ABN Amro, Deutsche Ban and Goldman Sachs are among 20 major investment companies that have endorsed a United Nations Global Compact report and initiative on ‘connecting financial markets’ to environmental, social and governance criteria. The 20 companies, who between them control $6 trillion in assets, have also agreed on steps to make these factors a standard part of analysing corporate performance and investment decision-making. Who Cares Wins: Connecting Financial Markets to a Changing World; Recommendations by the financial industry to better integrate environmental, social and governance issues in analysis, asset management and securities brokerages was issued at the Global Compact Leaders Summit on June 24. Contact Matthias Stausberg, Global Compact on 00 1 917 367 3423 (http://www.unglobalcompact.org)
Fair shares
Environmental and social issues must be integrated into business practices for shareholders’ benefit, says a report from the United Nations Environment Programme issued during the Global Compact Leaders Summit in June.
The Materiality of Social Environmental and Corporate Governance Issues to Equity Pricing focuses on 11 business sectors and finds that environmental, social and corporate governance issues affect long-term shareholder value. In response to the findings of the report, the United Nations Environment Programme announced on July 15 that it is to work with major institutional investors including Deutsche Bank and Morley Fund Management, to develop a set of globally recognised principles for responsible investment by September 2005. The Responsible Investment Initiative is a global alliance of investors to guide responsible investment best practice. Contact Michael Williams, UNEP on 00 41 22 917 8242 ((http://www.unep.org); Matthias Stausberg, Global Compact on 00 1 917 367 3423 (http://www.unglobalcompact.org)
Green reporting
Only a tenth (10%) of companies listed on the FTSE All Share Index use their annual report and accounts to report on waste and energy/climate change, and even fewer provide quantitative information, according to the results of the first study on Environmental Disclosures in the Annual Reports & Accounts of companies in the FTSE All-Share, published on July 15. The Trucost study finds that while most (89%) discuss some aspect of their interactions with the environment, the majority of disclosures “lack depth, rigour and quantification” and do not provide an adequate basis for shareholders to assess environmental risks or opportunities properly. Although three-quarters (72%) make a reference to environmental policies, less
than half report on a subject other than their environmental policies. Contact Phillipa Thomson, Trucost on 020 7321 3731 ((http://www.trucost.com))
Ruler of engagement
On June 23, reporting specialists AccountAbility and csrnetwork
launched the Accountability Rating, a new global index to evaluate how well the world’s 100 largest companies account for their impact on society and the environment. The ranking system measures company performance according to six
key areas: stakeholder engagement, strategy, governance, performance management, public disclosure and assurance. It shows a marked variation in responsibility practices across the Fortune 100 companies, with BP rated the most consistent performer with a score of 67%. Others rated in the top ten include Suez, Shell, Unilever, Hewlett-Packard and Vodafone. Twenty-three companies achieve a rating of less than 10%, however, with the average overall equalling 24%. European companies outperform US companies on the measure, with an average score of 31% as compared to 16%. Contact Mirahv Joseph, AccountAbility on 0207 549 0400 (http://www.accountability.org.uk)
in brief[b]Insight Investment is to provide a shareholder activism service on governance and responsibility issues for the Wellcome Trust’s £3bn UK FTSE 350 quoted portfolio. Contact Insight on 020 7321 1358 (http://www.insightinvestment.com)
Just Pensions launched From Crop to Shop on July 8, the fifth in a series of notes to highlight non-traditional financial risks to pension fund trustees. The note focuses on the food producers and retailer sector. Contact Meg Brown, Just Pensions on 020 7440 9711 (http://www.justpensions.org)
Cafédirect has raised £5m through an oversubscribed
stock market flotation, it was announced on June 1. Contact Wendy Richmond, Cafédirect on 020 7490 9520 (http://www.cafedirect.co.uk)
Brokered records
HSBC Securities and Dresdner Kleinwort Wasserstein are the leading sellside providers of socially responsible investments brokerage services, according to
Thomson Extel’s second annual Social Responsible Investment Survey. The survey, released on July 2, includes responses from 103 of Europe’s premier fund management firms. More than four-fifths (85%) of the companies surveyed expected their involvement in SRI to increase. Contact Steve Kelly, Thomson Extel on 020 7324 9277(http://www.thomson.com)
Interest in ethics
Two-thirds of investors are interested in having their money invested in a socially responsible way, according a to a new survey carried out by MORI for Friends Provident and Isis Asset Management. The research, published in June, also indicates that interest in SRI is higher among younger people, increasing to nearly three-quarters (74%) among investors under 45 as compared with two-thirds (64%) of people over 45. Contact Jason Hollands, ISIS on 020 7506 1168 ((http://www.isisam.com))
Ethics for everyman
UKSIF on July 2 launched (http://www.investability.org, a consumer facing website for people interested in ethically and socially responsible investment, to celebrate the first anniversary of its Retail Revolution programme. The site enables the public to learn about ethical investment, find an IFA experienced in this area and participate in Retail Revolution campaigns. Contact UKSIF on 020 7405 0040 ((http://www.uksif.org)
With women in mind
Calvert, a US-based family of socially responsible mutual funds, announced on June 23 the launch of The Calvert Women’s Principles, a code of conduct focusing on gender equality and women’s empowerment. The principles provide companies with a set of goals they can aspire to and measure their progress against, while offering investors a set of tools they can use to assess corporate performance on gender equality issues. Issues covered by the principles include: wages and benefits; health, safety and violence; discrimination in the workplace; civic and community engagement; management and governance; hiring; promotion and professional development; business and supply chain practices; and monitoring and reporting. Contact Melinda Lovins, Calvert on 00 1 301 657 7089 ((http://www.calvert.com))
Ducks in a row
Morley Fund Management has launched a campaign to show how charities can align their investments with their organisational principles without compromising returns. Morley’s SRI team is sending an information pack to over 1,100 charities, demonstrating how charities can use their financial weight to invest for good. UKSIF research shows that three fifths of top charities do not have a written ethical or socially responsible investment policy. Contact Morley on 020 7809 8617 (http://www.morleyfm.com)
COMMENT:
Evidence is growing that the City is taking CSR seriously – not because it is concerned about social responsibility, but because it makes business sense.
The first three stories in our investor section are indicative of a new but distinct trend. Big banks are getting seriously interested in social and environmental issues. This is not because they want to move out of banking and into philanthropy. It is because, as the Chief Operating Officer of Westpac says, “Considering that a large share of company value is intangible and relates to future earnings, it is evident that risks and opportunities deriving from environmental and social trends are of great importance.” It’s the money, stupid! In the electric utilities sector, the level of financial risk exposure from regulatory responses to climate change can vary by a factor of 30. No wonder the banks want to find out which companies have high risks and which low risks. Banks are even starting to produce guides to assist in the assessment as in the excellent Goldman Sachs Energy Environmental and Social Index (GSEES Index).
Heightened interest by mainstream investors will have an increasingly big impact on companies and their CSR agendas. (It is interesting to see how much emphasis the GSEES Index puts on workforce matters for example, not currently considered to be a major CSR issue for oil and gas). Growing mainstream investor interest could begin to crowd out NGO influence in setting the CSR agenda. It is likely to make CSR more systematic, more measurement driven and more cost/benefit conscious.The next milestone? UNEP’s publication of globally recognised principles for responsible investment in September 2005. Mark it in your diaries.
COMMENTS