As consumers and activists have increased their focus on the impact of corporate behaviours on society, companies have responded by upping their emphasis on their corporate social responsibility (CSR) initiatives. This is an undoubtedly positive trend and should be applauded.
However, at the same time headlines relating to corporate tax avoidance have become increasingly frequent. Household names including Google, Starbucks and Vodafone have sparked concern over their “tax planning” practices, despite some of their commitments to improve their environmental and social impacts.
Are CSR initiatives effectively being funded by tax avoidance? Does this actually matter to firms’ stakeholders? In this blog post, I will take a closer look at this relationship, consistent with the findings from research published by academics at the University of Oregon’s Lundquist College of Business. A holistic triple bottom line approach to corporate strategy has become embedded in the minds of many mangers. The concern is that tax avoidance is an equally ingrained logic.
Continue reading “CSR and tax avoidance: Two sides of the same coin?”
Climate change is currently the most pressing issue uniting socially responsible investors globally. Responses by different investors have varied from outright divestment of fossil fuel producers, engagement through shareholder resolutions seeking further disclosure, to measuring the direct carbon exposure of investment portfolios.
Each of the approaches used by large institutional investors has advantages and disadvantages in trying to effect corporate change. This blog post attempts to summarise these issues, weighing the arguments and counterarguments from a range of sources. Ultimately, the most appropriate course of action will differ on a case-by case basis.
However, the present debate on divestment has largely ignored individual investors. The existing investment architecture needs a rethink to enable individuals to have a stronger say in how their investments are managed when it comes to environmental, social and governance (ESG) issues.
Innovation is possible and necessary, and I suggest three approaches to aid engagement by individual investors, namely: a “building blocks” approach, look-through proxy voting and standardised ESG exposure metrics. Responsible investing is simultaneously personal and universal. The investment industry has an important role to play in evolving its infrastructure to let the voices of all investors be heard.
Continue reading “Divestment dilemma: Resolution, revolution or evolution?”
When you hear the word “bank”, what’s the first thought that pops into your head? Crisis or scandal? Unethical or heartless? Perhaps something more sinister? The banking industry isn’t usually positively associated with social values. However, it doesn’t need to be that way: change is often led by innovators willing to challenge the status quo.
On Saturday, I attended the Annual Meeting of Triodos Bank’s* UK operations in Bristol. It was refreshing and enlightening to learn more about a financial institution set up with human values at its core. A common thread throughout the day was the combining of people, planet and prosperity – issues not normally associated with the profit-focused banking industry.
I couldn’t help but think that this was a glimpse of the future of finance. Or rather, maybe it’s a return to the original purpose of finance and banking: to enable humans to create a greater shared prosperity.
Continue reading “Better Banking: Reflections on the Triodos UK Annual Meeting”
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.
Continue reading “Anatomy of an “investor responsibility map””
Recently published reports in the UK and US highlight how low wage employers are being subsidised by the social welfare system in what is effectively a transfer from taxpayers to shareholders. While this link is clear within developed countries, it is possible to argue that a similar, albeit less direct, effect is also occuring in developing countries.
This blog post will explore whether corporates headquartered in the developed countries effectively receive similar subsidies as a result of paying low wages in developing countries. Is foreign aid actually funding corporate profits?
Continue reading “Cheap labour + government aid = corporate profits?”
In Part 1 of this blog post, the focus was on the use of dialogue between investors and corporates to engage on environmental, social and governance (ESG) issues. A framework for this engagement proposed by Fabrizio Ferraro (IESE) and Daniel Beunza (LSE) was discussed, in addition to the way in which it might possibly be extended to other actors in the investment community, including fund managers.
How can this framework be harnessed and utilised by non-investors? Part 2 of this blog post takes a closer look at aligning the actions of investors and non-investor activists in interacting with corporates. Further, the use of dialogue by groups such as ShareAction, Fairtrade and Oxfam as part of ESG engagement is analysed. Ultimately, further collaboration between end investors, fund managers, civil society organisations (CSOs) and individuals will enable greater awareness and integration of ESG considerations by investors and corporates.
Continue reading “Talk isn’t cheap: Engaging corporates on ESG issues (Part 2)”
Power relationships and influence matter a lot when it comes to corporate behaviour. However one of the less well covered power relationships is between investors and the companies they own. A recent paper by Fabrizio Ferraro (IESE) and Daniel Beunza (LSE) offers some interesting insights on how the Interfaith Center on Corporate Responsibility (ICCR) has used its position as an investor in major multinationals to catalyse changes in corporate behaviour through dialogue. The findings are revealing and also relevant for non-investors, such as activists and certification bodies, for engaging with corporates on environmental, social and governance (ESG) issues. The constructive and collaborative nature of dialogue enables corporates to be more willing to engage.
In Part 1 of this blog post, the key findings of this paper are discussed together with implications for the pensions and investment industry, particularly the way in which fund managers can play a stronger role. Part 2 will analyse broader implications for other stakeholders, including activists, and the way in which non-investors can influence corporates by collaborating with the investment channel.
Continue reading “Talk isn’t cheap: Engaging corporates on ESG issues (Part 1)”