FairPensions' survey unveils truth - and risks - behind fund managers' "corporate responsibility" policies
15th October 2007
To read the Executive Summary of the report, click here.
The Fund Manager Responsibility Survey by FairPensions reveals that 75% of the top 20 fund managers do not disclose responsible investor policies that address environmental and social issues, such as climate change and human rights, as well as corporate governance matters.
Some of the UK's biggest household names such as Scottish Widows and Barclays Global Investors appear in the bottom half of the report. Goldman Sachs and State Street are ranked last. Only five fund management companies publicly disclosed a detailed policy covering environmental, social and governance issues.
Top performers in the survey included F&C, who are majority-owned by Friends Provident. F&C scored 100%, followed closely by Hermes, Morley and Insight who all demonstrated a high degree of transparency and a concrete commitment to engagement on responsible investment.
FairPensions, a campaign for responsible investment that encourages investors to understand and influence the way their money is invested, says that ethical issues such as climate change are likely to become serious financial risks for those investors that do not have clear responsible investment policies in place.
The companies included in the survey together manage 7 trillion pounds on behalf of clients including individual investors, occupational pension funds and charities.
The Stern Report highlighted the huge global financial risks attached to climate change. Recently, companies such as Barclays and Scottish Widows have made public statements on their companies' climate change policies and their plans to cut their carbon emissions, thereby acknowledging the seriousness of the issue. However, the survey did not find evidence that these companies had policies on encouraging similar cuts among companies they invest in. In contrast, F&C and Insight provided clear policies on how they engaged with companies to help them reduce their carbon footprint.
Alex van der Velden, Executive Director of FairPensions said: "Investors need to know how fund managers are responding to the financial risksassociated with such important issues as climate change and human rights. Environmental and social issues can lead to heavy losses which are then passed on to investors.
"We are not asking people to move all their pension funds into ethical and environmental funds, but they need to engage with fund managers to make sure Corporate Social Responsibility policies are being carried through."
The FairPensions' website, www.fairpensions.org, helps consumers to email their fund managers and pension trustees asking them to become more financially and ethically responsible.
Alex van der Velden added: "We carried out this survey to probe under the surface of fund managers' public statements, to find out whether their activity on environmental, social and governance issues matched their public commitment.
"Our findings demonstrate a clear gap between rhetoric and activity. The survey demonstrates that although many organisations are getting to grips with corporate social responsibility, fund managers are still behind the times."
FairPensions analysed transparency and engagement by searching for information on each company's public website and inviting fund managers to provide additional information on their responsible investment policies and activities.
Media enquiries to:
Zoe Butt, Mainland PR 0203 008 7409
Kelly Rawlinson, Mainland PR 0203 008 7406
Alex van der Velden, FairPensions 020 7403 7800
Duncan Exley, FairPensions 020 7403 7806 / 07847 006 253
Editors' Notes:
What is FairPensions?
FairPensions calls for responsible investment by UK pension funds and fund managers. As owners of approximately a fifth of the UK stock market, occupational pension funds alone are major shareholders, powerful enough to affect company behaviour on environmental, social and governance issues. FairPensions believes that investors should consider their customers' values - instead, many do not challenge those companies in their portfolios that undermine human rights and damage the environment.
FairPensions urges investors not to avoid certain industries, but to use shareholder power to improve company behaviour. Responsible investment has already had an impact: including helping persuade drug companies to lower the cost of AIDS drugs in southern Africa, and forcing companies to start tackling climate change.
FairPensions is the successor organisation to Ethics for USS (Universities Superannuation Scheme), a campaign which convinced one of the UK's largest pension funds to adopt a socially responsible investment policy. FairPensions is a registered charity.
FairPensions' activities fall into three main areas:
- Education: running awareness initiatives to promote ethical investment
- Research: monitoring the adoption and implementation of responsible investment by investors in the UK
- Advocacy: campaigning on behalf of pension fund members for the responsible investment of their pension
FairPensions is supported by a number of leading charities and trade unions, including Amnesty International UK, Oxfam, WWF, Unite, Traidcraft, NUJ, CWU, ActionAid, CAFOD, EIRiS, ECCR and Unison, as well as thousands of individuals - over 4,000 have registered already.
The Research
The 20 fund managers representing the UK's 20 biggest managers of pension fund assets and other assets held in the UK have been selected based on the 2006 Hymans Robertson Market Briefing Survey and the 2006 Investment Management Association Survey.
The report, "Fund Manager Transparency and Engagement on Environmental, Social and Governance Issues" looked specifically for client engagement reports, voting records or policies and previous responses to other surveys such as the UN Principles of Responsible Investment. All the information was then collated to create a benchmark on environmental, social and corporate governance issues.
Transparency
The Transparency section of the survey was designed to measure the levels of disclosure and openness shown by UK fund managers in relation to Responsible Investment. The information for this section was gathered and verified independently from the fund manager's public website
Engagement / Integration
The Engagement/Integration section of the survey was designed to measure the extent to which UK fund managers engage with companies on ESG issues, and the extent to which ESG issues are integrated into the fund managers' mainstream business. Again, the information for this section was gathered and verified independently from the fund manager's public website. However, fund managers were also invited to provide any information that was not available on their public websites, such as voting data or client engagement reports, and this information was taken into account.