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Impact Investing

IPE special report May 2018

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ESG roundup: Lord Myners, Church of England, Oikocredit

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  • ESG roundup: Lord Myners, Church of England, Oikocredit

EUROPE - Shareholders should ask more questions about a company's risk appetite and take a much more active role in appointing members of the board of directors, said Lord Myners, former UK Financial Services Secretary.

Speaking on the future of investment governance at the Responsible Investor conference in Amsterdam, Myners called for closer involvement in corporate decision-making by shareholders.

"Currently, none of the shareholders really seem to feel the responsibility to own large companies," he said.

From his period as Financial Services Secretary, he recalled that many directors "apparently didn't know what was going on inside their bank" and particularly did not know "the risks their company was facing".

Myners, who is currently a partner at asset manager Cevian Capital, said he was very much in favour of the Scandinavian governance model, which includes shareholders on nomination committees for board members.

In his opinion, investors should pull out of a company rather than try to make it stick to ESG guidelines.

In other news, investment banks have failed on ethical issues and need to revise their approach to decrease the risk of further costly mistakes, an investment adviser for the Church of England has said.

If the sector fails to establish its own ethics standard committee, it will face regulation from the outside, predicted John Reynolds, chairman of the Church of England's Ethic Investment Advisory Group (EIAG).

Speaking on the Responsible Investor conference in Amsterdam, Reynolds said investment banks' current ethics codes were "uniformly disappointing" and of "little practical use".

He later told IPE: "The investment banks acted perhaps legally but unethically by selling securities while knowing they were flawed, and they actively misled credit rating agencies."

Reynolds said the £8bn investment funds of the Church of England also engage on public issues such as the purchasing policy of the large supermarkets toward farmers.

"There is no funding for or profiting from investments that go against the Church of England's beliefs," he said.

The investment adviser also said the Church of England's scheme benefitted not only from its size but also from the moral authority of the Church.

Lastly, several industry experts have claimed that microfinance as an "impact investment" has evolved past the "hype stage" and is here to stay.

Speaking at the Responsible Investor conference in Amsterdam, Ben Simmes, director of the €550m microfinance investment fund Oikocredit, said: "The sector is now focusing on professionalising the financial aspects."

However, he conceded that the social return of microfinance was still "quite challenging" and that a measuring method for social performance was needed.

According to Simmes, who has been running his fund for more than 10 years, the sector is currently in a stage of self-reflection after becoming aware of certain drawbacks, such as over-indebtedness of borrowers and a lack of regulation and governance.

"Although client principles have been introduced, not all microfinance companies have signed up yet," he said, adding that the sector also needed to increase its transparency on, for example, charged interest rates.

In his opinion, new financial products are needed to reach the people who still lack access to financial services.

"Until new products are developed, I don't expect a spectacular growth in microfinance," said Simmes.

Lauren Burnhill, managing director at One Planet Ventures, added: "Microfinance is not hype any longer, but it does product innovation."

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