The Irish government has announced that it will set up an “interdepartmental committee” to plan for the introduction of practical responsible investment guidelines for the country’s €16.4bn National Pensions Reserve Fund (NPRF).
The original remit for the fund, when established in 2001, was to maximise returns subject to prudent risk management. However, in 2007, the fund hired Hermes Equity Ownership Services to provide an environmental, social and governance overlay service.
And last year, the NPRF decided to exclude companies which are involved directly in the manufacture of cluster bombs. This decision was taken following the signing in December of an anti-cluster bomb treaty by 100 nations.
Despite these initiatives, the NPRF has drawn criticism for its investments in weapon production companies and firms with operations in Zimbabwe and Sudan.
In 2008, Progressio Ireland, an independent organisation that works for sustainable development, published research that identified NPRF investments totaling more than €575m in companies operating in Zimbabwe.
Welcoming the government announcement, Progressio’s advocacy officer, Emmet Bergin said: “At last, the National Pensions Reserve Fund will soon cease investing in companies that contravene basic human rights, trade in war and destroy the environment.”
The commitment to work towards the drafting of ethical guidelines for the NPRF was made on the same day that legislation was presented to the Irish parliament allowing the fund to be used to recapitalise Irish banks. The fund will contribute $4bn of a €7bn recapitalisation of Allied Irish Banks and Bank of Ireland.
The remaining €3bn will be provided by a “frontloading” of the exchequer’s contributions to the NPRF for 2009 and 2010. These investments remain part of the reserve fund and the return on them will accrue to the fund. Each bank will receive €3.5bn of “tier one” capital.
• Climate change information is factored into the investment decisions and asset allocations of a majority of institutional investors, according to a recent report by consultants Mercer in conjunction with the Carbon Disclosure Project (CDP).
Sixty-nine per cent of respondents said they currently use CDP data as a tool for corporate engagement.
However, only 11 per cent indicated that they fully incorporate carbon emissions data into financial analysis.
Forty-nine per cent of respondents said they would ask companies to do more than just disclose information on climate change. For instance, some respondents said they are willing to ask for emissions reductions.
Investors also highlighted barriers to using greenhouse gas data – including a lack of comparability between responses, incomplete sector coverage and the absence of a unified global reporting and regulatory framework.
A significant number of respondents revealed that they are still working on how to integrate CDP and other climate data into their existing systems, models and processes.
“As climate change regulation matures and expands around the globe, members of the investment community will be increasingly compelled to analyse climate risks and opportunities in greater detail,” said Danyelle Guyatt, a principal in Mercer’s responsible investment team.
Mercer and CDP canvassed 475 institutional investors around the world with $55,000bn (€43,495bn) of assets under management.
