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RI round-up: Dec 17

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

KLP, the Norwegian insurance company, has blacklisted four new companies from its investment portfolio for breaches of its ethical guidelines. The companies are China Mengniu, Rio Tinto, Textron and AES. China Mengniu has been banned after poisoning baby milk powder with melamine. Rio Tinto is banned because of environmental damage in Indonesia due to the discharge of mine tailings into a natural estuary. AES operates the hydro-electric dam, Chan 75, in Panama, which, according to UN reports, is associated with violations of the indigenous population’s, Ngöbe’s, human rights. Textron has been banned because of the production of cluster bombs banned by a recent international convention signed in Norway. KLP said it had reinstated French services company Sodexo after the company agreed to overhaul its human rights policy following incidents at Harmondsworth Immigration Removal Center near Heathrow Airport in the UK, which is managed by Sodexo subsidiary Kalyx. BHP Billiton has also been included again in KLP’s portfolio.
The €34bn ($54bn) French pensions reserve fund (FRR) has hired EIRIS, the UK research company, to help it examine whether companies in its investment portfolios respect international accepted environmental, social and governance (ESG) standards. The fund will use EIRIS’ Convention Watch service to scrutinise its global portfolio of large and mid cap companies. EIRIS, which recently opened an office in Paris, will support the FRR’s new responsible investment committee avoid investment in companies that do not respect the UN Global Compact or the conventions of the International Labour Organisation. The fund is also looking to use EIRIS for a future strategy of corporate engagement.
One in five Dutch pension funds and pension insurers have yet to make any effort to develop a socially responsible investment (SRI) policy, according to the Dutch Association of Investors in Sustainable Development (VBDO). The report said it thought pension funds needed to do more to outline their investment policy to participants and other interested parties, whilefunds also should do more to facilitate a more consequent and thorough dialogue with the companies in which they invest. VBDO surveyed 18 industry-wide pension funds, two occupational pension funds, 16 corporate pension funds, and seven pension insurers, nine of which stated not to have any SRI policy in place nor were they planning on implementing any such policy. A number of small pension funds said it was difficult to implement an SRI policy, saying it was difficult to find asset managers who could implement an SRI policy without additional costs.
France’s Société Générale has cut forecasts for prices of carbon permits traded under the EU’s Emissions Trading Scheme to an average €17 euros per tonne, for 2009. The French bank said an EU recession could depress carbon permit prices for years. Benchmark European carbon allowances EUAs have been trading at about €15 per tonne in recent weeks, half of their two-year high hit in July.
Scotia Securities, the US mutual fund group, has hired London-based F&C Management Limited as portfolio advisor for its Scotia Global Climate Change Fund.
Fatih Birol, chief economist of the Paris-based International Energy Agency, has predicted that global oil production will plateau by 2020. In an interview with George Monbiot for the Guardian newspaper, Birol said: “In terms of the global picture, assuming that OPEC will invest in a timely manner, global conventional oil can still continue, but we still expect that it will come around 2020 to a plateau as well, which is of course not good news from a global oil supply point of view.” In a report, published last month, the IEA said it projected a rate of decline of 6.7% for oil production over the last year based on a study of the world’s 800 largest oil fields.Link to report
The era of abundant and cheap oil is over, according to a study by Dexia Asset Management. In addition to geological conditions, this is increasingly due to environmental, social, and governance challenges, according to the report: Link to website

A total of $5 trillion has been wiped off the value of private pension funds in OECD countries since the beginning of the year, according to an OECD report. Of the 28 major economies covered in the study, Ireland has been worst hit with the value of retirement savings dropping by more than 30% on average.
The International Corporate Governance Network (ICGN) has called on governments to include strengthened corporate governance as part of measures aimed at restoring confidence to markets. It said a key element of the governance package should be steps to secure fair and transparent markets in which large speculative positions cannot be built up in obscurity. ICGN members are largely institutional investors who collectively represent funds under management in excess of US$15 trillion.
The development of a successful global carbon trading market requires improved market infrastructure, according to a report by The Bank of New York Mellon. The report, in conjunction with Point Carbon, said carbon markets needed to become globally standardised, liquid, transparent and predictable. It said that linking existing and planned programs to create a framework for efficient global trading would allow the global carbon market to grow from $63 billion (year-end 2007) to $3 trillion by 2020. Link to report
The Australian government has endorsed a carbon emissions reduction target of 5%-15% by 2020, following the introduction of a carbon trading scheme in 2010.
EU member states have agreed to target a fifth of Europe’s energy mix to come from renewable sources within 12 years as part of its efforts to slash greenhousegas emissions by 20% by 2020.
PepsiCo and Bertelsmann were among 120 companies and 33 non-business stakeholders that joined the Global Compact during November, while 22 companies were delisted for failing to communicate on progress. The Compact now has 4,869 business participants and 1,544 non-business participants. The number of delisted companies has reached 783.
People affected by worsening storms, heatwaves and floods could soon be able to sue the oil and power companies they blame for global warming, a leading climate expert has reportedly told the Guardian newspaper. Myles Allen, a physicist at Oxford University, said increasing scientific evidence of man-made climate change in extreme weather events could see individuals go to courts over insurance claims and damage losses.
Companies based in China, India and Russia are perceived to routinely engage in bribery when doing business abroad, according to Transparency International’s 2008 Bribe Payers Index (BPI). Companies from Belgium and Canada were recorded as being least likely to bribe abroad, followed by The Netherlands and Switzerland. Companies from Russia ranked last just behind China, Mexico and India (6.8). Public works contracts and construction, oil and gas, mining and real estate and property development were seen as the sectors whose companies were most likely to use legal or illegal payments. http://www.transparency.org/
ASSET4 has launched assetmasterExecutive a product for corporations to monitor their company‘s ESG performance and that of their peers.