SRI principles aren't creating specialist mandates
UK – The investment industry has seen few specialist socially responsible investment (SRI) mandates, despite many pension trustees incorporating corporate social responsibility (CSR) policies into their statements of investment principles, says the Industrial Society (IS).
The IS comments come in response to the publication by the Association of British Insurers (ABI) of a set of disclosure guidelines on SRI.
Says Will Hutton, chief executive of the IS: ”We welcome the guidelines. They throw down significant challenges of accountability and are by international standards robust and demanding but investors will need to be vigilant if they are to be effective.”
The IS claims that statements of principles are not enough on their own and that trustees will need to monitor the performance of investment managers proactively.
The guidelines were also welcomed by Friends Ivory & Sime (FIS), which says that it has published a revision to its corporate governance policy to incorporate them.
The ABI guidelines call for companies to establish formal systems to identify risks and opportunities arising from ethical and environmental issues and to disclose which of these issues are important for their business.
FIS conducted a survey in conjunction with Sustainability Ltd, to check the quality and extent of companies’ governance and risk management systems with regard to social, environmental and ethical factors (SEE).
Carried out over the last 12 months by means of interviews with senior representatives of the 14 largest UK companies by market capitalisation and information collected from a further 30 companies, the survey found that:
•most companies consider that risks arising from SEE factors are significant for their business
•very few companies have yet developed systematic approaches to governance and risk management of ethical and environmental factors.
•a small number of companies are in the process of pioneering fully integrated systems for managing SEE risk.
Says Craig Mackenzie, director of governance and socially responsible investment at FIS : “Our research shows that management of ethical and environmental risks is relatively underdeveloped. The new ABI guidelines will therefore prove to be a considerable challenge to many companies.”