Winning in the sustainability stakes
Thirty-two UK companies were included in the first annual Global 100 Most Sustainable Corporations in the World (Global 100) , well ahead of any other nation, according to a survey published by Canadian CSR magazine Corporate Knights and research firm Innovest at the World Economic Forum in Davos.
Loosely defined as “a corporation that produces an overall positive impact on society and the environment”, the UK winners included BP, British Airways, Cadbury Schweppes, Unilever, Marks & Spencer, Scottish & Southern Energy and Centrica. Due to the proprietary nature of the sustainability ratings, companies were not ordered according to how they scored on social, environmental, and governance indicators. Comparisons across industry sectors would also have been difficult, since the issues for each sector Innovest looks at are inherently different.
The list singled out three companies for impressive sustainability practice: BP, Alcoa and Toyota.
“All companies may be created equal but not all are the same. The Global 100 sets out in one crisp list the best all-round global companies, trailblazers that are potential allies in helping to create a better world,” said Toby Heaps, editor of Corporate Knights. Companies were rated on such criteria as strategic governance, environmental initiatives, and labour relations practices. Contact Innovest Strategic Value Advisors 00 1 905 707 0876; Toby Heaps, Corporate Knights 00 41 78659 3549 ( http://www.global100.org)
Pension funds must adopt an international set of good governance principles to overcome barriers to considering social, environmental and ethical factors, AccountAbility and the World Economic Forum said in a joint report. Mainstreaming Responsible Investment, published January 12, was based on a series of three roundtables involving pension fund trustees and executives, fund managers and buy- and sell-side analysts. “The real owners of capital in today’s markets are you and me, the intended beneficiaries of the pension funds, mutual funds and insurance companies,” said Simon Zadek, chief executive of AccountAbility. “The responsibility of institutional investors must be to meet our intrinsic interests, which go far beyond near-term returns…” Other recommendations include:
l developing new business models for research on non-financial issues by analysts
l creating a specific professional competency for non-financial analysis l widening the dialogue between analysts and corporate investor relations officers on non-financial information. Contact Pat Breen, AccountAbility 020 7549 0400 ( http://www.accountability.org.uk)
Vive le SRI
Novethic, a resource centre for SRI in France, said in a survey that funds under management in the country surpassed the 5bn euro mark in 2004, a rise of 24% since year-end 2003. At year-end 2004, a total of 122 SRI funds were available to investors in the French market, as opposed to 108 in 2003 and 80 at year-end 2002, an increase of more than a third in two years. New funds entering the French market last year included Orsay Gestion, JP Morgan Fleming and Fédéris Gestion. Contact Garance Bertrand 00 33 1 5850 9823 ( http://www.novethic.fr)
Pragmatic investment in China
SRI in China can be successful if investors are willing to overlook the country’s poor record on labour rights, according to Made in China, a report by Switzerland’s Bank Sarasin. Although no company would in reality be able to comply with ILO standards in China, because independent trade unions are banned, this should not prevent investment in those companies with a good record on CSR elsewhere, Sarasin advises.”The aim of socially responsible investment is to invest in companies which are dealing with environmental and social issues linked to their business activities in a responsible way,” the bank says. The study analyses multinational companies operating in China with a good track record in corporate social responsibility and identifies remaining challenges. Contact Bank Sarasin 00 44 61 277 777 777 ( http://www.sarasin.ch)
Bad good business
Ethical Financial, one of the UK’s biggest ethical investment advisory firms collapsed in January, leaving investors with losses of around £1m in total. The company, founded in 1989, aimed to “promote awareness and understanding of ethical investment”. It asked clients to invest in the company itself, offering them preference shares, which it said would pay an interest rate of 7-10%. Since these were a direct investment, they were not covered by the Financial Services Compensation scheme. Investors may end up losing their entire capital.
A radical take on shareholder activism
Former stockbroker Max Keiser joins forces with the editor of The Ecologist, Zac Goldsmith, to launch a hedge fund that plans to ‘short’ Coca-Cola’s shares and donate the proceeds to the “victims of Coke’s business model in places like India and Colombia”.
Keiser, founder of Karma Banque, reckons the campaign will reduce shares by a half to $22. And he’s ready to commit as much money as it needs to ‘take down’ Coke.
The hedge fund plans to borrow shares from a broker and sell them at less than their market value. It would then buy them back at less than it sold them for and pocket the difference before handing them back to the broker.
But it’s a risky strategy: the hedge fund would be left open to massive losses if the price of the stock rises.
Contacted for a response, Coca-Cola’s press office in Atlanta did not return Briefing’s calls. Contact ( http://www.karmabanque.com)
Socially responsible investment analysts do not generally suffer from a lack data and information on a wide range of social, environmental and ethical (SEE) issues. In addition to their own extensive in-house research material, they are generally spoilt for choice as they sift through the numerous surveys, indices and rankings published almost weekly. The Global 100 survey, launched with much fanfare at the World Economic Forum, provided one of the latest examples.
The survey identified actual initiatives companies have made to become more sustainable: BP is singled out for its participation in emissions trading schemes, development of a solar power business and a shift towards natural gas from oil; Toyota is identified for its commitment to environmental management, with particular emphasis on its hybrid Prius model, the fastest selling car in the US last year.
All well and good. But, how can companies such as BP, whose business essentially involves pumping out a finite resource, and British Airways, whose business is essentially burning that finite resource, be members of any sustainability ranking?
Certainly this question hinges on one’s definition of ‘sustainability’. But Global 100 provides very little evidence of a rigorous methodology. And Innovest, who supplied the research for the survey, wants to keep it under wraps.
Surveys such as Global 100 are guilty of ‘showboating’ companies that are ‘good’, and as such are generally unhelpful in convincing a predominantly distrustful financial world of the merits of SRI. In stark contrast, AccountAbility and the World Economic Forum’s report Mainstreaming Responsible Investment makes a very good case for rigorous reporting of SEE issues, so that the real owners of capital – you and me through our pension schemes and investments – are properly represented by institutional investors. By introducing a thorough approach to responsible investing, AccountAbility hopes to propel it from the boutique to the mainstream financial community.
class=”footer”>Corporate Citizenship Briefing, issue no: 80 – March, 2005