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IPE special report May 2018

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ESG roundup: ISS on active ownership, EIRIS on UK green investment

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  • ESG roundup: ISS on active ownership, EIRIS on UK green investment

EUROPE - Absent active ownership has been harmful to the investment industry, according to Robert Monks, founder of Institutional Shareholder Services (ISS) and former administrator of the US Office of Pension and Welfare Benefit Programs.

Speaking at Sarasin & Partners' sixth annual responsible investment seminar via video link, Monks said: "The failure of private company pension plans, mutual funds, foundations and universities to participate [in active ownership] has been harmful in two related ways.

"First, it deprives the market of the experience and perspective of their input, and second, it allows the category of shareholder activism to be trivialised, and, indeed, to be dismissed by policymakers because activism is unrepresentative of the ownership class as a whole."

He said there could be no effective corporate governance until the major institutions became involved, which would not happen until a formal legal policy was in place that showed shareholder activism was in the public interest and the national policy.

Monks stressed that, in the absence of global institutions, laws and regulations, the only possible effective enforcer of corporate governance was ownership.

"Whether we live in a poor or an adequately financed society depends on the effectiveness of our system of corporate governance," he added.

"Institutions must take the initiative to protect their relevance as a wealth-preserving energy in a free society. Institutional initiative is a prerequisite to making capitalism more responsible.

"They cannot wait for others, nor can they decline to act. Institutions must take the lead because all other courses have failed."

Meanwhile, in the UK, the amount of money invested in green and ethical retail funds has reached a record high of £11.3bn* (€12.9bn), according to London-based independent research provider EIRIS.

Launched in the run-up to the UK's third National Ethical Investment Week, which runs 16-22 October, the latest figure of £11.3bn represents more than 750,000 investors in green and ethical funds, up from around 250,000 investors in 2001 when £4bn was invested ethically in the country.

Statistics from the Investment Management Association also show that inflows into UK ethical funds were up by 23% in the second quarter compared with the same quarter in 2010.

Mark Robertson, head of communications at EIRIS and editor of YourEthicalMoney.org, said: "A significant chunk of the UK population is clearly interested in green and ethical finance and government initiatives, such as the launch of the Big Society Bank, and plans for a Green Investment Bank will likely raise its profile even further."

The figure is an estimate based on total AUM data collected from 84 UK-domiciled green and ethical retail funds.

According to EIRIS, £10.9bn was invested in UK-domiciled green and ethical retail funds as of 31 December 2010.

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