Anatomy of an “investor responsibility map”

Apple Map

Socially responsible investment (SRI) and corporate social responsibility (CSR) go hand-in-hand. Both practices have rightfully gained in prominence as investors have delved deeper into the environmental, social and governance (ESG) aspects of corporate behaviour.

However when considering an investor’s responsibilities, ownership goes beyond simply the direct exposure to the company itself. Investors are also ultimately responsible for the corporate’s supply chain practices, both directly and indirectly.

The aim of this blog post is to take a closer look at the characteristics of large investors, with a particular focus on how they interact with a company’s supply chain. This is done by introducing the concept of an “investor responsibility map” which summarises an investor’s direct and indirect exposures to a corporate’s supply chain.

To illustrate the concept, Apple’s investor base and their supply chain is used as an example, due to the company’s position as the world’s largest by market capitalisation. Interestingly, large investors such as fund managers and pension funds not only own significant stakes in Apple, they also own large portions of Apple’s suppliers. This puts these large investors in the prime position to engage and influence on ESG issues as part of their overall responsibilities.

With over 1 billion products sold, you would be hard pressed nowadays to find someone in developed countries who doesn’t own an Apple product or know someone who owns one. It’s difficult to be unimpressed by the company’s financial success, although Apple has certainly been the subject of criticism over its production practices.

An especially impressed group are the investors who have flocked to bid up the company’s stock price. Apple grew to become the world’s largest company in 2011 and has held onto that crown ever since. At the end of May 2015, Apple was valued at US$750 billion, that’s bigger than the GDP of Switzerland. As a result, Apple is owned by a wide range of large and influential fund managers and pension funds.


Apple’s size also means that it has a large and complex supply chain. Helpfully, the firm provides a full list of its suppliers including their locations. In total, Apple’s suppliers manufacture components and products in over 700 locations. Additionally, using data sourced from Bloomberg, it’s also possible to identify Apple’s most important suppliers.

As illustrated in Figure 1, Apple’s direct supply chain is dominated by 3 companies: Foxconn (officially known as Hon Hai Precision Industry Co. Ltd.) and Pegatron, both headquartered in Taiwan, and Intel which is run from the US.

Figure 1: Apple’s three largest suppliers
Percentages refer to proportion of Apple’s supplier costs attributed to each supplier firm. Number of factories in each country are provided in brackets.

These 3 firms collectively account for around 68% of Apple’s supply chain costs. Furthermore, these companies are large in their own right. Foxconn is worth around TWD1.4 trillion (US$45 billion, close to GDP of Ethiopia), Pegatron has a market capitalisation of TWD220 billion (US$7 billion, GDP of Kosovo) while Intel is valued at around US$150 billion (GDP of Bangladesh).

Unsurprisingly, the vast majority of the factory locations for these suppliers are based in developing countries with China accounting for 34 out of a total 46 locations across the 3 firms.

Modern day colonialism?

Also using data from Bloomberg, it’s possible to further analyse Apple’s shareholder register (also available here). In total, Apple has over 3,000 institutional shareholders according to the Bloomberg data. Of these, nearly 75% are listed as being based in the US.

An interesting exercise is to observe the location Apple’s supplier factories compared to where their investors are based. This is illustrated in Figure 2 with the top 10 countries in each category marked out as well as their relative importance.

Figure 2: Location of Apple’s suppliers and investors

Top 10 supplier countries

Top 10 investor countries

Percentages refer to number of suppliers or investors as a proportion of the total. Locations for suppliers are as per the Apple supplier list. Locations for investors are as per the locations sourced from Bloomberg and usually refers to the head office location of the investor.

What immediately jumps out is the clear “east versus west” distinction between the suppliers and the investors. The vast majority of Apple’s supplier factories are located in Asia ranging from rich countries such as Japan and Korea to poorer ones such as Vietnam and the Philippines, with China by far the largest. By contrast, the majority of investors are located in North America and Western Europe, with the US and Japan belonging to both groups. While the direction of travel is unsurprising, the stark nature of the difference is eye-catching.

Taking this further, Figure 3 highlights the size of the differences between these groups. Based on data sourced from the IMF, the average GDP per capita among Apple’s top 10 supplier countries is US$22,670. By contrast, for the top 10 investor countries, the average GDP per capita is roughly double at US$54,557.

Figure 3: GDP per capita by country for Apple’s suppliers and investors

Top 10 supplier countries

Top 10 investor countries

Sources: IMF (2014) via Wikipedia, CURRENTLY UNDER DEVELOPMENT.

The implication here is that developed country investors have benefitted from accessing the cheap labour of poorer countries. Conversely, it’s also arguable that rich country investors are enabling capital and jobs to flow into developing economies, aiding longer term economic benefits for the latter.

The bottom line though is that investors have significant power over the lives of many in developing countries. If investors demand that corporates adopt a narrower focus on profits, the consequences could be large for developing country workers. Alternatively, investors can accept greater responsibility for the corporate’s supply chain practices by demanding better labour standards, even if there is a potential marginal impact on profitability.

Either way, investors have a choice in outlining their expectations of corporate behaviour. Importantly, the choices are not mutually exclusive: improving supply chain practices doesn’t automatically mean reduced profits.

Responsible investors?

So who are these investors? And how much do they emphasise ESG factors?

Figure 4 shows the 20 largest shareholders in Apple. Collectively, these investors own just under a third of the company. The vast majority of this group are affiliated with fund managers with only 2 pension funds represented by Norges Bank (responsible for managing Norway’s government pension fund) and TIAA CREF (US based pension managing on behalf of academics and researchers, among others). One investor that does stand out is activist hedge fund manager Icahn Associates who have recently been vocal about their view of the company being undervalued, in part due to the company’s dominant market position.

Also shown in Figure 4 is the widespread adoption of the UNPRI framework for incorporating ESG considerations into investment decisions. Among Apple’s largest investors, 17 out of 20 are signatories to the initiative, indicating that non-financial factors are important to these investors.

Figure 4: Apple’s 20 largest shareholders by size of holding


In terms of Apple’s major suppliers, the composition of the investor base is noticeably different. This is shown in Figure 5 for Foxconn (Hon Hai) and Pegatron where the fund managers are not as dominant. Further, the extent of UNPRI coverage is also much lower so investors in these companies are less likely to publicly state their consideration of ESG factors, although this is not to say that these investors necessarily ignore these issues.

Of further interest is where there is overlap between the major investors in Apple and those of its suppliers. For example, Vanguard, BlackRock and Norges Bank are top 20 shareholders in all 3 companies. In fact, the majority of Apple’s largest investors also have significant stakes in the firm’s suppliers, more on this later.

Figure 5: Foxconn and Pegatron 20 largest shareholders




Furthermore, in the case of Pegatron, the largest shareholder is Asustek, a computer company which itself is also listed. The same 3 investors listed above are also large shareholders of Asustek, so the look through ownership of Pegatron needs to be added to the direct investment to get the total exposure to Pegatron.

What is illustrated in this analysis is that major investors have both direct and indirect exposure to supply chains, with fund managers having the most overlap. This places fund managers in a unique and powerful position to effect change, where required. Fund managers are able to experience and engage on ESG behaviours across the supply chain enabling them to have a broader perspective on this issues and coordinate initiatives to improve standards.

The bigger picture

Bringing all of this information together allows for a more comprehensive understanding of the role of large investors and their responsibilities. This information is summarised by what I call an “investor responsibility map”. The full map would include all investors and the full supply chain (including the suppliers of a company’s suppliers). Naturally, the full map would be difficult to display due to the sheer number of stakeholders and connections between them, however a sample subset for Apple is shown in Figure 6.

Figure 6: A subset of Apple’s investor responsibility map

Solid lines refer to investment holdings. Dashed lines refer to supplier linkages based on proportion of Apple’s costs attributed to each firm.

Figure 6 demonstrates the extent to which large investors are embedded in a corporate’s supply chain. For example, Vanguard, Apple’s largest investor, owns not only 5.7% of Apple, it also owns 2.6% and 2% of Foxconn and Pegatron (2.6% of when the look through exposure of Asustek is included), respectively. Likewise, Apple’s biggest direct pension fund holder, Norges Bank, owns 0.8% of Apple, together with 1.4% of Foxconn and 0.8% of Pegatron (1.1% including the Asustek look through).

Returning to Apple’s top 20 investors, Figure 7 tabulates the type of data which would be incorporated into an investor responsibility map. As previously alluded to, Apple’s top 20 investors also have meaningful stakes in their suppliers with a collective 9.3% of Foxconn, 10.5% of Pegatron and 29.8% of Intel. Using the weights in Figure 1, this implies that this group controls around 7.5% of Apple’s supply chain.

In each case, if these investors collaborate and act with one voice, the collective size of investment would easily be noticed by corporate management. In some cases, this size of investment would qualify for “proxy access” with the potential to empower investors to nominate a large part of the company’s board of directors. Nevertheless, not all fund managers are willing to use this power, which brings into question the degree to which these investors want to engage with corporates.

Figure 7: Apple’s top 20 investors and supplier holdings
Apple TableSources: Bloomberg, CURRENTLY UNDER DEVELOPMENT.
* Pegatron holdings include look through exposure due to Asustek holdings.

Large investors are the key link in analysing responsibility within the supply chain. Despite this, as highlighted by ShareAction in the UK, fund managers are not always “walking the walk” by using the power that is entrusted to them.

For fund managers and other large investors to take action, activists and end investors will need to lobby these investors where there is a lack of action on ESG issues. After all, fund managers and pension funds act as the fiduciary to their end investors. If enough end investors speak up, these large investors will be compelled to act.

Anatomy of an “investor responsibility map”

4 thoughts on “Anatomy of an “investor responsibility map”

  1. I’ve just taken a quick look at the data on Barry Callebaut. It’s biggest shareholder is Jacobs Holdings AG at just over 50% ownership. It seems that they are a foundation and you can find out more on their website here:

    The remainder is owned by the usual suspects which you can see here:

    Meanwhile there is much less information on their suppliers (on Bloomberg that is). There may be more on the web, but it definitely depends on how transparent the company are on that point.

    I’m happy to help on this, although it does take a lot of digging to get much of this information!


  2. Well written and documented, again; are you in for the same kind of analysing of chocolate Belgo-Suisse chocolategiant Barry Callebaut? I coined the term “equal pay trade” on my blog, regarding who’s making money throughout the supply chain of a chocolate bar. I don’t have any clue who are the shareholders of BC, though.


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