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Workers’ Capital News - Feb. 24

In this issue:

  • CalPERS CEO Urges Investors to Push for Strong Action on Climate Change / Harvard Pensions Project Report on Supply Chain Labour & Human Rights / Benefits of Private Equity Called into Question / NYC Pension Funds Submit Shareholder Proposal on Strengthening Clawback Policies

CalPERS CEO Urges Investors to Push for Strong Action on Climate Change

Top 1000 Funds reports that at an investor summit on climate change in New York, Anne Stausboll, chief executive of CalPERS, urged delegates to actively push businesses and policymakers to address environmental and sustainability issues. Stausboll stated that taking strong action on climate change is an important part of pension funds’ fiduciary duty. Jack Ehnes, CalSTRS ‘s chief executive,  also  spoke to delegates about the importance of amplifying investor action and attention on climate change issues.

At attendance at the Investor Summit on Climate Risk and Energy Solutions, jointly organized by Ceres and the UN, were 450 global investors with over $10 trillion in assets under management.  Through an action plan signed at the summit, delegates called for increased investment in green technologies and made commitments to examine more closely companies’ management of climate change risk. Reports released at the summit by Deutsche Asset Management and Bloomberg New Energy Finance exhibited increases in investments in green technology. The report by Deutsche Asset Management, however, also revealed that in 2011 public market investment in clean technology slowed considerably and clean technology public equity stocks underperformed as well.

Harvard Pensions Project Report on Supply Chain Labour & Human Rights

A report on “Supply-Chain Labour and Human Rights: S&P/ASX 200 and Global Supply Chain Policies” has been published by the Harvard Pensions Project for the Australian Council of Superannuation Investors (ACSI). The report benchmarks the supply-chain labour and human rights policies of the S&P/ASX 200 (ASX 200) against 2,500 of the largest global companies and builds on the Project’s previous publication, “Benchmarking Corporate Policies on Labour and Human Rights in Global Supply Chains”. Findings by the Project reveal that ASX 200 companies in general fall behind companies in other listed markets, with only 17% issuing a labour and human rights policy covering their supply chain compared to 35% in the global sample.

The Project also published a report on Key Performance Indicators for Investors to Assess Labour & Human Rights Risks Faced by Global Corporations in Supply Chains” as part of its KPI (Key Performance Indicator) Initiative. The initiative aims at establishing a standardized method to assess reputational risks and operational shortcomings associated with labour and human rights factors in corporate supply chains.

Benefits of Private Equity Called into Question

Private equity has attracted much interest recently due to the focus on Republican presidential candidate, Mitt Romney’s former role as a private equity executive. A recent article in the Financial Times calls private equity profits into question.

According to a study conducted by Yale and Maastricht University, in the past ten years private equity has proven more effective at garnering wealth for managers than generating profits for US pension funds. Data indicates that private equity management fees have risen since 2000. As cited in the article, from 2001 to 2010, on average, US pension plans made 4.5% a year after fees, from investments in private equity. During this period, 4% of invested capital was paid on average by pension funds every year towards management fees. The increase in management fees may likely be due to funds being in the early investment phase when fees are high or because of the increased use of third party funds to invest in private equity.

*Please note that viewing the article "Private equity profits called into question" requires registering for free at the Financial Times site

NYC Pension Funds Submit Shareholder Proposal on Strengthening Clawback Policies

According to an article by Top 1000 Funds, five NYC pension funds have filed shareholder proposals calling on firms JP Morgan, Goldman Sachs and Morgan Stanley to strengthen their ‘clawback’ policies. Clawback provisions are intended to hold senior executives financially accountable for undue risk-taking practices and unethical behaviour. New York City Comptroller, John Liu, who manages the five pension funds’ assets, has asserted that the focus on the specific firms is because they have garnered attention in the past for improper practices, particularly with regards to mortgage securities. In his announcement of the proposal, Liu highlighted that each of the firms have paid large amounts in settlements due to charges related to mortgage securities. Liu also stated that the proposal is aimed at eliminating incentives for some of the bad practices that led to the global financial crisis.

The five pension funds pushing for the proposal are the New York City Employees’ Retirement System, New York City Police Pension Fund, New York City Fire Department Pension Fund and the Board of Education Retirement System, which together hold nearly 15.5 million shares in the targeted firms. The proposal on strengthening clawback focuses on three main areas:  broadening the policies to hold executives responsible for more than just “material losses”, to hold them responsible for actions of subordinates under their supervision, and pushing for disclosure of a board’s decision to recoup executive compensation.

Disclaimer: The CWC News Digest is a compilation of news items covered in industry publications. The content does not necessarily reflect the views of the Committee on Workers Capital or its members. Comments and reflections on news items may be sent to gpatel@share.ca .

 

 

 

 

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