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Workers Capital News - Dec 09

In this issue:

  • Governance and Disclosure

    The Dow launches sustainability index for institutional investors / UN releases draft of guiding principles on human rights and transnational corporations / Denmark pension funds urging managers to join UNPRI

  • Shareholder Activism

    259-strong investor group seek Cancun climate change action / US SEC: Proxy access not available for 2011 AGM season; CalSTRS may take legal action / Lithuanian pension association suing national government

  • Pensions and Investments

    Hungary gives pension-fund ultimatum to citizens / Ireland to draw from National Pension Reserve fund for recovery purposes

Governance and Disclosure

The Dow launches sustainability index for institutional investors

In response to a growing global demand for sustainable investment, the Dow Jones is launching a sustainability index in conjunction with partner Sustainable Asset Management (SAM). According to Global Pensions, the Dow Jones Sustainability World Enlarged Index (or DJSI World Enlarged) was launched on November the 30th. It serves to monitor the economic, environmental, and social performance of 20% of the most sustainably firms as chosen from the Dow Jones Global Total Stock Market Index. Both the Dow Jones president and the SAM managing director quoted the growing number of investor inquiries for long-term sustainability options as the main drive behind the inception of the DJSI.

Read the November 22, 2010 Dow Jones press release regarding the DJSI here.

UN releases draft of guiding principles on human rights and transnational corporations

The Business and Human Rights Centre reports that the U.N. Special Representative to the Secretary General has released a draft of a guideline report on protecting human rights in the context of global business. The report was commissioned by the U.N. Human Rights Council in 2008, in order to provide detailed guidance on the practical implementation of the U.N. “Protect, Respect, and Remedy” framework. The framework itself designates distinct responsibilities to nations and businesses to prevent human rights abuses. Currently spanning 28 pages, the report advocates joint state-business action to protect and foster business respect for human rights, especially in the case of transnational corporate entities.

The draft of “Guiding Principles for the Implementation of the United Nations “Protect, Respect, and Remedy Framework” is open to public review and comment until January 31, 2011.

Denmark pension funds urging managers to join UNPRI

Global Pensions reports that the majority of Danish pension schemes are not only embracing the United Nations Principles for Responsible Investments (UNPRI), but also actively requesting that their managers sign onto the principles. Although the managers are not required to do so, pension funds report a high rate of success in such requests.

Danish investment managers and pension funds are notably ESG-friendly as well as supportive of the UNPRI in their investment decisions – the percentage of Nordic pension funds with an ESG policy in place is a high 87%. However, critics have noted that the act of simply requesting their managers to sign onto the UNPRI is not enough, and further engagement should be encouraged.

Shareholder Activism

259-strong investor group seek Cancun climate change action

Responsible Investor reports a coalition of 259 investors have requested that government policy makers address global warming. The coalition, which consists of institutional investors such as Deutsche Bank AG and CalPERS, was created in the lead up to a key climate change summit hosted by the United Nations Framework Convention on Climate Change (UNFCCC), currently taking place in Cancun. The group called for more emphasis on investing in a low-carbon economy, in light of research showing that losses caused by climate change could eliminate 20% from the global economic output by 2050. According to Global Pensions the statement requests that countries enact policies which support renewable energy and exact fees for carbon-dioxide pollution, in order to cut down emissions.

For more details, please read the press releases in the U.S. and Europe. A live and on-demand webcast from the Climate Change Conference can also be viewed at the UNFCCC site.

US SEC: Proxy access not available for 2011 AGM season; CalSTRS may take legal action

The U.S. Securities and Exchange Commission (SEC) reported this November that proxy access (defined as the ability to select directors from a company for a shareholder vote) will most likely not be available to investors in the 2011 AGM season, as reported by Responsible Investor. This decision was made following a legal challenge to the SEC from the US Chamber of Commerce and Business Roundtable. In response to the decision, the California State Teachers’ Retirement System (CalSTRS) is considering legal action. The organization claims that delaying proxy access, and by that virtue taking away investors’ abilities to determine their boardroom representatives, will hinder good corporate governance and shareholder rights.

Lithuanian pension association suing national government

Global Pension reports that the Lithuanian government is currently facing legal action from the Lithuanian Association of Pension Fund Participants. The suit claims that the national government had failed to fulfill the stipulated requirements of pension reform legislation. The legislation in question was passed in 2004 and proposes a 5.5% contribution of gross salary, but the government was not successful in maintaining the contribution level at that rate. According to the pension fund, subsequently the government had failed to pay its citizens an accumulated total of $323mil (U.S.) as of November 2010.

Pensions and Investments

Hungary gives pension-fund ultimatum to citizens

Global Pensions reports that the Hungarian government has recently enacted a new economic policy to shift the private pension fund assets of Hungarian citizens under state control. The legislation was passed in order to address the country’s financial deficits and debts. Critics labeled the policy as a “confiscation” of pension savings and an “effective nationalization of private pension funds”. Hungarian PM Viktor Orban has announced plans to use those pension funds to pay off current government pensions, among other things.

Private pension fund associations in Hungary are already in the process of filing a motion with the courts in an attempt to have the law annulled.

Ireland to draw from National Pension Reserve fund for recovery purposes

The Irish National Recovery Report details the national government’s intentions to draw from the National Pensions Reserve Fund (totaling €24bil in assets), as reported by Global Pensions. The report also details other plans for recovery from the national debt, such as a pension deduction for public service pensioners. Blueprints for a reformed pension scheme for new public service employees which would reduce their pay by 10% are also discussed within the report. The funds accumulated from these cuts will be used not only to tackle the national debt, but also to fund infrastructure investment and support the government bond market.

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