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Workers Capital News - November 24

In this issue:

  • Governance and Disclosure

    State Street Global Advisors report: ESG becoming major investing fad / EU rejects voluntary code model for corporate governance, may legislate on ESG-related data / New Canadian report on institutional investors and social finance

  • Shareholder Activism

    Dutch PNO blacklists Wal-Mart due to labour law violations

  • Pensions and Investments

    France pension bill passed into law / US deficit panel considers pension reform / IOPS launches global supervisory standards, updates guidance principles for pension fund managers / Peruvian pension funds projected to cut local stocks in favour of stocks

Governance and Disclosure

State Street Global Advisors report: ESG becoming major investing fad

A new research report by State Street Global Advisors (SSgA), suggests that due to international emphasis on factors such as the growing world population and concern for climate change, ESG is rapidly becoming a key issue for not only investors but also companies as well. According to Global Pensions, SSgA’s “Sustainable Investing: Positioning for Long-Term Success” report identifies the transformation of ESG from a marginal factor in investment deliberation to a pivotal one as a result of investor and company realization of a global “sustainability crisis”.

The report also revealed findings which showed that companies with strong ESG practices suffered less during the 2008-2009 financial crisis, and that the same companies enjoyed an increased magnitude of protection during market declines.

The report can be read here.

EU rejects voluntary code model for corporate governance, may legislate on ESG-related data

Representing the European Union, Internal Markets Commissioner Michael Barnier has rejected the argument that voluntary codes (alternatively called the ‘comply or explain’ model) are the only method for improving corporate governance. Barnier advocated for the necessity of “clearer and more specific” rules in the future, echoing the EU’s preference for a controlled, top-down approach towards corporate governance. Responsible Investor reports that this position could potentially cause conflict between the EU and countries who favour the voluntary approach, such as the UK.

Further to their stance on corporate governance, the EU’s Commission revealed 50 proposals in a 46 page press release at the end of October. Among these proposals were plans of launching a public consultation on methods to improve corporate transparency on human rights and ESG-related policies such as board diversity and sustainable practices, which could potentially “lead to legislative initiatives”, as cited by RI.

New Canadian report on institutional investors and social finance

A policy brief discussing the potential of engaging institutional investors on responsible investing was recently released by Dr. Tessa Hebb of the Carleton University’s Centre for Community Innovation. The report, titled “The Role of Institutional Investors in Social Finance”, focuses on the potential role that Canadian pension funds could play in creating social capital via an impact investment approach which focuses on concepts of CSR (corporate social responsibility). The report, which was presented to the Canadian Task Force on Social Finance, puts forth several recommendations for policies to be put into place that encourage and incentivize institutional investors, particularly pension funds, towards the practice of responsible investment.

The report can be read here.

Shareholder Activism

Dutch PNO blacklists Wal-Mart due to labour law violations

Responsible Investor reports that the Dutch media sector pension fund, PNO Media, has excluded the corporation Wal-Mart from its investment considerations, due to the company’s track record of labour rights violations. PNO Media, a United Nations Principles for Responsible Investment (UNPRI) signatory, had been engaging with Wal-Mart in an attempt to advocate for ESG and labour standards in the company’s corporate practices since July 2008. Although some attempts, such as their persuasion of Wal-Mart to work on cutting CO2 emissions, were met with success, the pension fund stated that their decision to blacklist the company was largely influenced by the “lack of progress” in the corporation’s practices towards labour rights.

While the Norwegian Government Pension Fund also blacklisted Wal-Mart earlier in 2006, the Swedish AP funds’ Ethical Council is currently still engaging with the corporation over its numerous violations of workers’ rights.

Pensions and Investments

France pension bill passed into law

France24 reports that President Nicolas Sarkozy’s proposal to raise the minimum retirement age from 60 to 62 has been officially passed into law. Sarkozy’s initial pension proposal stemmed from the government’s desire to address the graying population and the pension budget deficit by a projected deadline of 2018. Since early September 2010, French unions have expressed dissatisfaction with the pension reform, launching a total of 8national strikes against the conservative government. Despite such efforts, the bill was passed into law on November the 10th, 2010. Recently approved by both the lower house of parliament and the Constitutional Court, the legislation will raise the full-pension age from 65 to 67.

US deficit panel considers pension reform

Draft proposals from a U.S. presidential commission on budget reform (Peterson-Pew) are hinting at raising the pension retirement age and reducing benefits for the country’s pensioners, according to the Globe and Mail. The Social Security retirement age would be raised to 68 by 2050, and 69 by 2075 (with exceptions for certain occupations). If adopted, the proposals are projected as being able to reduce the deficit by $4 trillion. However, analysts predict that members of the Peterson-Pew Commission will not be able to come to a consensus on these harsh recommendations in approving them for a final report on budget balancing for President Obama.

IOPS launches global supervisory standards, updates guidance principles for pension fund managers

In a bid to incorporate the experiences and lessons garnered from the global financial crisis, the International Organization of Pension Supervisors (IOPS) has launched a new set of supervisory standards in the form of an “online tool-kit”, for pension funds to use in identifying potential issues and weaknesses. According to Global Pensions, IOPS also revised its “Principles for Private Pension Supervision” to include risk-based supervision principles that will help fund managers better plan for the long term.

Peruvian pension funds projected to cut local stocks in favour of stocks

As reported by Global Pensions, CEO of pension fund Profuturo AFP, Mariano Paz Soldan, predicted that Peru’s four pension funds will trade local stock holdings in order to buy Chilean and Colombian shares. Paz Soldan’s proclamation was made in light of the move towards integration of exchanges in the three nations. The integrated Andean exchanges, to be called Mercado Integrado Latinoamericano (or MILA), are projected to have a value of $661billion. In his interview with the press, Paz Soldan mentioned that the integration will also serve to allow Peruvian pensions that are breaching the 30% legal ceiling on investing in international markets to expand their domestic options. Trial runs of the integrated market will begin on November the 22nd, and Peruvian and Chilean investors will be able to buy shares on MILA in January.

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