News and commentary from the February/March edition of Corporate Citizenship Briefing, issue 104
Survey launched to shed light on responsible investment policies of UK corporate pension funds
On February 3, UKSIF launched the 2009 ‘Responsible Business: Sustainable Pension’ survey looking at the Responsible Investment policies of UK Corporate Pension Funds. The survey is being sent to the pension managers of all UK listed companies in the FTSE4Good and Carbon Disclosure Leadership Indexes. This is the second bi-annual survey of the pension funds of companies highly regarded for their corporate responsibility. The survey was developed by independent pension fund industry leaders to give an RI framework specifically tailored to the needs of this group. Contact: UKSIF www.uksif.org
Private equity council members adopt guidelines for responsible investment
On February 10 the Private Equity Council (PEC) announced that its members have adopted a set of comprehensive responsible investment guidelines that they will apply prior to investing in companies and during their period of ownership. Guidelines call for consideration of environmental, health, safety, labour and governance issues, openness with stakeholders and respect for human rights. The guidelines grew out of a dialogue between PEC members and a group of the world’s major institutional investors, which took place under the umbrella of the United Nations-backed Principles for Responsible Investment (PRI). Contact: Private Equity Council www.privateequitycouncil.org
Investors target Exxon, GM and Massey for lack of climate action
On February 18, investor coalition Ceres put companies including Exxon Mobil, General Motors and coal miner Massey Energy on a ‘Climate Watch’ list, citing concerns that the firms’ long-term competitiveness could be hurt by their lack of action on climate change. The ‘Climate Watch’ companies include influential coal companies, oil and power producers and other businesses that investors believe are not adequately dealing with climate-related business impacts, whether from physical changes, emerging climate regulations or growing global demand for low-carbon technologies and services. Two of the oil companies were targeted for extensive investments in Canada’s oil sands region, where carbon-intensive extraction technologies are being used to produce more than one million barrels of oil each day. Contact: Ceres www.ceres.org
PRI says investors should take blame and responsibility for fixing credit crisis
The United Nations Principles for Responsible Investment (UNPRI), the world’s biggest investor initiative, has issued an eight-point action plan for rebuilding market confidence. The UNPRI says global pension funds and institutional investors should accept part of the blame and also take responsibility for fixing the credit crisis as the owner shareholders of the banks that created it. It called on investors to lobby governments and market authorities at a national and international level to promote investor responsibility through support of strong shareholder rights rules and improved company reporting requirements. In addition, it asked investors to say clearly how they will pay fund managers, consultants, brokers and research providers for better ESG research Contact: UNPRI www.unpri.org
CSR Alliance report on valuing non-financial performance
In the last year, a ‘CSR laboratory’ has been exploring the relationship between financial and non-financial performance, and the relevance of corporate responsibility in the dialogue between companies and investors. It aims to explain causes of the long-term value of companies, and ways that investors can better identify winners and losers based on non-financial performance. The ultimate aim is to develop a European framework for company and investor dialogue. Contact: European Alliance for CSR www.investorvalue.org
Standard and Poor launch new us carbon efficiency index
Procter & Gamble, Johnson & Johnson, Wal-Mart and Chevron made the list of companies in Standard and Poor’s new US Carbon Efficient Index. The new index, a subset of the S&P 500, is made up of 362 large-cap companies that have lower carbon footprints when compared to the overall S&P 500. Through 2008, the Carbon Efficient Index had an average annual carbon footprint that was 48% lower than the S&P 500. The footprint figure is based on the amount of annual greenhouse gas emissions divided by a company’s total revenue. The IT sector was the most heavily weighted, followed by health care and energy. The top 10 companies on the US Carbon Efficient Index by weight include: AT&T, IBM, Microsoft, McDonald’s, Cisco and General Electric. Contact: Standard and Poor www.standardandpoors.com
Comment
“In the long run we are all dead” or so John Maynard Keynes thought. Responsible investment turns Keynes’s sentiments inside down. Thanks to responsible investment its proponents tell us we will all be alive and prosperous. We are lucky not to be suffering from snow-blindness as a result of the flurry of investors leaping forward to endorse one or other set of responsible investment principles.
Yet how different are responsible investment principles from common or every day investment principles? After all an ordinary investment strategy involves anticipating long-term developments in the economy. It requires the investor to assess the long-term prospects of individual companies.
Responsible investment takes a long-term view too but does so based on some fixed assumptions: usually that future prosperity requires a low-carbon economy, preservation of biodiversity and the maintenance of some degree of social equity. Arguably therefore responsible investment is defined by a set of pre-suppositions. The pre-suppositions may be true or false but they are not, in the short-term provably either one or the other.
What are the practical implications of this for companies? CERES’s Climate Watch list suggests that it is not a good idea to be a responsible investment bad-boy. Prizes are handed out for good behaviour but denunciation is a more potent weapon. So companies must produce a sustainability report stating their case.
That, though, is not enough. Companies should act as far as possible to keep hostile shareholder-sponsored resolutions off the Annual Meeting agenda. If one gets on, it should be drowned in honey, not treated with contempt. Whatever the corporation’s view of responsible investment is, it is not in a company’s interest to antagonise this growing and powerful lobby.
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