Monday, June 29, 2015

WSJ: Green bond sales struggle


A flattening in “green bond” sales this year is highlighting the uncertainty facing the market for the debt, which is billed as financing projects that would mitigate climate change.
Green bonds have been sold all over the world in recent years and have helped pay for energy-efficient buildings, improvements to water and sewer systems and mass transit. As the market has grown, however, so have concerns about whether projects financed by green bonds are truly beneficial for the environment, and whether the companies, municipalities and banks that sell the bonds are using the money as promised.
The Climate Bonds Initiative, a nonprofit group in London that tracks the market, forecast $100 billion in new green bonds in 2015 after sales roughly tripled last year. But green-bond sales are about in line with last year’s pace, with $18.3 billion sold as of Wednesday, compared with $20 billion in the first half of last year, according to the group. About $37 billion of green bonds were sold last year in total.

The sluggish sales come as the broader debt market is booming, with investors snapping up bonds that offer higher yields than the low rates on safe-government debt. Some analysts say heavy demand for regular bonds could be dissuading some issuers from selling green bonds, which typically need additional effort to show a project is environmentally friendly.
Even so, the flat pace of sales in the first part of 2015 from a year ago has disappointed and flummoxed the debt’s supporters. “It’s been a bummer of a first quarter, and a bummer of a first five months really,” said Sean Kidney, the group’s chief executive officer, adding that green-bond sales still could hit $70 billion this year.

Bankers, investors and environmental groups are working to add clarity to the green-bond market. Mr. Kidney’s group is rolling out an advisory service for issuers who want to sell green bonds but are unfamiliar with the market. It is also putting out detailed criteria by sector for its own certification program, which is available for green bonds.
The Banking Environment Initiative, a group of financial institutions at the University of Cambridge Institute for Sustainability Leadership, said this month that it will work with other organizations to “support the emergence of industry-level consensus on standards” for green bonds.
And in March, the International Capital Market Association, a trade group for banks, issuers and asset managers, updated a set of voluntary green-bond guidelines that were initially released last year. The guidelines recommend that an outside party review whether a green bond is appropriate and suggest issuers regularly report on their project’s environmental impact.
The guidelines “focus on transparency and disclosure,” said Marilyn Ceci, head of green bonds at J.P. Morgan Chase & Co. That allows investors to make informed decisions about whether they want to purchase green bonds linked to a specific project.
The guidelines don't explicitly exclude any type of project from being financed with green bonds. Some investors have gone a step further. One investor group, coordinated by the nonprofit Ceres, supports adherence to the guidelines but said any project that helps perpetuate fossil-fuel uses or emissions might be better served with conventional bonds.
“The marketplace asks a lot of questions,” said David Sand, chief investment strategist at Community Capital Management, which manages $2 billion and was part of the Ceres group. “The last thing that anybody, investment banker or issuer, wants to do is come to market with something that doesn’t hold up to scrutiny.”
Mr. Kidney said he expected the green-bond numbers to be boosted this year by new issues from India and China, trends that haven’t significantly materialized so far. U.S. municipalities have stepped up their volume of sales, but he said relatively few U.S. corporations have ventured into the market.
To be sure, there are a few days left this month for deals before the first half of the year concludes, and new issuers have still tapped the market. Earlier in the year, German bank Berlin Hyp AG sold what was billed as the first green covered bond, a type of mortgage-backed security that is common in Europe. In the U.S., Morgan Stanley sold its first green bond, as did the city of Asheville, N.C.
Asheville was looking to sell a $50 million bond tied to water-system upgrades, including replacing asbestos water pipes with iron ones that help limit leaks, when its bankers at Bank of America Merrill Lynch suggested turning the bond green, said Barbara Whitehorn, the city’s chief financial officer.
The city provided a description of the environmental benefits of the upgrades, which were already completed, and plans to update investors on the “environmental sustainability” of its water system, according to a bond prospectus. Ms. Whitehorn said Asheville didn’t get an outside opinion on its green bond because it was “really clear in what the purpose was, that we’re conserving water.” But she said the city would consider it for a larger infrastructure project.
“I’m hoping over time that we’ll get some more clear criteria,” Ms. Whitehorn said. “I think the criteria right now are really amorphous. You can kind of say, ‘Sure, it’s green.’”

Sunday, March 1, 2015

PDAC 2015 Community Engagement: never too early, never too often

Who knew anthropologists were so much fun? Sunday afternoon’s CSR stream began with a session, Respecting human rights during the exploration phase. Two of the three panellists were anthropologists by education and training, although currently working in mining. The session managed to be both interesting and amusing, with many anecdotes that both brought a laugh and taught a lesson.

Alison Colwell of Business for Social Responsibility, (the non anthropologist) began with an overview of the Ruggie Principles, and the Protect, Respect, Remedy framework. Although the Principles are not legally binding Ms. Colwell felt that ‘the court of public opinion’ has led many companies to adopt them.
She identified 6 best practices in the area of respecting human rights,
1)Be respectful; treat people fairly. This is particularly important for the exploration team as they are often the first people on the ground
2)Engage early, engage often
3)Recognize that human rights due diligence must be integrated as early as possible -  in the country risk assessment, in initial MOUs, in stakeholder mapping etc.
4)Train staff and contractors about what is expected of them
5)Encourage and incentivize all staff to flag potential human rights issues
6)Have one person responsible for human rights

Next up was a conversation between Chris Anderson of Rio Tinto and France Bourgouin of BSR.
"Increasingly, weirdos like us are getting hired by mining companies” began Dr. Anderson. “When I was last at PDAC, about 10 years ago, there was maybe 5 minutes on CSR in the whole week.” The idea of thinking about people, about communities, about behaviour, moving beyond strictly technical issues has taken hold in mining companies, many of whom acknowledge the concept of a social license to operate.

Is the exploration stage too early to start thinking about human rights or community engagement? Definitely not.  Dr. Anderson felt that “they (the exploration team) need to understand the lens of human rights because that’s how the project is going to be seen by the rest of the world.”
When asked about the challenge of securing resources for ‘the soft stuff’ at a time when mining companies are struggling, Dr. Anderson quipped “‘My motto is ‘soft is hard'. In today’s world digging the ore out of the ground is the easy stuff. Above ground social issues are the challenge.”

In the 1950’s health and safety issues began to be raised, resulting in the education and training of health and safety professionals. Then in the 1970s, environmental issues were addressed, again creating new academic programmes and professional qualifications. Over the last 10 years, we can see the nascent professionalization of dealing with the social impacts of mining. 

Dr. Anderson stated, “It’s still early days in getting mining companies to recognize human rights.” However, there was agreement that with more interdisciplinary training there would be a broader spectrum of mining professionals who understand that mining is not just about geology, it’s also about people.

The session concluded with a few thoughts on what needs to be done - demystify human rights, integrate human rights due diligence into what you are already doing in exploration, offer more interdisciplinary training to people interested in pursuing a career in mining.


Cluster munitions ban aims to spark human rights discussions in Canada’s investment community

Originally published on RIA Canada website

Critics might say it’s nothing more than a symbolic gesture. But it could have wide-ranging implications for Canada’s investment industry.

Last week, two of Canada’s investment firms announced they were banning companies involved in cluster munitions. The companies involved, NEI Investment and Desjardins, have SRI fund families, which already exclude cluster munitions. But this move goes a step further, banning cluster munitions manufacturers in all of their investment products.

The companies decided to publicize the move, after studying the Canadian government’s Cluster Munitions Act, which contains a provision banning the “aiding and abetting” of the manufacturer of cluster munitions, says Michelle de Cordova, Director of Corporate Engagement & Public Policy at NEI Investments.

“We read this and thought, wow, that’s pretty unusual, it’s not every day that the government appears to be attempting to forbid everybody from investing in something,” she says.

As well, there has been little discussion of the clause in the Canadian investment industry, de Cordova adds. “How many people even know that that this is the will of the Parliament?”

 “We hadn’t seen any discussions, we hadn’t been involved in any discussions on this topic, that’s the point we decided we needed to go live on this and tell as many people as possible that this provision is in the act and that Parliament also thinks it means investment,” she adds.

In addition to drawing attention to the issue, NEI’s cluster munitions policy could be a blueprint for other companies interested in making a similar move, she adds.

The next step for NEI is writing to all cluster munitions manufacturers around the world, explaining to them that they have been excluded from Northwest funds, NEI’s mainstream fund family, and explaining why, at the same time encouraging them to get out of that area of manufacturing.

De Cordova admits banning cluster munitions in investments might be a challenge for some Canadian financial firms, particularly those who do not have an in-house ESG team, or any type of RI policy. But the ban could at least get a discussion started, de Cordova hopes.

 “What do you do if you are running index funds, does this apply in that situation? It’s trying to get some clarity on what a Canada-wide prohibition on cluster munitions would actually look like.”
Advisor support
Carol Smith, an advisor with Desjardins Financial Security Investments in Mississauga, Ont., says she strongly supports the cluster munitions ban.

“When I saw commercials with kids with their limbs blown off, I was horrified,” Smith says. “So when I saw that Desjardins and NEI Investments have decided to ban these from their entire investment lineup, I thought that was very admirable.”

 “It’s encouraging that they have taken this stand. I tip my hat to them; I think it is great.”

Human rights agenda

NEI’s de Cordova says the Canadian government’s move to make cluster munitions illegal raises questions about other human rights-related issues.

She points to the United Nations Guiding Principles for Business and Human Rights, which state that there is an absolute duty on all companies to respect human rights, including a due diligence process: 

”Making sure that you are not implicated in human rights abuses, or if someone in your supply chain is implicated, that you should take steps and use the leverage you have to try and address that issue.”

Since the UN’s convention also applies to the investment community, NEI has raised the issue with the United Nations Principles for Responsible Investment.

“If there is an absolute duty on companies to respect human rights, the implication there is that there might be some issues where on the ESG side, where an investor has to take action on the issue,” she says. “Maybe it’s not exclusion, maybe it’s engagement, but some type of action. We haven’t really had a satisfactory answer to that question.”

Still, opening a dialogue on cluster munitions is a good start, de Cordova says, particularly for those investment companies who have yet to even consider whether they are onside with Canadian law.

“I think we might find new issues emerging, we are right at the beginning of this discussion.”

Tuesday, February 24, 2015

Obama vetoes Keystone!

From the Globe and Mail on line:

President Barack Obama vetoed the Congressional approval of the Keystone XL pipeline Tuesday although he made clear he wasn’t making any final decision about the merits of the controversial Canadian pipeline.
“Through this bill, the United States Congress attempts to circumvent longstanding and proven processes for determining whether or not building and operating a cross-border pipeline serves the national interest,” the president said in a letter to the Senate. “Because this act of Congress conflicts  with established executive branch procedures and cuts short thorough consideration of issues that could bear on our national interest – including our security, safety, and environment – it has earned my veto.”
Read the full article at the Globe and Mail here.
And the American take from Forbes here.
I'm sure there will be lots more to come.
Stay tuned!