Thursday, March 28, 2013

Impact investing set for growth

Impact investing has come a long way in a relatively short period of time, but it could take 10 to 15 years to fully develop the market, according to the authors of a report on the subject. 

Edward Jackson, a faculty member at the School of Public Policy and Administration at Carleton University and Karim Harji, a co-founder and partner at Purpose Capital, spoke in Ottawa this week at an impact investing seminar sponsored by Aga Khan Foundation Canada. 

“This is a long game – it’s going to take time to build the field,” Jackson said, adding that impact investing is small, dynamic and growing, and opens the door to other forms of innovative financing.

Impact investing will not replace development aid, and it’s no excuse for governments to ignore their obligations, Jackson said.

“Entrepreneurs want to integrate social considerations but it’s not easy,” Harji said. ”This is going to take time, and higher levels of leadership.”

At the retail level, there’s currently little opportunity for investors to align their capital directly with a cause, Harji noted. He expects that to change in the long term. Investors should not be overly concerned about the risks of impact investing, Harji said, stating that the perception of risk is much higher than the actual risk.

Last year, Jackson and Harji co-authored an extensive report on impact investing for the Rockefeller Foundation, noting that the field is in the market-building phase, and should evolve to capture the value of the marketplace in 5 to 10 years, with the entrance of mainstream players.

“Much progress has been made in building the field of impact investing globally,” the report says. “Many tangible gains have been achieved. And there is still much to be done. To be sure, building an effective global industry is a long-term, complex and difficult task. However, this is precisely the time for the leaders of the impact investing field to recommit to building a fully developed marketplace.”


Monday, March 11, 2013

more fracking controversies

First up, fun with fracking...
As reported by the Guardian, "Yoko Ono and Susan Sarandon star in new anti-fracking music video - Celebrities join forces for new rendering of Sean Lennon's Don't Frack My Mother in effort to stop hydraulic fracturing in New York." Click here for the article and the music video.

Meanwhile, although many New Yorkers are adamantly opposed to drilling in the Marcellus shale, the Geisinger study on the health issues around fracking is probably years away for coming to any conclusions according to this story. 

And for some visual impact, check out the Marcellus Shale Documentary Project, as reported here.

Finally,  a scary story from Reuters "China's plans to unlock what could be the world's biggest shale gas reserves risk running further off track after 16 firms awarded exploration rights in the latest auction lacked one core skill - not one has drilled a gas well before."

Saturday, March 2, 2013

PDAC 2013: Directors’ Duties

Yesterday afternoon’s short course offered much discussion and some divisive debate on the subject of directors’ duties.  Doug Bryce and Jeremy Fraiberg of the mining team at Osler, Hoskin & Harcourt LLP provided the legal framework and some background on directors’ duties in Canada. They were joined on the panel by Peter Dey and Wesley Voorheis, who presented practical examples based on their combined decades (maybe even a century?) of governance experience.

The material reviewed by the Osler lawyers was particularly interesting as a follow up to Prof. Lynn Stout’s presentation on the myth of shareholder primacy at last year’s Responsible Investment Conference. Mr. Fraiberg opined that the Supreme Court of Canada has shied away from the ‘Revlon duty’, a decision of the Delaware courts affirming directors’ duty to maximize shareholder value.  Rather, Canadian courts have held that the duty is contextual, and is not confined to short term profit or share value. 

In honouring their fiduciary duty, the directors may consider the impact of decisions on various stakeholders, and they must consider the impact of decisions on affected stakeholders. Peter Dey added that it is becoming increasingly important for Boards to look at longer term impacts and results, a positive development.  

Mr. Dey continued with an update on what’s happening within boards today. He endorsed the use of a skill matrix to ensure a balanced board with a depth of knowledge. He also suggested that ‘you look at your stakeholders and make sure that you have directors that can address the issues that are important to those stakeholders.’ This bodes well for more diversity on Boards over time as a broader range of stakeholder interests achieve legitimacy.    

Significant discussion was generated by the idea put forward by both Mr. Dey and Mr. Voorheis that board decisions be unanimous. Ultimately, the audience agreed that consensus was the goal of every board, and that a board that consistently had, for example, an 8/4 or 6/2 split was dysfunctional. However, whether a director should record their dissent to a particular decision, and how much discussion for and against a motion should occur to bring recalcitrant directors onside created heated debate on both sides of the issue. It may be that more experienced directors are able to reach a consensus in a way that newer directors are not, and that working together on a Board is also a learned skill.   

The afternoon ended with a brief discussion of three case studies, as the amount of interesting and relevant commentary on the earlier material left us a bit short of time. Overall, an excellent start to what is always a thought provoking conference.  

Friday, March 1, 2013

NEI Divests from Enbridge Over Northern Gateway

NEI Investments has announced that it will divest its Enbridge holdings from the Ethical Funds portfolio over risks that First Nations' opposition poses to the Northern Gateway pipeline project.

“We have taken the dialogue as far as we can and have been part of some important developments as a result of our efforts,” NEI said in its monthly newsletter. “But in the end, we reached an impasse with the company that we couldn’t overcome.”

NEI said its seven years of discussions with Enbridge have not been fruitless, noting that it has twice received substantial support for shareholder proposals at the company, “showing that we have been successful in getting mainstream investors to seriously consider what would traditionally be considered a social risk as an investment risk.”

NEI also noted that Enbridge has strengthened its link between environmental, social and governance performance and executive compensation. “Forty per cent of the business unit scorecard used to determine executive bonuses is now linked to safety and environmental performance. This is a significant change that should have a ripple effect in the industry. “

Still, NEI said its decision to divest came down to its concern that the Enbridge board does not see substantial First Nations opposition as a reason to walk away from the project. “That means potentially trying to build the pipeline over the objections of First Nations communities and, more importantly, ignoring First Nations’ concerns about aboriginal and treaty rights.”

 “To be clear, we don’t believe this project will proceed,” NEI concluded. “The legal, operational and reputational challenges of building in the face of this opposition have doomed it from the start. We could be proven wrong, but in the meantime we hope the company will take our advice and state that it has no intention of building the project in the face of significant First Nations’ opposition.”