Responsible Investment

Edited by Rory Sullivan and Craig Mackenzie

40% discount on this title

February 2006 382 pp 234 x 156 mm

hardback ISBN 978-1-874719-03-8 £45.00

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Do responsible investment strategies systematically result in improvements in the social, ethical and environmental performance of companies? To what extent is it in investors' interest to encourage higher standards of corporate responsibility? Do responsible investment strategies enhance financial performance for investors?

"[The] editors are to be applauded ... for corralling such a wide-ranging, intelligent, and experienced group of writers"
Bill Baue

"This is a book that no professional, academic, or student with an interest in the emerging field of responsible investment will want to be without."
Ethical Performance

DESCRIPTION

Most investment today is conducted by a relatively small number of institutional investors — pension funds and investment managers — who manage the pensions and saving funds of millions of ordinary people. The manner in which these institutional investors invest and discharge their responsibilities as the owners of companies is, therefore, of critical importance to society as a whole.

In recent years, some of the biggest institutional investors have actively encouraged companies to improve their management of social, ethical and environmental issues. A number have also sought to explicitly analyse companies' performance on these issues and to incorporate this analysis into investment decision-making. These activities have contributed to important changes: a number of companies have committed to stabilising or reducing greenhouse gas emissions from their activities and operations, labour conditions in many retail supply chains have improved significantly, and many companies have significantly improved their governance of corporate responsibility issues.

However, to date, there has been little systematic analysis of fundamental questions such as: Do responsible investment strategies systematically result in improvements in the social, ethical and environmental performance of companies? To what extent is it in investors' interest to encourage higher standards of corporate responsibility? Do responsible investment strategies enhance financial performance for investors?

In this ground-breaking collection, Rory Sullivan and Craig Mackenzie have brought together some of the leading practitioners and commentators in the field of responsible investment to explore these questions. The contributors to this book present their views on the practicalities of implementing responsible investment strategies, the outcomes that have been achieved, the practical issues and barriers faced in implementing such strategies, and the challenges to be faced if responsible investment is to become a mainstream investment approach. The results are both unique and surprising.

This book will be mandatory reading for all those involved in the field of social and environmentally responsible investment, corporate governance and corporate social responsibility whether they be academics, researchers or practitioners.

PRAISE

A 'who's who' of leading UK SRI thinkers and practitioners, together with a savoury salting of other EU and US experts. Highly recommended.
John Elkington, Founder and Chief Entrepreneur, SustainAbility

Voting demographics, a growing crisis in public finances and the destruction of economic value through shareholder short-termism will drive forward responsible investment even if our personal and collective ethics fail to underpin a moral renaissance in investor behaviour. The question is when and how, not whether, and this book offers much-needed pathways that the investment community can choose to take, or else be overwhelmed by coming changes.
Simon Zadek, Chief Executive, AccountAbility

Companies are unlikely to thrive in the long term if they are in conflict with the society from which they derive their franchise. This book sheds useful light on the implications of this for investment.
Peter Montagnon, Director of Investment Affairs, ABI

This book provides valuable hard evidence of the practice of responsible investment. As the world moves towards a new model of caring capitalism there is the possibility of the next 'great transformation'. We need news from the front of the movement from corporate social responsibility to corporate citizenship and this book has an abundance of intelligent insights by reflective practitioners.
Malcolm McIntosh, General Editor, Journal of Corporate Citizenship and Visiting Professor, Universities of Bath, Nottingham and Stellenbosch

Responsible investment has been defined too narrowly for too long. This book redefines responsible investment to reveal its relevance to all institutional investors, suggesting that many today may be engaged in irresponsible investment that neither serves society nor their fiduciary obligations.
Craig Smith, Senior Fellow in Marketing and Ethics, London Business School

Just what's needed: an introduction to the field; case studies that set out the state of the art; and a critical appraisal of the hype by some of socially responsible investment's foremost practitioners. Part manual, part call to arms and part thought-provoking reflection. An essential starting point for anyone who wants to shape the future of socially responsible investment or to understand its potential and limitations.
Halina Ward, International Institute for Environment and Development

Responsible investment is now not only an important issue for investors, but also for regulators, NGOs and listed companies. This book brings together leading thinkers from these fields and makes a valuable contribution to the development of the subject.
Mark Makepeace, Chief Executive, FTSE Group

This excellent book explains the increasingly important role played by institutional investors who demand financial returns that are sustainable over long-term horizons. A welcome addition to a field that is quickly entering the financial mainstream.
Matt Christensen, Executive Director, European Sustainable and Responsible Investment Forum (Eurosif)

REVIEWS

An impressive and wide-ranging list of contributing writers advance a balance between elucidating the strengths of socially responsible investing while also exposing its weaknesses ... On first glance, the most impressive aspect of Responsible Investment is its list of contributors ... [The] editors are to be applauded not only for corralling such a wide-ranging, intelligent, and experienced group of writers, but also for a more subtle aspect of this indispensable volume ... [they] frame the book with a set of questions, including whether SRI actually improves corporate governance, social, ethical, and environmental (GSEE) performance, and whether SRI enhances financial performance for investors. While the second question has received much attention, the first question, which really gets at the fundamental foundation of SRI, has slipped under the radar.
Bill Baue, SocialFunds.com
Read the full review

This is a book that no professional, academic, or student with an interest in the emerging field of responsible investment will want to be without. It sets out to answer three questions: Do responsible investment strategies actually contribute to improvements in the social, ethical and environmental performance of companies? To what extent is it in investors' interests to encourage higher standards of corporate responsibility? And do responsible investment strategies enhance financial performance for investors?

To accomplish this task, it draws on a wide range of contributors (39 in total), many of whom are wizened responsible investment practitioners. Readers may recognize the names of individual thought leaders, such as Russell Sparkes and Chris Tuppen, as well as key institutional players, such as FTSE4Good, Goldman Sachs, Henderson Global Investors, Innovest, Insight Investment, Morley Fund Management, Sustainable Asset Management and the UK Social Investment Forum.

One of the consequences of such an impressive stable of authors is that the book presents a good cross-section of opinions, including perspectives from investment analysts, fund managers, government representatives, companies and campaigners. Refreshingly, many chapters deal with the significant challenges of responsible investment, as well as its more commonly noted progress and potential.

Although the book takes an in-depth look at enhanced investment analysis, decision-making and shareholder activism, its self-confessed limitations relate to its scope. The focus is primarily on the UK and on investments in equities and bonds. However, the experiences shared and lessons learned clearly have global implications and arguably set the benchmark for what responsible investment is all about.
Wayne Visser, in Ethical Performance magazine Vol. 8 Issue 1 (May 2006)

The leading SRI thinkers at Insight, Morley, Innovest, Goldman Sachs and many more have pooled their latest thinking in this important book. The editors have marshalled a range of perspectives on the ‘why’ and ‘how’ of investor responsibility. Each contributor gives a clear elucidation of their house style. Case studies show how they go about their job in practice. Each one illustrates the processes being used to analyse stockmarket implications of social issues.

This is the most detailed resource yet available on how SRI funds work in practice.
Corporate Citizenship Briefing, January 2007

Foreword

Stephen Timms MP, Minister for Pensions Reform, UK

Part I: Introduction and background

1. Introduction

Rory Sullivan and Craig Mackenzie, Insight Investment, UK

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2. The scope for investor action on corporate social and environmental impacts

Craig Mackenzie, Insight Investment, UK

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3. A historical perspective on the growth of socially responsible investment

Russell Sparkes, Chief Investment Officer, Central Finance Board of the Methodist Church, UK

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Part II: Enhanced investment analysis and decision-making

4. Does a focus on social, ethical and environmental issues enhance investment performance?

Rory Sullivan, Craig Mackenzie and Steve Waygood, Insight Investment, UK

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5. Integrated investment analysis: investment implications of the REACH regulation

Steve Waygood, Insight Investment, UK, and Steffen Erler, Walter Wehrmeyer and Harish Jeswani, Centre for Environmental Strategy, University of Surrey, UK

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6. Morley Fund Management’s approach to investment integration

Ronnie Lim, Morley Fund Management, UK

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7. Integrating governance, social, ethical and environmental issues into the corporate bond investment process

Kerry ten Kate and Andy Evans, Insight Investment, UK

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8. HIV/AIDS: economic implications for the Southern African mining industry

Simon Toyne, Dresdner Kleinwort Wasserstein, UK

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9. The Goldman Sachs Energy ESG Index: integrating environmental, social and governance factors into energy industry analysis

Sarah Forrest, Anthony Ling and Jonathan Waghorn, Goldman Sachs, UK

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10. Sustainable investment research: Innovest Strategic Value Advisors

Matthew Kiernan, Innovest, USA

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11. SAM’s approach to measuring and valuing corporate sustainability performance

Gabriela Grab Hartmann and Thilo Goodall, SAM Sustainable Asset Management

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12. Communicating risks to pension fund trustees: the UKSIF sector notes project

Meg Brown, UKSIF, UK

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Part III: Shareholder activism

13. Shareholder activism on social, ethical and environmental issues: an introduction

Rory Sullivan and Craig Mackenzie, Insight Investment, UK

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14. Universities Superannuation Scheme: implementing responsible investment

Peter Casson, University of Southampton, UK, and David Russell, USS, UK

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15. Henderson Global Investors: engagement and activism

Rob Lake, Henderson Global Investors, UK

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16. Insight’s approach to activism on corporate responsibility issues

Craig Mackenzie and Rory Sullivan, Insight Investment, UK

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17. The role of activism in responsible investment: the FTSE4Good indices

Will Oulton, CRG Advisory Services, UK

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18. Measuring the effectiveness of investor engagement: GSK and developing-country access to essential medicines

Steve Waygood, Insight Investment, UK

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Part IV: Perspectives on responsible investment

19. The universal owner’s role in sustainable economic development

James P. Hawley and Andrew T. Williams, Saint Mary’s College of California, USA

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20. Companies run in shareholders’ long-term interests also serve society’s long-term interests

Robert Monks, Lens Governance Advisors, USA, and Allen Sykes, UK

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21. Why socially responsible investment requires more risk for companies rather than more engagement

Peter Frankental, Amnesty International UK

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22. SRI analysts: is it time to bring them in from the cold?

Ralph Edmondson and Adrian Payne, British American Tobacco, UK

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23. Exerting influence: engagement or best-in-class?

Andy Wales, Severn Trent plc, UK

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24. Engaging with investors: from values to value

Chris Tuppen, BT, UK

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25. Workers’ capital: promoting trade union concerns through investment

Tom Powdrill, Trades Union Congress, UK

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26. Pharma Futures: investor analysis of the future of the pharmaceutical sector

Sophia Tickell, Pharma Futures, UK

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27. Evaluation and research of SRI managers

Emma Whitaker, Mercer Investment Consulting, UK

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28. Why should investors care about responsible investment?

Yusuf Samad, Hewitt Bacon & Woodrow, UK

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29. A critical perspective on activism: views from a pension fund professional

Raj Thamotheram, USS, UK

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30. Shaping the market: investor engagement in public policy

Nick Robins, Henderson Global Investors, UK

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31. Harnessing investors to support the implementation of health and safety public policy

Steve Waygood and Rory Sullivan, Insight Investment, UK, and Alan Morley, Health and Safety Executive, UK

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Part V: Discussion and conclusions

32. The practice of responsible investment

Rory Sullivan and Craig Mackenzie, Insight Investment, UK

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33. Looking forwards

Craig Mackenzie and Rory Sullivan, Insight Investment, UK

ABOUT THE EDITORS

Rory Sullivan has been Director, Investor Responsibility with Insight Investment (the asset management arm of HBOS plc) since October 2002. He has over 15 years' experience in environmental management and public policy, having worked for private-sector and government agencies in Australia, South-East Asia, Africa and Europe. His experience includes evaluating development-focused partnerships (health, education, water) on behalf of the World Bank's Business Partners for Development programme, advising Environment Australia and the OECD on the design of pollution release and transfer registers, and assisting public- and private-sector organisations with the implementation of environmental and risk management systems. He has written widely on corporate responsibility and responsible investment issues and has written/edited four books on these issues, including Business and Human Rights: Dilemmas and Solutions (editor, 2003) and Rethinking Voluntary Approaches in Environmental Policy (2005). He is also the co-editor of Putting Partnerships to Work: Strategic Alliances for Development between Government, the Private Sector and Civil Society (2004).

Craig Mackenzie is Head of Investor Responsibility at Insight Investment. He leads the team that is responsible for conducting research, company engagement and voting on corporate governance and corporate responsibility issues on behalf of Insight's £74 billion of assets. Previously, Craig led the creation of the highly regarded governance and SRI team at Friends Ivory & Sime (now F&C). He is a leading advocate of investor engagement and activism strategies to encourage more responsible and sustainable approaches to value creation by companies. Craig is chair of the FTSE4Good criteria development committee, a member of the steering group for the Business in the Community Corporate Responsibility Index and the technical advisory committee for the Global Reporting Initiative. He is a former member of the advisory boards of the UK Social Investment Forum and AccountAbility.

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