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ESG roundup: Eurosif survey, News Corp, Hermes, LAPFF

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  • ESG roundup: Eurosif survey, News Corp, Hermes, LAPFF

GLOBAL - The European sustainability market is showing continuous strong growth and increasing sophistication, according to the fifth 'Sustainable and Responsible Investment Study' by the European Forum for Sustainable Investment (Eurosif).

The 2012 study found that European investors were adopting a wider array of responsible investment strategies, often in combination, such as sustainability-themed, best-in-class, norms-based screening, exclusions, environmental, social and governance (ESG) integration, engagement/voting and impact investments.

The growth of each responsible investment strategy covered in the study has been stronger than the broader asset management market growth.

Four strategies have grown by more than 90% between 2009 and 2011.

Norms-based screening is the fastest growing strategy, with an estimated €2.3trn in assets under management and a growth of 137% since 2009.

Exclusions of specific sectors, companies or practices and best-in-class strategies have experienced growth in assets under management of 119% and 113%, respectively.

With an increase of almost 17%, engagement and voting are still growing in Europe and starting to spread to new markets such as Spain or Italy.

Integration has risen by 14% over the period.

Eurosif executive director Francois Passant said: "The study shows the continuing sophistication of a fast-evolving market as several players are adopting multiple responsible investment strategies, often in combination.

"This sophistication also highlights the need for enhanced transparency and clarification of practices.

"It also surely supports our conviction that socially responsible investment (SRI) has the potential to bring some answers to the growing concern by society and policymakers about reconciling finance with long-term, sustainable growth."

European investors are also increasingly adopting investment policies excluding certain types of weapons.

The study finds that almost 50% of Europe's overall assets under management now have policies in place that specify the exclusion of companies involved in the manufacture of certain types of weapons, the most common being those subject to the international conventions on cluster munitions and anti-personnel mines.

According to the study, the main driver for SRI demand continues to be demand from institutional investors.

Institutional assets represent 94% of the market today against 92% in 2009.

However, since the last study in 2009, legislative drivers have jumped from fifth to second rank in importance.

Focus on the role and behaviour of investors and financial markets by national and EU legislators is the likely reason for this, as several regulators make moves to safeguard Europe from future financial turbulence caused by short-sighted behaviour.

Impact investing was included in the survey for the first time.

The European market for impact investments was estimated to stand at €8.75bn. This reflects the increasing interest of investors in achieving a measureable social and/or environmental impact from their investments.

In other news, support for governance reform at media company News Corporation is growing, with Hermes Equity Ownership Services (Hermes EOS) also backing a resolution for the appointment of an independent chair.

The resolution has been co-filed by US-based Christian Brothers Investment Services (CBIS) and members of the UK's Local Authority Pension Fund Forum (LAPFF).

Hans Hirt, global head of corporate engagement at Hermes EOS, said: "While we acknowledge the recent board changes made by the company, News Corp has still not sufficiently addressed the significant shareholder concerns about its board structure and corporate culture highlighted at last year's annual meeting.

"The time is right for the company to appoint an independent chair to rebuild trust and ensure the interests of all investors are more properly represented."

Proxy voting advisory service Glass Lewis has also recommended that shareholders vote in favour of the resolution.

The backing of these groups follows earlier shareholder support for the resolution.

In July, 18 investors with more than $1.6trn (€1.2trn) in assets under management and 13.4m News Corp class-A shares wrote to the News Corporation board expressing their support.

These included major US and UK investors such as Legal & General Investment Management, Railpen, the Co-operative Asset Management, AP4 and Mercy Investment Services.

In support of the resolution, CBIS and LAPFF have produced a proxy advisory briefing, which has been distributed to News Corp shareholders, and used in engagements with major investors.

Ian Greenwood, chairman at the LAPFF, said: "Whilst we recognise the efforts the company has made to clear up the mess left by the hacking scandal, we continue to believe News Corp and its shareholders would benefit from the appointment of an independent chair.

"The clear sense we are getting is that major News Corp shareholders agree with our analysis and share our desire for the company to commit to meaningful reform."

Julie Tanner, assistant director of socially responsible investing at CBIS, added: "Although approximately 40% of voting shares are tied to the Murdoch family, this resolution allows independent shareholders to voice their dissatisfaction with the lack of responsiveness from the News Corp board.

"An independent chair is a necessary step toward rebuilding shareholder trust and protecting long-term shareholder value."

The resolution will be voted on at News Corp's AGM on 16 October.

The LAPFF, CBIS and Hermes EOS will attend the meeting.

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