Friday, January 23, 2015

RIA launches 2015 Responsible Investment Trends Report


At a boisterous party for the launch of the RIA’s 2015 Canadian Responsible Investment Trends Report, the SRI community celebrated a major milestone: over one trillion dollars in RI assets under management.

The report identifies 3 factors that contributed to this growth. These are: the adoption of RI strategies by large pension funds, new entrants to the industry particularly among investment managers and qualitative factors including personal values, increased awareness of ESG risks and generational transfer of wealth. Read more about the report here.

Remarks by Michael Jantzi, CEO of global research powerhouse Sustainalytics, provided food for thought. Michael began by acknowledging the RIA, its predecessor, the SIO, and everyone in the room whose contributions have brought us to where we are today. He identified the broader acceptance of sustainability, “study after study shows sustainability is a top 3 priority for CEOs globally”, as something which leads naturally to discussion of ESG issues. Showing how pension fund managers’ thinking has evolved, Michael gave us this inspiring quote from Peter Borgdorff, head of PFZW, the second largest pension fund in the Netherlands,”A good pension is worth nothing in a polluted and unsafe world. We intend to use the power of this money to bring a better world closer,"  

On the retail side, assets showed significant growth, but remain small relative to institutional assets. As someone who has worked in retail for many years, I was pleased to hear Michael say “Retail deserves more attention from the responsible investment community. We will not capture all the opportunities if it’s only about gains on Wall Street or Bay Street.”

A number of advisors who are new to SRI attended the launch, testament to the attractiveness of SRI as a business building strategy. Media coverage of issues such as the collapse of the Rana Plaza factory in Bangladesh and the Northern Gateway pipeline have more investors asking their advisors, ‘what’s in my portfolio?’

Tammy Laframboise, a long time professional member of the RIA, believes that growth in SRI funds will continue to outpace growth in other mutual funds,”SRI funds are managed with a longer time horizon and so are better able to withstand the increasing volatility in the market. “

Confirming this, the Report identified the top 3 reasons for considering ESG criteria in the investment process are to minimize risk, client or beneficiary demand, and to improve returns over time.

Sandra Odendahl of RBC summed it up neatly when she welcomed us to the event, “SRI is growing, RI is growing, Impact Investing is growing. You can make money and do good. Yay!”

 

Thursday, November 13, 2014

SHARE releases ESG concerns regarding Tim Hortons/Burger King merger

SHARE this week released a proxy advisory regarding environmental, social and governance (ESG) issues that may be of concern to shareholders in the Tim Hortons-Burger King merger proposal. 

 

In a joint proxy circular issued earlier this month, Tim Hortons and Burger King Worldwide described details of a deal touted as the largest restaurant merger in history, creating a post-merger entity with combined global sales of $23 billion and with 18,000 restaurant locations in 98 countries.


After analyzing the currently available information on the proposed merger, SHARE has identified certain ESG issues that may be of concern to shareholders of a successfully merged new entity, including:
  • Inherited reputational risks from BKW’s U.S. employment practices
  • Differences in sustainability reporting between the two companies;
  • Potential job losses and decreased tax contributions;
  • Lack of independent directors;
  • Excessive executive compensation
Environment

Tim Hortons has published comprehensive sustainability reports in recent years, achieving a B+ level of reporting based on the Global Reporting Initiative (GRI) framework. Burger King, however, does not release annual sustainability reports. To date, there have been no specific commitments from Tim Hortons or its new owners regarding the continuation of GRI-based sustainability reporting. 

Social

A prominent national campaign in the U.S. has targeted the fast food industry for the extremely low wages paid to employees. In addition, the National Labor Relations Board recently censured a large Burger King franchisee for its anti-union activities.

Concerns have also been raised about cuts to operational costs by 3G Capital, Burger King’s owner, which could take the form of hundreds of layoffs at Tim Hortons’ head offices and distribution centres, considering 3G’s pattern of similar losses which occurred at Heinz and Labatt plants after takeovers by 3G Capital.

Governance

3G Capital has a history of poor corporate governance; BKW’s board does not have a majority of independent directors, has no nominating committees, and other key committees, such as the compensation committee, are entirely composed of insider directors. By contrast, at least two-thirds of the current Tim Hortons board are independent directors and its audit committee is entirely independent.

Conclusions

The proposed merger may raise ESG concerns for long-term investors who will now be faced with new governance structures and practices as well as new risk profiles based on ownership of Burger King’s global operations.
·          

  • SHARE asks if the combined company will continue and expand THI’s practice of issuing regular sustainability reports for investors based on GRI indicators.
  • How will reputational risks from Burger King’s employment practices in the U.S. impact on the combined company’s value?·    
  • Will 3G Capital and Burger King be making specific commitments regarding retention of employees at company-controlled facilities in Canada?·      
  • What will be the merged company’s approach to Canadian taxes?
  • Will the company commit to nominating independent directors to at least two-thirds of the board of the new company after the merger?
    ·           
All good questions from SHARE and ones investors deserve answers to.

Thursday, October 9, 2014

Eurosif Study Reveals Double Digit Growth in SRI Strategies

Eurosif's sixth study of sustainable and responsible investment in Europe shows that SRI investment strategies have grown at double digit rates between 2011 and 2013, faster than the broader European investment market.

For example, the study reveals that assets subject to exclusion criteria, also known as negative screening, grew by 91% between 2011 and 2013, and now cover an estimated 41% of European professionally managed assets. Voluntary exclusions related to cluster munitions and anti-personnel landmines are the most common.

Assets subject to engagement and voting policies have grown by 86% over the period to reach 3.3 trillion euros, versus 1.8 trillion euros in 2011. Half of that growth comes from the U.K., with other key contributors being the Netherlands, Norway and Sweden. 

Impact investing is the fastest growing strategy, the study reveals, with 132% growth since 2011. Impact investing is now a 20 billion euro market. Key markets for this strategy are the Netherlands and Switzerland, representing an estimated two-thirds of European assets, followed by Italy, the United Kingdom and Germany. Microfinance represents an estimated 50 % of European impact investing assets.

The study also sheds light on how the integration of non-financial factors into investment decisions is implemented. All forms of ESG integration have grown by 65% since 2011, making this one of the fastest growing strategies.

Despite the impressive growth of the SRI market, the study highlights a number of market failures such as the wide variations in adoption of SRI practices across countries and the weakness of the retail SRI market. Institutional investors continue to drive the SRI market in Europe with an even higher market share than in 2011.

Data was collected or estimated at the end of 2013 covering institutional  and retail assets from 13 distinct European markets. 





Thursday, September 25, 2014

Montreal Carbon Pledge Attracts Large Institutional Investors

A group of large institutional investors have signed on to the Montreal Carbon Pledge, agreeing to measure and publicly disclose the carbon footprint of their investment portfolios on an annual basis.

Overseen by the UN-backed Principles for Responsible Investment, the pledge hopes to attract $3 trillion of portfolio in time for next year’s UN climate change conference.

"We are proud to launch the Montreal Carbon Pledge, a commitment by investors to translate climate talk into walk," said Fiona Reynolds, Managing Director of the Principles for Responsible Investment. "The first step to managing the long-term investment risks associated with climate change and carbon regulation is to measure them, and this initiative sets a clear path forward."

Carbon footprinting enables investors to quantify the carbon content of a portfolio, the PRI said, noting that 78% of the largest 500 publicly listed companies now report their carbon emissions.

Eight funds are inaugural participants in the Montreal pledge, including the $298 billion California Public Employees’ Retirement System and France’s public sector pension plan known as ERAFP. The only Canadian fund to commit so far is Montreal-based B√Ętirente, which manages $1.2 billion in assets.

Batirente chief executive officer Daniel Simard said the pledge is the next step in the fund’s commitment to socially responsible investing.

“We think we must move to a new stage in responsible investment, and that is about capital allocation,” he said in an interview with the Globe & Mail. “For us, measuring our footprint means considering reducing our carbon footprint. So we will need to see how we can rethink our asset management in these terms.”

Toby Heaps of Corporate Knights told the Globe a number of Canadian investors have been reviewing the pledge and may sign on, including the Canada Pension Plan Investment Board, which said it is assessing the new initiative.