Each time I visit Berlin, I get a strong sense of optimism and renewal. So it’s only appropriate that the launch of the European Responsible Investment Network (ERIN) took place in this city which has undergone so much change. Like the renewed Berlin, the responsible investment field is trying to emerge from its historical identity, redefine its purpose and reimagine the way in which capital markets can serve society.
The event’s topics ranged from the challenges of engaging investors on environmental, social and governance (ESG) issues, the steps investors have actually taken to better incorporate these non-financial considerations, through to the ways in which campaigners can be more effective in influencing policy makers and fund managers. Instead of giving a linear impression of “what went on” at the conference, I’ll focus instead on the key themes that I took away from it. These themes included the function of finance, the challenges of overcoming short-termism, the intersectional nature of individual ESG factors, in addition to how campaigners can more effectively promote change.
There was a general recognition of gaps between the finance industry’s understanding of its responsibilities compared to the issues of most concern to NGOs and CSOs. These gaps can be overcome, but it will require empathy, finding common ground and persistence from all parties involved. All this effort will be for a worthy prize: a financial system which nourishes a sustainable real economy, with the needs of society at its heart.
Continue reading “Renewable investing: The launch of the European Responsible Investment Network”
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?”
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””
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)”