Comment by Deepa Mirchandani. From the April/May 2010 edition of Corporate Citizenship Briefing, Issue 111.
The tide may be turning with regards to Socially Responsible Investment (SRI). Recognition that environmental, social and governance issues (ESG) provide a vital long-term indicator of sustainable corporate success is a good thing; especially at a time when short-termism has been regarded as the main cause of our current economic turmoil.
Broadening public and investor access to company ratings in the Carbon Disclosure Project (CDP) will go some way towards helping raise the profile of environmentally responsible companies. The move by Google Finance to list CDP ratings, alongside financial basics is therefore welcome. Hopefully this will now set a precedent for other initiatives, such as the Forestry Footprint Project and the Water Disclosure Project to follow suit enabling investors to make better informed decisions on ethical and environmental grounds.
This does raise the broader issue about what information is driving investor decision making. Is it human rights, bribery, corruption or broader supply and value chains? The truth is, probably not. Investors will always be primarily concerned with making credible returns on their investments – and justifiably so, that’s nothing new. What is new is that mainstream investors such as Bank of New York Mellon are stating publically that they are looking at ways that ESG data can be used, not just from a prohibitive perspective (so avoiding traditional SRI exclusions such as tobacco, alcohol, nuclear involvement etc), but also to help identify companies that will outperform in the future, based on their environmental or social responsibility.
Thanks to the recession people are realising that companies which commit to long-term sustainability and behave responsibly are the ones that continue to do well; they do well financially and continue to attract the talent that drives their innovation. Not rocket science you might think, I’m just glad that it’s finally happening.
Deepa is a Consultant at Corporate Citizenship Email her at deepa.mirchandani@corporate-citizenship.com to discuss community investment, LBG, MDGs and public / private partnerships and all good things.
World Bank’s IFC issues first $200 million green bond
The International Finance Corporation, a member of the World Bank Group, issued its inaugural Green Bond on 15 April, reflecting its strong commitment to helping reduce greenhouse-gas emissions by supporting climate-friendly projects in developing countries. As part of IFC’s broader mandate to address climate change, proceeds from the four-year, $200 million fixed-rate bond will be set aside in a separate ‘green account’ for investing exclusively in renewable energy, energy efficient, and other climate-friendly projects in developing countries. Projects that may be funded by the Green Bond include rehabilitation of power plants and transmission facilities to reduce greenhouse gas emissions, solar and wind installations, and funding for new technologies that result in significant reductions in greenhouse-gas emissions.
Contact: International Finance Corporation www.ifc.org
Shell UK pension fund among new UN PRI signatories
The £10.5 billion Shell Contributory Pension Fund (SCPF) in the UK is among a raft of major financial industry names from across the globe that have signed up to the United Nations Principles for Responsible Investment recently. SCPF joins its Dutch sister Stichting Shell Pensioenfonds as a signatory to the PRI. There are now a total of 726 signatories to the PRI, comprising 203 asset owners, 386 investment managers and 137 service providers. Other new signatories include Swisscanto (Switzerland), ValueInvest Asset Management (Luxembourg), The Townsend Group (US), Longview Partners (UK), Alto Invest (France), Media Super (Australia) and Sumitomo Mitsui Asset Management (Japan).
Carbon Disclosure Project announced on 14 April that its carbon disclosure ratings, which assess the quality of companies’ climate change reporting, are now available on Google Finance. The ratings will be displayed in the ‘Key stats and ratios’ section alongside key financial data. CDP, in conjunction with PricewaterhouseCoopers, has developed standardized carbon disclosure ratings which are used as evaluation tools by institutional investors. Companies are scored on their climate change disclosure and high scores indicate good understanding and management of climate change related issues affecting the company and good internal data management. Making this data available on Google Finance further extends the reach of CDP information to individual investors who can evaluate companies’ climate change management when making investment decisions.
Companies asked to disclose anti-corruption measures
In April, a $1.7 trillion coalition of investors wrote to 21 major companies in 14 countries asking them to improve their disclosure on bribery and corruption risks and avoidance measures. The investors have asked companies from eight sectors, including defence, construction and capital goods, to explain whether their anti-corruption management systems adhere to international reporting frameworks developed by the International Corporate Governance Network (ICGN) and UN Global Compact. The 20 investors behind this effort manage assets in nine countries and are all signatories to the UN-backed Principles for Responsible Investment. They include APG, F&C Asset Management and Hermes.
Responsible investment charity FairPensions and the Co- Operative Asset Management in the UK led a resolution asking BP to report on the financial, environmental and social risks associated with proposed investments in the Canadian oil sands. At the AGM on 15 April, BP won the vote with just over 6% of shareholders voting in favour of the resolution and a further 9.2% of shareholders abstaining. Campaigners drew attention to the positive effects of the resolution, which raised awareness of issues and generated debate. BP will make a final decision about the $2.4 billion joint venture with Husky Energy by year’s end. Supporters of the protest included several large investors such as Calpers and Calstrs, the California state employees’ and teachers’ pensions funds, and Co-operative Asset Management in the UK.
Sustainable World Trust named product of the month
The Co-operative Investments’ Sustainable World Trust was named Product of the Month in the What Investment magazine for April 2010. An independent panel from the magazine examined what the latest funds had to offer investors. Each product was given a star rating, representing its overall value for money, based on cost, terms and conditions and investment potential. The Sustainable World Trust targets the investment opportunities that result from a shift in consumer attitudes towards sustainable business practices. All funds within the range target companies that are set to benefit from major global changes such as urban regeneration, the ageing global population or climate change. In line with Co-operative Investments’ ethical investment policy, the trust does not invest in companies that are involved in armaments, animal testing for cosmetic purposes, tobacco or mining.
The UK’s second largest insurance group asked investors to vote on its corporate responsibility report on 28 April when it held its AGM. Currently, if shareholders are unhappy with a company’s environmental or social policy their only option is to vote against its reports and accounts. However, Lord Sharman of Redlynch, Aviva’s chairman, believes that companies need to open their activities to greater scrutiny. Aviva Investors, the company’s asset management business, has been an active proponent of corporate responsibility in recent years, voting against reports and accounts when companies have failed to publish information in this area. Aviva is now calling on stock market listing authorities to make it a requirement that businesses put their sustainability strategy to the vote at their AGM, like directors’ remuneration reports.
BankTrack calls on banks to close investment policies gap
On 27 April, BankTrack, the international NGO network monitoring the banking sector, presented ‘Close the Gap’, an extensive research project on the quality of lending and investment policies of major international banks. The research evaluates to what extent banks have incorporated sustainability criteria into their lending and investment policies. BankTrack evaluated the policies of 49 banks from 17 countries for seven key business sectors and on nine sustainability issues, with consideration for the performance of banks on transparency and accountability. To stimulate banks to make public commitment on their sustainability goals, the assessment only includes policies placed in the public domain. Bank policies for each of the seven sectors addressed in the report increased in the 2010 study compared to 2007, however none of the banks surveyed had adopted policies for all of the sectors and issues covered in the report. Seven banks were found to have no publicly available policies at all.
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