Against a backdrop of diverging approaches to SRI across Europe, The European Sustainable and Responsible Investment Forum (Eurosif) published the outline for its proposed SRI Toolkit for European pension funds last month.
Eurosif was launched in 2001 by five national SRI forums, with support from the EC’s DG of Employment and Social Affairs. It is a pan-European not-for-profit entity set up to encourage and develop sustainable and responsible investment and better corporate governance.
Current members of Eurosif include NGOs, financial service providers, academic institutes and research associations. The association represents assets totalling over E600bn through its membership.
Jérôme Tagger, head of research at Eurosif describes the toolkit as “a portfolio of strategies that are available to pension fund practitioners from which they can choose in order to better incorporate SRI into their own practices.”
The toolkit covers the following areas:
q Understanding and incorporating SRI in user’s organisation;
q Trends and best practice in SRI;
q Why SRI is a growing interest in institutional portfolios;
q Who are the major SRI institutional leaders and why;
q Why governments, NGO's, companies are interested in SRI;
q Barriers and misperceptions about SRI;
q Governmental policies and regulations around SRI;
q Ability to network with other institutional investors and organisations in SRI.
In terms of the governmental policies and regulations around SRI, the document looks at how this might effect the necessity for companies to get involved in SRI, such as in the statement of investment principles.
“Barriers include the idea that while SRI is good you can’t make money with it,” says Tagger. Eurosif originally proposed its toolkit idea to the European Commission’s DG on employment and social affairs last year and in view of the EC’s interest in such matters subsequently secured funding.
“We have a reporting obligation but the EC is giving us free rein in terms of how we manage the project,” says Tagger. An ad hoc advisory council consisting of five European pension and SRI specialists has been helping Eurosif develop the outline.
“I have also worked informally with the Trade Union Advisory Committee to the OECD who are doing a lot of work on corporate governance,” adds Tagger. “We have also been talking to the national SIFs.”
So what does the new toolkit bring to the party? One of the main benefits is that it brings together SRI thinking across Europe. “There are a lot of great ideas and they need to be communicated further,” says Tagger. He adds: “It is comprehensive in terms of the different strategies that it covers and also in terms of the level of detail.”
Another key aim is to raise awareness of SRI among pension funds. “Through the toolkit’s practical approach we want to give SRI more substance and visibility and thus expand the community of those involved with it,” he continues.
The toolkit also targets all those that are involved in the institutional investment process, with the emphasis on the trustees. It also addresses the concerns of the executive boards.
Given the differences between European markets in terms of their individual approaches to SRI and the level of maturity of the market, the impact of the document will vary by individual country. “It might be that in the south of Europe the concepts will be more significant for institutional investors other than pension funds,” says Tagger. “Also, southern Europe has more of a best in class approach where the north, particularly the UK, is more engagement orientated.”
Tagger adds: “For us to present all those alternatives in a non-prejudiced way and in a way that will not scare everyone off will be a great challenge.”
So will countries be expected to adopt Eurosif guidelines over those of their own national SIFs? “There is no question of subsidiarity,” stresses Tagger. “We want to be in a position of peaceful coexistence.” The fact the users are intended to chose those elements of the toolkit that suit them should reassure the sceptics.
In spite of all the differences, the discussions among the five members of the advisory council have been very cordial. However, there has been what Tagger refers to as “a slight disagreement” on the issue of whether voting is considered a stronger tool than engagement and dialogue. “In the end representing the views of the advisory council and the different countries involved is a balancing act,” he says.
Following publication of the outline to Eurosif members, a draft content will be reviewed by the advisory council in mid-June. The content will be drawn from SIFs, the Just Pensions Programme, from the advisory council and from internal Eurosif research. The final draft will be presented to the industry at the end of October.
“Following that we will work with the national SIFs,” says Tagger. “They have good contacts with the representatives of the industry in their own countries and so they will be very strong sales partners.”