News and views on the world of socially responsible investing in Canada, including original content related to social, environmental, human rights and corporate governance issues. Written and maintained by a Toronto-based financial advisor and an Ottawa-based writer/editor.
SHARE’s annual proxy voting surveyresulted in the highest
response rate and highest average score since 2005, suggesting that investment managers and proxy voting
services are more willing to vote against management’s recommendations when
they believe it is in the best interests of investors.
“Overall, this year’s results indicate that
investment managers and proxy voting services are disclosing more information
about how they vote proxies,” the report states.
This year’s high scores also indicate that participating
firms are willing to take the time and care needed to look critically at issues
on proxy ballots, SHARE noted. “This may be the result of a growing acceptance
of responsible investing amongst mainstream asset managers.”
The survey analyzes the voting records of 40 firms
with combined Canadian equity holdings of more than $70 billion, examining the decisions
of investment managers and proxy voting services on selected issues that were
particularly controversial or that raised critical corporate governance issues.
For
example, the survey reveals that Canadian shareholders are increasingly
critical of the excessive nature of executive compensation.
Last April, 85% of shareholders
voted against Barrick Gold’s approach to executive compensation. The company
had a net loss last year, but paid its top five executive officers $56.8
million in compensation.
“If they continue, these high levels of executive pay
without any connection to Barrick's performance would be detrimental to the
company and its stakeholders over the long-term,” SHARE said. “SHARE joined a
significant majority of Barrick's shareholders in voting against the company's
executive compensation.”
“More
and more shareholders are voting against executive compensation packages,” said
Catherine Smith, author of the 2013 survey report and Manager of Proxy Voting
Services at SHARE. “Although the majority of shareholders continue to vote with
management, votes against executive compensation packages are on the rise. The
average vote against compensation at Canadian companies was 10% in 2013,
compared to 8% in 2012 and 6% in 2011.”
With billions of dollars of investment required to cope with climate change, the market for “green” bonds that finance environmentally friendly projects has taken off – and is forecast to grow rapidly.
Green bond issuance is estimated to have increased more than fivefold last year, with Dealogic recording 29 deals worth a total of $11.2bn. Already this year 11 bonds have been issued, worth a total of $3.78bn, so the surge is continuing.
Jim Yong Kim, president of the World Bank, speaking at the World Economic Forum in Davos, called for a doubling of the global market for green bonds to $20bn by September, when the UN convenes a high-profile climate summit. He added that it should reach at least $50bn in time for the UN climate negotiations in Paris by the end of next year.
The green bond principles recognise several broad categories of potential eligible green projects, including renewable energy, energy efficiency (including efficient buildings), sustainable waste management and land use (including forestry and agriculture), biodiversity conservation and clean transportation and water.
Marilyn Ceci, a managing director at JPMorgan Chase, says increasing the amount of capital targeted to address pressing environmental challenges such as climate change is critical.
“By providing transparency and integrity to the green bond market and bolstering investor confidence, we expect the green bond principles will expand capital allocation to projects that provide environmental benefits,” she says.
Mr Kim called the principles a key step towards attracting more financing for renewable energy and clean technology, especially for emerging markets where the green growth financing gap is significant.
“We need to seize the opportunity, one that many financial leaders have been calling for,” Mr Kim said at Davos. “Let’s use appetite for green bonds to expand the universe of investors who are investing in green assets.”
Rachel Kyte, World Bank vice-president and special envoy for climate change, says green bonds create a crucial new flow of finance for low-carbon development. “But they do more. They have the potential to move the finance fulcrum in a cleaner direction, away from traditional fossil fuel investments and into the projects that will build our low-carbon future,” she says.
In Tunisia, green bonds issued by the World Bank help improve efficiency in irrigation and reliable water supply in rural areas where groundwater sources are stressed. In China, they help reduce communities’ vulnerability to natural disasters through flood control management and warning systems. In Colombia and Mexico they support energy efficient mass transit systems, and elsewhere renewable energy projects.
Most green bonds to date have been issued by supranational organisations such as the World Bank and the European Investment Bank. But recent corporate issuers include SSE, the utility group, which was raising funds for an offshore wind farm, and Bank of America.
In November EDF, the French power group, launched the first euro-denominated green bond issued by a large corporate. The $1.9bn bond had a maturity of 7.5 years and an annual coupon of 2.25 per cent. EDF says the issue was twice subscribed and was a great success among institutional investors and also achieved the group’s aim of attracting new investors.
“This strong demand specifically came from investors integrating environmental, social and governance criteria in their investment decisions and which accounted for 60 per cent of the issuance allocation,” says EDF.
Navindu Katugampola, vice-president at Morgan Stanley, says his bank was one of the leading underwriters of green bonds last year, with seven deals worth $4.75bn.
“We believe that the green bond principles will help act as a catalyst to develop this rapidly growing market, by providing a clear set of voluntary guidelines for issuers, investors and underwriters,” he says.
Zurich Insurance Group recently said it aims to become the largest global green bonds investor, with an initial target of $1bn.
“Green bonds are a good fit with Zurich’s overall investment strategy as well as its impact investing aspirations, targeted to support sustainable development and resilient communities,” says Cecilia Reyes, chief investment officer with the insurer. “It is an opportunity to invest both with impact and at a return fully compensating for the risk.”
