that includes pension giants CalPERS and CalSTRS has renewed appeals to the SEC to require companies tofully disclose financial risks and opportunities from climate change. Anne Stausboll, acting CIO of the $245.4 bn CalPERS fund said: “CalPERS is supporting other efforts to improve climate risk disclosure, including state legislation in California and a National Association of Insurance Commissioners proposal to improve climate-related disclosure. But SEC guidance for all publicly traded companies is needed to protect investors.”
Amnesty International, Genocide Intervention Network (GIN) and Investors Against Genocide, have called for investors to boycott India’s Oil and Natural Gas Corp (ONGC) over its operations in Sudan following similar campaigns against Chinese and Malaysian oil firms. ONGC has invested nearly $1bn in Sudanese oilfields and is one of the top three players in the oil sector in that country. The NGOs say that ONGC is blocking efforts by activists and investors to engage the company on its operations in Sudan. The Sudan conflict, which started in 2003, is believed to have killed nearly 300,000 people and displaced at least two million Sudanese from their homes. Amy O’Meara, Amnesty International USA human rights and business director, said: “We are talking to major investors in the US who have holdings in ONGC as well as the other major oil companies operating in Sudan, in the hopes that they will raise these concerns with the company.”
The United Nations Global Compact has removed 630 companies from its list of participants for failure to communicate progress. The Global Compact was launched in 2000 by Kofi Annan, the former UN general secretary. Its ten principles range from upholding union
rights to the abolition of child labour. The Compact has been criticised in the past for not taking action when companies were failing to progress on commitments. Georg Kell, executive director of the Global Compact, said: “While the delisting of companies is regrettable, it is essential that the UNGC initiative stays true to its accountability policy. This helps protect the integrity of the initiative as a whole, while also protecting the engagement of seriously committed companies.”
During the first half of 2008, 701 new companies have joined the UN Global Compact, increasing the total number of business participants to 4619, and the total number of all participants – companies plus non-business stakeholders — to 5982. Global Compact delisted companies link
3i, the UK private equity company, has launched a corporate responsibility website. The site looks at each stage of the investment process from raising funds to realising its investments and examines the issues raised in the recent socio/economic debate on the role of private equity.
The UK Personal Accounts scheme, to be launched in 2012 for workers with no pension cover, is likely to have a separate SRI fund, according to Paul Myners, head of the UK Personal Accounts Delivery Authority. Myners told Thomson Investment Management News: “The personal accounts scheme will be an exemplar in governance and accountability. We will consult [on an SRI fund] and if there is a strong demand as I anticipate there will be for SRI management, then there will probably be an SRI fund.” It is estimated that personalaccounts will bring an extra £4-£5bn ($8-10bn) per annum in new UK pensions savings when launched.
The World Economic Forum’s Partnering Against Corruption Initiative (PACI) has joined with the International Chamber of Commerce, Transparency International and the United Nations Global Compact to launch a publication titled Clean Business Is Good Business – The Business Case Against Corruption. The report aims to demonstrate good practice and compliance tools that can fight against corruption in corporations, governments and public sectors.
Eighty-four per cent of finance professionals believe business has a moral obligation to help address global issues, according to a new report by The Chartered Institute of Management Accountants (CIMA) and the Institute of Business Ethics (IBE). However, only one third of the 1300 CIMA registered member organisations surveyed publicly report on ethical performance and CSR. Only 30% of respondents said they actively collect ethical management information despite the fact that nearly half of those who fail to do so think their organisations would benefit from it.
Investors selecting an SRI global equity portfolio optimised in terms of CO2 emissions would be contributing to 40% lower CO2 levels than that of a conventional portfolio indexed to the MSCI World, according to a report by Pictet Asset Management and Centre Info, the Swiss sustainable research company. The report said the same portfolio could also have achieved a positive social impact in terms of job creation for 2007 of +4.2%, or half as much again as benchmark
job growth of +2.7%. Pictet said the starting point for the report, titled: “The SRI performance paradox – How to gauge and measure the extra-financial performance of Socially Responsible Investment.” was the issue that SRI investors, while having enhanced social or environmental returns in mind, widely accepted reporting in terms of financial returns alone. It said investors should also look at the ‘extra-financial performance’ of reduced CO2 emissions and the social impact in terms of job creation.RiskMetrics Group, the risk management and corporate governance group, has launched Governance Exchange, an online forum for board members, corporate executives and institutional investors to discuss corporate governance issues.
The aviation sector is to be included in Europe’s emissions trading scheme (ETS) from January 2012. It is estimated that the EU agreement could leave the airline sector needing to buy 80 million EU allowances in the first year.