Weekly News Round-Up: March 17th, 2017

Opportunities for Action

Launching the Investment for Impact Research Prize l University of California Berkeley Haas School of Business

  • The Center for Responsible Business at UC Berkeley Haas School of Business has just launched a $5,000 research prize for work on the role of impact investment aimed at improving society or the environment. The deadline for submitting papers is 11:59 PM Pacific time on April 3, 2017.  A distinguished panel of judges will select the winning paper in late June 2017 and publicly award the prize in September. The competition is open to studies from all disciplines tied to business, economics, law, public policy, or other social sciences. Unpublished working papers suitable for publication in peer-reviewed journals are eligible, as well as papers published in peer-reviewed journals in or after 2016.
  • The Put A Price On It campaign is seeking endorsements from college and university presidents in support of carbon pricing, as an effective and pragmatic solution to climate change. The campaign, led by the non-profit Our Climate and the National Geographic series Years of Living Dangerously, works with student leaders across the country to build support for carbon pricing, and elevates the importance of the policy through film, celebrity endorsements, and social media. The president endorsement letter can be found online here, and questions can be directed to Page Atcheson at page@ourclimate.us
 
 
Upcoming Events
 
Superbugs & Super Risks: The Investment Case for Action l Farm Animal Investment Risk & Return (FAIRR) Initiative, March 20th, 2017, 3:30 - 6:00 p.m. EST, New York, NY
  • The FAIRR Initiative is pleased to invite members of the IEN community to join them for an event on antibiotic resistance and investment risk in New York City on Monday March 20th 2017, kindly hosted by BlackRock. The event will be a forum for investors to learn more about the material risks associated with this issue, to explore strategies to identify and manage these risks, and to share investor and company perspectives on opportunities and challenges in addressing resistance. RSVP by emailing events@fairr.org
Smart and Sustainable Campuses Conference 2017 l University of Maryland, March 26-28, 2017, College Park, MD
  • IEN members will be presenting a panel session on "Higher Ed Endowments & The Paris Climate Agreement" 
Impact Investing Forum 2017 l Opal Group, April 23, 2017 - April 25, 2017, Boca Raton, FL
  • The Impact Investing Forum will look at many of the asset classes that encompass this space. Themes of defining impact investing, portfolio construction, asset class opportunities, and the role of the investor will be covered at this event. This conference will exclusively feature dialogue driven panel discussions led by consultants and family offices.
The Impact Capitalism Summit l Big Path Capital, April 25-26, 2017, Chicago, IL
  • The Impact Capitalism Summit is the Largest Convening of Impact Investors Globally. This year at the Impact Capitalism Summit in Chicago we will explore the progress of leading impact investment portfolios, discover the latest innovations across sectors, themes and asset classes, and identify the steps needed to harness the power of capital markets to build a sustainable, fair and just economy where opportunity and prosperity are shared by all.

Ceres Conference 2017: Sustainability is the Bottom Line, Inspiring Action l Ceres, April 26-27. 2017, San Francisco, CA

  • Across the globe, leading investors and corporations are accelerating innovative sustainable solutions that are building long-term value, while protecting the health of our planet and the economy. The Ceres Conference will bring together leaders who are catalyzing the biggest breakthroughs on sustainability issues and recognize that, regardless of political headwinds, sustainability is the bottom line.
New Reports
 
  • For anyone with an interest in real estate or sustainability, this report will give insights about how the asset class has performed and is expected to perform in an era of uncertainty about climate change policy
 
 
Sustainable / ESG Investment
 
Bloomberg Brief l Sustainable Finance
  • This week's Bloomberg Brief highlights how getting BlackRock to commit to a stronger position on climate change ironically took the threat of a public vote on the issue at its own shareholder meeting; Calpers will back more proxy solicitations on climate risk; Northern Trust sees demand for ESG REITs; Prudential Financial Vice Chairman Mark Grier on the firm's plan for $1 billion in impact investments; Companies are focused more on measuring social effort than effect, an NYU study shows.
European Parliament Passes ESG-Boosted Shareholder Rights Directive (Subscription) l Responsible Investor
  • The plenary session of the European Parliament has today passed legislation to amend the EU Shareholder Rights Directive with an ESG-driven focus, after the so-called ‘trialogue’ agreement reached in December 2016 between the EU law-making institutions. The resolution passed by 646 votes to 39, with 13 abstentions. The final compromise text between the EP, the European Commission and the Council of the European Union aims at promoting long-term shareholder engagement and touches on core corporate governance and stewardship issues.
Inside the Big Business of Investing in Supply Chains l Green Biz
  • This article, which is an excerpt from the State of Green Business 2017 report, examines the financial and societal opportunities of embedding sustainable practices into supply chain management. Published by GreenBiz in partnership with Trucost, the full report provides a global view of the year's trends in sustainable business. 
Why and How Investors Use ESG Information: Evidence from a Global Survey l Harvard Business School
  • Survey data from more than 400 senior investment professionals provides insights into why and how investors use ESG information as well as the challenges in using this information. This study also documents what investors believe will be important ESG styles in the future.
  • Some of Europe's biggest asset managers have been called out by a pressure group for failing to be clear about fees, and being uncommunicative on responsible investment issues, such as the way they vote at company AGMs. The UK lobby group ShareAction conducted research on 40 managers overseeing €21 trillion ($22.3 trillion) between them, ranking them out of 90 on responsible investment criteria.
  • A recent report just out finds striking variation in both the performance and the transparency of the largest asset managers operating in Europe. Research conducted by ShareAction, a non-profit group in the U.K. that campaigns for responsible investment, ranks the 40 mega-managers who, between them, invest over €21 trillion ($22.4 trillion) on behalf of pension schemes, charities, universities, and individuals across the world. All of them bar one - - Santander Asset Management - are signatories to the PRI. 
Five ESG Stocks Poised For Big Turnarounds l Forbes
  • This article lists five companies that score well on ESG practices and also have strong elements of a turnaround in their financial performance. Many of these are higher-quality companies already, and so their valuations tend not to be overly discounted but still offer attractive upside potential.
Investing in ‘Sustainable Democracy’ l Barron's
  • The Supreme Court’s 2010 Citizens United decision opened the floodgates to corporate political contributions. For that reason, socially responsible investors should favor companies that provide political spending transparency, have policies governing how they donate and have strong board oversight of managements’ campaign contributions. To learn how companies rate in terms of “sustainable democracy,” go to the Center for Political Accountability (CPA) website. CPA examines the websites of S&P 500 companies to gauge whether they have 24 qualities pertaining to campaign contributions. 
UK: Sustainable Investment And ESG Compliance ─ Emerging Litigation l MONDAQ
  • There is an increasing desire amongst PE firms to publicise value creation through the use of bespoke metrics to measure improvements and value derived from ESG policies including improved reputational risk management; better and more transparent governance; better health, environmental and safety standards; heightened efficiency; less disruption as a result of sanctions and protest; etc. here is more to this evolving area than simply general compliance and being a good corporate citizen. Real reputational, legal, political and financial consequences can arise from failing to align business practice with ESG statements and policies.
Five ESG Stocks Poised For Big Turnarounds l Forbes
  • Listed in this article are five companies that score well on ESG practices and also have strong elements of a turnaround in their financial performance. Many of these are higher-quality companies already, and so their valuations tend not to be overly discounted but still offer attractive upside potential.
  • One concern that frequently arises among those new to sustainable investing is performance, specifically whether investors have to sacrifice returns if they invest sustainably. There is no good evidence of any significant performance difference between sustainable and non-sustainable mutual funds, as Morningstar director of sustainability research Jon Hale has noted in a couple of recent studies. Similarly, an article from 2012 surveys the academic literature showing no significant performance penalty for sustainable funds.
ESG/SRI Investing: Can Investors Have Their Cake and Eat it too? l Community Capital Management
  • Despite SRI's growing popularity, some investors have voiced their concern regarding a returns trade-off.  ESG investors and managers, including the 1,500 signatories of the UN Principles for Responsible Investment, will point to numerous studies showing that returns need not be sacrificed when investing in ESG issues. However, it appears that some still need convincing.  This past month, the California Public employees’ Retirement System (CalPERS) announced a request for asset managers to show historical performances of ESG investing in order to prove outperformance of cap-weighted benchmarks or benchmark.
RI Interview: Rhode Island’s Seth Magaziner on Long-Term Investing, Trump and Proxy Voting (Subscription) l Responsible Investor
  • Seth Magaziner was elected General Treasurer of the state of Rhode Island, in charge of, among other things, its $7.5bn public pension fund in January 2015. In this interview, Magaziner talks about what it was like to move from Trillium Asset Management to become Treasurer for Rhode Island, proxy voting, and Rhode Island's fund performance.

Shareholder Engagement
 
  • BlackRock Inc, which wields outsized clout as the world's largest asset manager, planned on Monday to put new pressure on companies to explain themselves on issues including how climate change could affect their business as well as boardroom diversity. The move could bolster efforts like climate-risk disclosure practices developed by the Financial Stability Board, the international body that monitors and makes recommendations about the global financial system. BlackRock's top "engagement priorities" for meetings this year with corporate leaders include climate risk and boardroom diversity.
  • A shareholder resolution calling on Royal Dutch Shell to set greenhouse gas (GHG) emission reduction targets, promoted by the NGO Follow This, has seen growing support from leading investors. According to one investor, “Last year the resolution was a bit prescriptive and too much focused on renewables. There are other ways in which Shell can align with the Paris Agreement outcomes. It’s not up to investors to decide it. This year however, we appreciate that Follow This have consulted us about the initiative and feel comfortable about it because the text aligns with our goals.”
  • A coalition of institutional investors, including many Catholic religious orders and the CoE Church Commissioners, who have four trillion dollars under management, led by New York State Comptroller Thomas P DiNapoli, as trustee of the New York State Common Retirement Fund (CRF), and the Church Commissioners for England, have again asked ExxonMobil to disclose how it will ensure its business will remain resilient as global efforts to mitigate climate change proceed. The CRF and the Church Commissioners filed a similar proposal for consideration at Exxon's 2016 annual meeting. Despite Exxon's unsuccessful attempt to exclude the proposal from a vote at the meeting, it received support from 38.2% of voting shareholders, a record for a climate change resolution at the company.
 
 
Impact Investing
 
  • Sustainable investing - a common catchall term for socially responsible, ESG, and impact investing - has become sufficiently mainstream so it isn't a great idea for an investment advisor to say, "We don't do that," said Jon Hale, head of sustainability research for Morningstar Investment Management. "Conversely, advisors who make it a specialty will be gaining a valuable differentiator." To help advisors learn about what can appear to be a daunting topic, Hale presented four keys for sustainable investing success at IMCA's 2017 Investment Advisor Forum.
Impact Investing Growing Among Alternative Managers l Private Wealth
  • Impact investing is growing in importance among the alternative investing community, according to a new survey by the Chartered Alternative Investment Analyst (CAIA) Association.The CAIA survey showcases the tailwinds driving impact investing’s growth: 77% of respondents to the survey agree that responsible investing is more important than it was three years ago, while 78% anticipate it will be more important three years from now
Green Bonds
  • Crédit Agricole CIB is pleased to announce the completion of Premium Green 2017-2, a $3 billion synthetic risk transfer related to the bank's portfolio of project finance and object finance loans. This transaction is a first-of-its-kind Green Capital Note, blending best practices from capital management with the objectives of socially responsible investing. Mariner Investment Group, through its IIFC platform, has purchased notes corresponding to the $3 billion Structured Finance portfolio through two of its managed funds, bringing Mariner's overall transaction volume to more than $8.2 billion in synthetic securitization risk transfer.
Corporate Governance
 
Board of Directors Compensation: Past, Present and Future l Harvard Law School Forum on Corporate Governance and Financial Regulation
  • There has been a massive shift in how outside Board Directors have been paid over the past 20 years. This has largely been fueled by changes in corporate governance practices over time. Overall, the shift has been away from paying Directors like executives and towards paying outside experts for their time and contributions during their term of service.
Fiduciary Duty
 
Why Investors Have Fiduciary Duty for the Environment l GreenBiz
  • The sustainable investing tide will rise ever higher in 2017 as more investors incorporate sustainability criteria into equity shareholder issues and consider sustainability criteria as part of corporate lending and credit risk. The net effect for corporations? Greater scrutiny and use of environmental disclosure data, as investors aim to uncover quantifiable links among environmental performance, risk and company value. Businesses and investors are increasingly aware of climate-related risks, whether it is the physical impacts (water scarcity or rising sea level) or policy risks if a carbon- or water-intensive asset becomes subject to policies or regulations that would make the asset less valuable, or "stranded."
Climate Risk, Science & Regulation
  • California pension giants CalPERS and CalSTRS and their New York peers are among 1,000 investors and corporates that have today taken full-page ads in US newspapers including the Washington Post urging President Trump to support low-carbon policies and stay in the Paris climate accord. Signatories include not only the California Public Employees’ Retirement System, the California State Teachers Retirement System and the New York City Comptroller’s Office and the New York State Common Retirement Fund but also investors such as Wespath Benefits and Investments and many others too numerous to mention.
  • The World Health Organisation (WHO) recently launched a campaign dubbed ‘BreatheLife’ to make people more aware about the fact that air pollution – which it calls the invisible killer – is a major health and climate risk. WHO says more than 80% of people living in urban areas that monitor air pollution are exposed to air quality levels that exceed the normal limits. They note that while all regions of the world are affected, populations in low-income cities are the most impacted.
A Makeover for the World's Most Hated Crop l Nature
  • Oil palm has a reputation as an environmental menace. Can the latest genetic research change that? Orion Biosains technicians are testing plant shoots to send growers a report on the quality of their young plants. If adopted on a large scale, the test could raise industry revenue by about US$4 billion per year. And, importantly, it could do so without expanding plantations. “We can get more oil for an equivalent area of land — this could help take the pressure off deforestation."
  • EPA Administrator Scott Pruitt said on CNBC “I think that measuring with precision human activity on the climate is something very challenging to do, and there’s tremendous disagreement about the degree of impact, so no, I would not agree that it’s a primary contributor to the global warming that we see.” This is consistent with Pruitt’s previous public statements and writings on climate change. Mr. Pruitt has a lot of science homework to do if he is to make good on his oath and bring his science grade up to a passing level.
Shell Oilsands Divestment Shows Carbon Tax Will be Opposition Cudgel for Years to Come l Edmonton Sun
  • News broke this week that Shell was selling almost all of its oilsands assets in Alberta province. With Canadian Natural Resources Ltd. buying most of Shell's assets, one thing it does mean is that Canadian firms now dominate the oilsands. It's worth examining why Shell left, just as much as it's worth asking why CNRL chose to make such a big investment in the oilsands, said Andrew Leach, a professor of economics at the University of Alberta, and one of the architects of the province's Climate Leadership Plan, which included a carbon tax. "CNRL certainly sees enough value to, for all intents and purposes, bet their company on this transaction," he said.
General Higher Education Endowments News
 
  • In a white paper published this month by the TIAA Institute, it is argued that grouping endowments by size makes for poor benchmarks of endowment performance. According to the report, the practice disregards key differences in goals and objectives among similarly sized endowments -- and can even result in worse performance outcomes.
University of Michigan Endowment Banks on Funds That Make Loans l Bloomberg
  • The University of Michigan is betting its endowment can make money on loans to small businesses from Barcelona to Beijing. The endowment, valued at $10.5 billion as of Dec. 31, has added more managers who specialize in lending -- through private credit, distressed and other forms of debt -- according to annual reports and other public documents. The strategy accounted for about 30 percent of new managers the endowment invested with in the year through June 30. The board of regents approved commitments of about $400 million to these managers.
  • The $10.5 billion University of Michigan endowment is making a big bet on small business lenders worldwide. In an expanded strategy to access the global private lending market, the endowment has added new managers who would account for 30% of all the endowment’s managers specializing in private credit, distressed and other forms of debt. In total, the new managers would receive $400 million. The endowment did not release how many new managers were hired or their names.
Dartmouth Taps Wealth Manager Ruth to Run $4.5 Billion Endowment l Bloomberg
  • Dartmouth College hired wealth manager Alice Ruth as chief investment officer overseeing the Ivy League school’s $4.5 billion endowment. Ruth, 55, an alum who’s a member of Dartmouth’s investment committee, will succeed Pamela Peedin in April, the college said Monday in a statement. Peedin in November announced her plan to step down after six years as head of Dartmouth’s 13-person investment office.
University of California Endowment Doubles Private Equity in New Asset Allocation l Pensions & Investment
  • University of California Board of Regents' investment subcommittee approved on Tuesday changes to the long-term target asset allocation of its $10.3 billion endowment, which included a significant increase to private equity and reduction to public equity.
Berkeley Investing Chief Steps Down From $1.6 Billion Endowment l Bloomberg Brief
  • The University of California Berkeley started a search for a chief investment officer to oversee its $1.6 billion endowment after John-Austin Saviano announced his departure. Saviano, who was hired in 2009 when Berkeley established a management company to oversee investments for its foundation, will step down in the coming weeks, Jose Rodriguez, a spokesman for the school, said this week.
 
Fossil Fuel Divestment on Campuses
 
  • Building on Columbia’s longstanding commitment to addressing climate change, the University’s Trustees have voted to support a recommendation from the Advisory Committee on Socially Responsible Investing (ACSRI) to divest from companies deriving more than 35% of their revenue from thermal coal production and to participate in the Carbon Disclosure Project’s Climate Change Program.
  • As a part of the February 2017 meeting, the Mount Holyoke Board of Trustees spent some time discussing the College’s endowment performance, including the question of divestment of fossil fuel funds from portfolio of holdings. The College’s investment advisors, Cambridge Associates, provided a presentation and updated the Board on the status of the investments, as well as their ongoing evaluation of all current and potential portfolio managers regarding how they are incorporating environmental sustainability in their investment decisions. While the Board took no vote on divestment, they plan to determine  position this academic year and will share our decision widely with the College community.
  • The UC has been divesting and will continue to divest from Energy Transfer Partners and Sunoco Logistics, two companies involved in the construction of the Dakota Access Pipeline, according to CIO Jagdeep Bachher. Bachher, however, noted that the decision was purely economic. He stated that the “headline risks, social risks, and environmental risks” of these investments would erode the financial returns. “We do not divest in our office,” Bachher said during the meeting. “The world is complicated and you have to incorporate thinking about sustainable investing as part of your investment decision making, not as some isolated, headline-grabbing event.”
  • Efforts are afoot to put divestment motions on the floor at teachers union meetings as OTPP continues to pour a hefty $24.8 billion of its $170 billion in total retirement holdings into oil, coal and natural gas projects.
University of Winnipeg Students Push School to go Fossil-Fuel Free l Winnipeg Free Press
  • Divest UWinnipeg is advocating for the University of Winnipeg to divest from fossil fuels. To date the university administration had offered to investigate the idea and present its finding to the board of regents at the school, which has the ability to direct the school’s endowment fund to divest.
Sarasin to Re-Tender for Climate Mandate as Bristol University Divests Fossil Fuels (Subscription) l Responsible Investor
  • Long-term incumbent fund manager Sarasin & Partners says it plans to re-tender for a climate change-aware mandate at Bristol University as the academic institution seeks to divest from fossil fuels. Bristol University in western England became the latest to join the fossil fuel divestment campaign which has seen a reported 43 UK universities, representing £10.7bn in assets, divest.
Divest Concordia Stopped From Mobilizing l The Concordian
  • Student members of Concordia University's divestment movement protested outside the Board of Governors (BOG) meeting last week as a means to push the BOG to put fossil fuel divestment on their agenda. However, Divest members were met with Concordia security, who blocked access to the entrance of the fourth floor of the GM building.
  • National University of Ireland Galway has officially committed to divest from fossil fuel shares by the end of 2017. The Climate Change, Agriculture and Food Security Society had submitted a petition of over 1,000 signatures, and a report highlighting the case for divestment of the €3.4 million worth of shares that NUI Galway has invested in companies such as Gazprom and Statoil in late November. This report was welcomed by University President Dr James Browne, who highlighted divestment of fossil fuel shares is in line with the values held by NUI Galway with regards to sustainability.
 
Divestment in Other Sectors
 
  • Norwegian mutual insurer and pension fund manager KLP has excluded four companies involved in the Dakota Access Pipeline (DAPL) joint venture: Energy Transfer Partners (ETP), Phillips 66, Enbridge Inc. and Marathon Petroleum Corporation. This decision came after a recent statement by the UN Special Rapporteur on the rights of indigenous peoples that the approval of the DAPL was granted “without an adequate social, cultural or environmental assessment” and in “the absence of meaningful consultation or participation by the tribes”. KLP has published a fourteen-page document explaining the rationale for excluding the companies. It said it has engaged the companies and that they haven’t announced any intention to halt the construction in response to the UN Special Rapporteur’s statement.
  • At last night's city council meeting, Berkeley officials voted unanimously to divest of any company that involves itself with President Trump's border wall. This includes not just contractors who construct the proposed divider, but any company that designs, finances, or works in any way on the project. Berkeley is the first city in the country to pass such a law.
San Francisco Moves To Divest $1.2B From Companies Financing Dakota Access Pipeline l CDB San Francisco Bay Area
  • The San Francisco Board of Supervisors unanimously voted Tuesday in support of efforts to divest from banks financing the Dakota Access Pipeline. The board approved a resolution introduced by Supervisor Sandra Lee Fewer urging City Treasurer Jose Cisneros to add the Dakota Access Pipeline to the list of screening factors he considers when making city investment decisions.
Investment Manager News
 
  • Morgan Stanley Wealth Management today announced the launch of two sustainable investing model portfolios with reduced account minimums of $10,000 on its Investing with Impact platform. These new portfolios – Investing with Impact Access Balanced and Investing with Impact Access Equity – will provide investors with diversified goal-specific solutions to help align financial goals with personal values.
  • Early-stage investing in emerging markets is hard. A commitment to serve low-income customers makes it even more challenging. Scaling that up around the world? Next to impossible. In this article, Capria Network discusses why they think they've cracked the code. With its latest $2 million in investments in early-stage impact funds in west Africa, South Africa, Colombia and Brazil, the Seattle investment firm now has stakes in nine emerging market fund managers investing in businesses providing low and lower-middle income customers in emerging markets with life- and environment-enhancing products and services.