Response of the UK Social Investment Forum to the European Commission Green Paper: 'Promoting a European Framework for Corporate Social Responsibility'

UKSIF submission: Dec 21, 2001

 

The UK Social Investment Forum (UKSIF) is the UK's membership network of stakeholders in socially responsible investment (SRI). UKSIF's 250+ members and affiliates include providers of socially responsible investment funds, other financial institutions, socially responsible investment research consultancies and independent financial advisers. We provide the secretariat for the UK Parliament's All-Party Parliamentary Group on Socially Responsible Investment.

Working with four national social investment forums in Europe, UKSIF took the lead in initiating the European Sustainable and Responsible Investment Forum (Eurosif) with strong support from the European Commission. Eurosif aims to inform, educate and provide a European network for discussion among national SIFs and other actors in Europe interested in sustainable and responsible financial services. It aims to encourage transparency, disclosure and active ownership, with regard to corporate practice and governance, and investment objectives and processes.

To inform our response to the Green Paper 'Promoting a European Framework for corporate social responsibility', UKSIF held a consultation meeting with members and affiliates in October 2001. The meeting heard from Dominique Bé from the DG for Employment and Social Affairs and was attended by over 50 representatives from UKSIF member organisations.

Socially Responsible Investment in the UK

Drivers

Socially responsible investment integrates social, ethical and environmental issues into investment decision making. This may be done for a wide variety of reasons, including:

  • aligning with the values of the investing individual or organisation.
  • protecting the reputation of the investing individual or organisation.
  • seeking to achieve a higher financial return.

A higher financial return may be sought by selecting companies with superior social and environmental performance, encouraging companies to improve their long-term success by better addressing their social and environmental performance and/or encouraging companies to behave in ways which deliver portfolio-wide benefits.

The Market

There is an active and innovative market for socially responsible investment products and services in the UK and Europe.

An increasing range of organisations act as commercial suppliers of socially responsible investment research and information to the UK's investment sector. These organisations include:

  • Ethical and Environmental Screening Services (EESS)
  • Ethical Investment Research Service (EIRIS)
  • Global Risk Management Services (GRMS)
  • Innovest Strategic Value Advisers
  • The Manifest Voting Agency
  • National Association of Pension Funds Voting Issues Service
  • Pensions Investment Research Consultants (PIRC)
  • Safety and Environmental Risk Management (SERM)

A number of UK-based investment managers now employ in-house staff dedicated to analysis or corporate governance work on SRI issues. Such investment managers include but are not restricted to AEGON Asset Management, Friends Ivory & Sime, Henderson Global Investors (part of AMP), Jupiter Asset Management (part of Commerzbank) and Morley Fund Management (part of CGNU).

In addition, some investment banks ("brokers" or "supply-side analysts") are now beginning to include SRI issues in the research they supply to clients.

Market Size 

In October 2000, an UKSIF study [1] of 171 major occupational pension funds representing 302 billion pounds sterling in assets, found 59% (representing 78% of assets) seek to incorporate SRI into their investment strategies - either by engagement or by specific request to the fund manager. Pension funds in the UK taking the lead in incorporating SRI issues into their investment approaches include the Universities Superannuation Scheme and members of the Local Authority Pension Fund Forum. 

More recently, the Association for British Insurers (ABI), the trade body for Britain's insurance industry, have issued guidelines to improve corporate disclosure on CSR issues and help institutional shareholders engage with the companies in which they invest [2]. The ABI represents over 400 insurance companies that provide over 97% of UK insurance and own approximately 1,100 billion pounds sterling of the UK stock market.

According to the Ethical Investment Research Service (EIRIS), there were 60 retail SRI screened funds in the UK at August 2001 with a total value of 4 billion pounds sterling.

Church investors and charities also invest using SRI criteria. Church investors were the originators of SRI in the UK in 1948 and still control one of the largest pools of investment assets worth over 10 billion pounds sterling.

The Role of the EU

UKSIF warmly welcomes the European Commission's interest in corporate social responsibility and socially responsible investment.

Increased Transparency and Disclosure

UKSIF would welcome EU support for increased transparency and disclosure:

  • By companies about their social and environmental processes, risks and performance. The EU should encourage the development of standards for corporate non-financial reporting based on emerging standards such as the Global Reporting Initiative (GRI). In order to meet the needs of socially responsible investors, non-financial reporting must take place in a way that allows effective comparison of the environmental and social performance of different companies.
  • By all pooled investment vehicles, about the extent to which they take social, ethical and environmental issues into account in their investment strategies and their policy relating to the exercise of their rights attaching to investments in order to encourage shareholders to recognise the responsibilities of share ownership. We would urge the EU to promote the adoption of disclosure regulations throughout the EU for all pooled investment vehicles and insure that the policy and results are disclosed to scheme members and/or policy holders.
  • By SRI research providers about their research methodologies, frameworks and processes, including validation processes, coverage, and the extent to which they take into account standards (e.g. ILO, OECD and UN standards) in their research.
  • By fund managers to their clients and other stakeholders about their processes and methodologies for investment including information on engagement processes and research (see above).
  • By regulatory bodies on the information they collect and hold on companies as part of their regulatory duties. We urge the Commission to encourage increased disclosure and harmonisation of reporting on companies by regulatory authorities (e.g. the UK's Health and Safety Executive and Environment Agency) across Europe.
UKSIF Policy Statement on Transparency

In 2000, the UKSIF Board made the following policy statement on transparency in relation to the UK Socially Responsible Investment market:

  • UKSIF believes that preferences differ between ethical investors in relation to ethical investment techniques and criteria. We believe that there is demand for funds with a diversity of approaches. So long as sufficient information is made available, the market will decide which approaches command the most support and which are less attuned to consumer demands.
  • Funds should be transparent about their ethical investment processes and policies i.e. they should provide sufficient information to allow consumers to make properly informed choices.
  • As part of this, they should make clear when prescriptive rules are followed and when judgement is used. The prescriptive rules should be made available to investors and prospective investors. Funds should make clear who makes decisions of judgement, what expertise they have relevant to these decisions and what principles or policies, if any, they can or must use to guide them.
  • Ethical investment specialists among financial advisers are particularly well qualified to comment on what their clients demand but of course, their client set will not necessarily represent all facets of the market.
  • UKSIF believes that advertising claims need to be capable of objective substantiation. It is the responsibility of the advertiser to be able to substantiate a particular claim.
Investor Specific Transparency Measures

In addition to transparency measures focused on the needs of all stakeholders the EU should consider supporting transparency and/or harmonisation measures specially to meet the needs of investors. Such measures might include: 

  • Improvements to corporate governance to allow pan-European investors to use more effectively their ownership power (including voting rights and rights to table shareholder resolutions) to hold companies to account for their social and environmental performance.
  • Encouragement of national investment bodies to adopt guidelines, such as the ABI SRI Guidelines (see above), calling for companies to identify, manage and disclose risks to the short and long term value of the business from social, environmental and ethical matters.
  • Improvements to investor-specific disclosure requirements such as stock market listing rules. We recommend that the proposed European Securities Committee [3] consider disclosures relating to Board responsibilities and policies, procedures and verification of environmental social and ethical matters in its review of listing rules and regular reporting obligations.
Standardisation and Harmonisation within SRI

As we have said above, the SRI market in Europe is diverse, thriving and innovative. It is vital that EC action should not stifle this.

UKSIF believes that there is scope for greater standardisation of the collation and reporting of core environmental and social data by companies. UKSIF members would be interested in becoming involved in a process to identify such core data. This core data should be based on international standards such as those of the ILO and the UN and should build upon work already undertaken by initiatives such as the Global Reporting Initiative.

It is essential that any intervention in this area protects competition and innovation in the SRI market. It must also ensure that SRI research providers and investment institutions can continue to provide innovative and diverse services to meet the differing needs of their varied client base.

We therefore would have grave concerns about any measures that might:

  • Seek to implement standardisation or harmonisation of the way social or environmental data is analysed by research providers and investment institutions.
  • Restrict the ability of research providers and/or investment institutions to obtain further data in addition to any future standard set of core data.
Ethical Investment

Some investors are concerned about a wide range of ethical, social and/or environmental issues because of their personal or organisational values. Some such issues go beyond those traditionally seen as part of corporate social responsibility (although value-based investors are often among the stakeholders identifying new and emerging CSR issues). Issues such as animal rights, pornography, abortion, arms manufacture and alcohol are often seen as parts of this "ethical" market. EU action should not reduce the ability of SRI service providers to address this market or of consumers to choose financial services based on ethical grounds.

In order to enhance consumer awareness and choice for retail socially responsible financial services we urge the EC to recommend that providers of financial services, including financial advisers, ask whether their client is concerned about any ethical, social and/or environmental issues in their client fact find. The EC should also encourage the development of retail SRI throughout Europe in order to promote increased understanding of financial markets and investor responsibility.

Companies and CSR

The Broader Benefits of CSR

In promoting the business case for CSR, the EU should take account of the full range of benefits it offers to shareholders and not restrict themselves to the impact of CSR on the profitability of an individual company. These shareholder benefits include:

  • Some shareholders (including individuals, religious investors, charities) seek social and/or environmental as well as financial benefits from their investments.
  • Some shareholders (particularly major institutional investors) seek to maximise the financial return from their whole portfolio rather than being concerned only with returns at the level of an individual shareholding. They require the companies in which they invest to behave in ways that maximise portfolio-wide benefits.

Main Actors and Stakeholders

Pan-European Dialogue

In order to allow pan-European dialogue among the stakeholders in SRI and between SRI bodies and companies, we would encourage the European Commission to continue to provide financial support for activities undertaken by the European Sustainable and Responsible Investment Forum (Eurosif) and support and nurture the development of national social investment forums.

Promoting CSR across EU Activities

In order for CSR and SRI to be used widely, the EU needs to create a broad policy framework that rewards high corporate social and environmental performance to create incentives for companies and socially responsible investors.

The European Union should not just promote but also create and protect the business case for corporate social responsibility. For example, it should actively encourage public procurement policies that take account of differing CSR performance, and hence differing social and environmental impact, in procurement decisions. It should also ensure and protect the legitimacy of public policies that take account of the impact of CSR in international fora like the WTO.

Evaluation and Effectiveness

Substantiation of Claims

UKSIF believes that companies, SRI researchers, pension funds, index providers and investment institutions should be capable of substantiating all social and environmental claims that they make about CSR performance, research, engagement and stakeholder dialogue, investment policies and products. Companies and organisations making claims that they cannot substantiate run significant reputational risks.

We believe that investment institutions should maintain sufficient skills and resources to be able to verify the claims and processes made on their behalf about SRI and research activities. In the case of the marketing of retail ethical funds, we believe that this is necessary within the UK to conform to government and advertising standards guidance. We believe that compliance with policy statements made in the Statements of Investment Principles by UK occupational pension funds (and similar legislation) should be monitored and reported by fund managers to the trustees, scheme members and/or policy holders.

UKSIF supports the use of effective verification in order to substantiate socially responsible investment claims and research processes. However, SRI remains an emerging and innovative industry so it is important that verification costs do not, at this stage, inappropriately stifle its development.

Social Indexes

Recently, a number of socially responsible investment indexes have been introduced. Some of these indexes have received wide publicity and appear to have been highly effective both in publicising the concept of SRI and in influencing the corporate social responsibility of some companies.

These social indexes are sold as commercial products and Exchange Traded Funds based upon them compete in the market with other socially responsible investment products. Attention needs to be paid to the claims made by index providers and those marketing them. UKSIF believes it is for the market to determine whether or not one or more of these indexes or indeed any other SRI selection methodology becomes a de facto standard for SRI funds, whether as a benchmark or as the basis for products. Given the range of sub-markets within the SRI market, we do not see it as inevitable that a de facto standard will emerge.

There is no evidence that retail SRI funds wish to use a customised SRI benchmark rather than using standard market benchmarks. Nor is there any demand from institutional SRI investors for special SRI indexes to be produced. We believe that the requirements of both individual investors and the fiduciary responsibilities of institutional investors will continue to encourage fund managers to use standard benchmarks.

At the UKSIF seminar on the Green Paper in October 2001 none of the fund managers present planned to use a customised SRI benchmark.

We therefore see no evidence for and considerable evidence against the claim in the Green Paper that "European market indices identifying companies with the strongest social and environmental performance will become increasingly necessary as a basis for launching SRI funds and as a performance benchmark for SRI."

We believe that it would be inappropriate and anti-competitive for the EU to promote any one commercial social index or any other commercial SRI product. We believe it is for the market to determine whether or not one or more of these indexes or indeed any other SRI selection methodology becomes a de facto standard for SRI funds.

Actions to support CSR

We support the proposals for EU support for:

  • Training and re-training in CSR. This should include support for the integration of socially responsible investment into the financial services training curricula and into financial services education provided by higher education institutions.
  • Dissemination and exchange of information. This should include support for activities such as events and website development undertaken by Eurosif and by national SIFs as well as support for NGOs researching corporate CSR claims.
  • Medium-term social policy analysis and research. This should include research on - the business case for CSR and SRI; the development of sector specific key performance indictors; on how engagement with companies can best achieve environmental and social goals; and on the implications of the concept of "fiduciary capitalism" (i.e. the concept that institutional investors "own the market" and should therefore be most concerned about portfolio-wide performance). The EU should also support developments to increase consumers awareness and ability to exercise their choice for SRI.
  • Analysis of the role of the legal framework. This analysis should ensure in particular that the legal framework for financial services does not inhibit the use of socially responsible investment. Consideration should be given to the development of incentives such as fiscal incentives for such social and environmental investments and integration of CSR.

Summary

We are grateful for this opportunity to respond to the European Commission Green Paper on Corporate Social Responsibility.

This response has been developed based on the Forum's mission to support and encourage the development and positive impact of socially responsible investment. It does not necessarily reflect the views of every Forum member.

Helen Barnes
Programmes Director
21 December 2001

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Notes 

  1. 'Response of UK Pension Funds to the SRI Disclosure Regulation' by Eugenie Mathieu, UKSIF October 2000. [context] 
  2. Association of British Insurers, Disclosure Guidelines on Socially Responsible Investment, issued 23 October 2001. The Guidelines are based around disclosures which investors would expect to see included in the annual reports of listed companies. Specifically they refer to disclosures relating to Board responsibilities, policies, procedures and verification on social, environmental and ethical matters. See www.abi.org.uk [context] 
  3. The European Securities Committee was recommended in the Final Report of the Committee of Wise Men on the Regulation of European Securities Markets, February 2001. [context]
     
Update:

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Response to HM Treasury Consultation Document "Savings and Assets for All"

UKSIF submission: July 31, 2001

To: The Saving Incentives Team, HM Treasury

I am writing on behalf of the UK Social Investment Forum in response to this consultation document.

We are grateful for the opportunity to respond to "Savings and Assets for All". Our comments relate specifically to the investment and personal finance education aspects of the Child Trust Fund and the Savings Gateway. We would, of course, be delighted to expand on these comments later in your consultation process if this would be of value.

UK Social Investment Forum

The UK Social Investment Forum is the UK's membership network of stakeholders in socially responsible investment. Our 250+ members include providers of ethical and socially responsible investment funds, banks and building societies, community development finance institutions, independent financial advisers and non-governmental organisations.

We initiated and provided the secretariat for the Social Investment Task Force, led by Sir Ronald Cohen. "Enterprising Communities: Wealth beyond Welfare", the Task Force's report to the Chancellor of the Exchequer, was published last year. We provide the secretariat for the All-Party Parliamentary Group on Socially Responsible Investment, which has over 80 parliamentarians as members, and are represented on the Advisory Group of the Personal Finance Education Group.

This response has been developed based on the Forum's mission to support and encourage the development and positive impact of socially responsible investment. It does not, of course, necessarily reflect the views of every Forum member.

Investment Strategies

Access to Islamic (ie. Shariah-compliant) Financial Services

According to Datamonitor (1999), there are 1.65 million British Muslims living in the UK, within 350,000 households. Home Office estimates put the total Muslim population at over 2 million, ie. 50% of all UK ethnic minorities. British Muslims now constitute the second largest religious community in the UK (after Christians). We are told that 600,000 Muslims worship at 1136 registered Mosques every Friday.

In order to ensure their acceptability to Muslim families, we would strongly recommend that the Child Trust Fund and the Savings Gateway both include access to Shariah-compliant investment strategies.

We understand that the Department for Education and Skills is currently considering the need for Shariah-compliant student loans.

The All-Party Parliamentary Group on Socially Responsible Investment has taken an active interest in access to Islamic finance within the UK. As their secretariat, we can provide contacts with a range of experts on this issue if required.

Investments damaging to Children: "Child Trust Fund invests in Child Labour"

In order to protect the reputation of the Child Trust Fund, we strongly recommend that all investment vehicles should be required address explicitly the issue of investing in companies or activities that would be generally regarded as damaging to children.

For example, a minimum set of exclusions could be compulsory or fund managers could be required to engage with companies to improve their social and environmental performance in relevant areas. Issues that must be addressed might include (a) use of child labour in the supply chain, (b) tobacco manufacture and/or marketing, (c) production of land mines and (d) sustainable development.

In addition to its reputational benefits, this approach would act as a powerful incentive to many companies to improve the impact of their activities on children and future generations.

Transparency and Access to Socially Responsible Investment

In addition, we recommend that financial services providers for the Child Trust Fund should be required to publish a statement identifying the extent (if at all) to which social, environmental or ethical considerations are taken into account in their investment strategies. The "SRI disclosure" regulation introduced in July 2000 for occupational pensions, local government pensions and stakeholder pensions offers a suitable model. This regulation has been internationally praised and similar regulations are now being introduced in France and Germany and considered in other countries.

This transparency requirement would help to ensure public knowledge of the availability or otherwise of socially responsible investment options and encourage providers to offer access to socially responsible investment (SRI) funds addressing a wider range of social and environmental issues.

Our members report that SRI Funds or "Ethical Funds" are a particularly popular choice for those wishing to make investments for children. In addition, as young people reach their teenage years, they often become concerned about the impacts of corporate behaviour and wish to influence, select or avoid particular companies. However, there is still a widespread ignorance about the existence of such funds.

It is generally accepted that it is not necessary to accept a lower financial performance from socially responsible investment funds, with some evidence that they may deliver financial out-performance in the long term. They use a range of social and environmental criteria, in addition to financial criteria, to select investments. Investment strategies used include selecting companies with superior social and environmental performance and avoiding companies with unacceptable behaviour. Some funds focus on issues such as sustainable development and human rights while others focus on concerns such as animal rights, which is likely to be of interest to many young people.

Personal Finance Education

The Child Trust Fund should be linked to broader social concerns by providing education on the way that the fund's investments deliver financial returns.

In particular, education should be provided on the links between the financial returns received by investors and the activities undertaken by companies in order to generate profits or pay interest.

As they become older, children could be encouraged to study the annual reports of companies in which they hold shares and to debate any shareholder resolutions tabled at those companies.

They could also study local small businesses that receive loans from banks and/or community development finance institutions in which the Child Trust Fund was invested.

Such educational activities should contribute to developing entrepreneurial skills and active citizenship as well as promoting greater awareness of the overlapping interests of individuals as shareholders, employees, consumers and citizens. They should also encourage saving by demystifying finance and investment.

Penny Shepherd MBE
Executive Director
UK Social Investment Forum
July 2001

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Response to Consultation on Myners Proposals

UKSIF submission: May 14, 2001

 

The UK Social Investment Forum (UKSIF) is the UK's membership network of stakeholders in socially responsible investment. We played an active role in support of the government's recent regulation, laid before parliament by then Pensions Minister Stephen Timms MP, which requires pension fund trustees to state, in their statement of investment principles:

  • The extent (if at all) to which social, environmental or ethical considerations are taken into account in the selection, retention and realisation of investments; and
  • The policy (if any) directing the exercise of the rights (including voting rights) attaching to investments.

This regulation has generated international interest with similar measures currently being adopted in France and Germany and under consideration in other countries including Australia.

In our evidence to the Myners Review last year, we said:

"The capital markets have a crucial role to play not only in enabling enterprise, innovation and growth but also in ensuring a high quality of life for people across the world. They are also an essential contributor to the capital which will be needed over the coming decades to address the challenges posed by issues such as climate change.
The operation of the capital markets needs to encourage and not inhibit investment in environmental technology, appropriate technology, regeneration and other areas which have the potential to deliver not only narrow financial security but also wider social and environmental security for pension fund members and their families."

UKSIF's 250+ members and affiliates include providers of socially responsible investment funds, other financial institutions, socially responsible investment research consultancies and independent financial advisers. We provide the secretariat for the All-Party Parliamentary Group on Socially Responsible Investment. We initiated and acted as the secretariat to the Social Investment Task Force, chaired by Sir Ronald Cohen, which reported to the Chancellor in October 2000.

Our comments on the proposed principles for pension fund investment decision-making are as follows:

Effective Decision Making

In order to avoid the "group-think" endemic to recent investment decision making, it is important that trustees continue to include within their number those with a broad understanding of the interests and concerns of pension fund members and civil society rather than only those with a professional or semi-professional expertise in investment. This broad understanding needs to include awareness of the expectations of consumers and civil society about company behaviour and the impact of drivers to sustainable development on investment. It would be counter-productive if the proposed principle resulted in a narrow professionalism which encouraged rather than avoided the "herd instinct" approach to investment which the Myners Report rightly condemns.

In our view, the proposed principle should make it clearer that trustees need to have sufficient expertise collectively to take investment decisions rather than each trustee needing personally to have professional expertise. It should also be made clear that any investment subcommittee should not be restricted to those with professional expertise in investment.

We are concerned that the level of emphasis on paid trustees will, in practice and over time, restrict trustees to professionals in investment. We would recommend that the principle states, at most, that some trustees should be paid.

Clear Objectives

For defined contribution pension schemes, we very much welcome the proposal that trustees should satisfy themselves that they have taken their members' preferences into account in selecting funds to offer as options. We believe that interpretation of this principle should make it clear that these preferences should include any ethical, social and/or environmental preferences held by members.

For defined benefit pension schemes, we believe that the investment objective set out by the trustees should also meet the requirement that it takes account of the desirability of

  • protecting the employer's reputation for corporate social responsibility and hence their support for the fund
  • member satisfaction with the social, environmental and ethical characteristics of the fund

Explicit Mandates

We believe that the principle should state that the written mandate (for defined benefit schemes) and the member communication (for defined contribution schemes) should cover also how the managers will attempt to implement any policies on social, environmental and/or ethical issues and on the exercise of rights attaching to investments set out in the statement of investment principles.

Activism

We strongly support this proposal which we believe would encourage and support institutional investors to take action on social, environmental and ethical issues which may affect long-term corporate performance. The US Department of Labor Interpretative Bulletin on activism makes specific mention of non-financial measures of corporate performance as one issue on which investors may act.

Transparency

This principle should make it clear that it does not, in any way, reduce the requirements introduced by the government's social responsibility disclosure regulation. The most effective way to ensure this would be to include these requirements as a further bullet within the list given.

Regular Reporting

We strongly support this proposal that will result in all members being informed whether or not trustees have set out any social responsibility policies in the statement of investment principles and, if so, what they are.

We anticipate that it may be most effective from a communications perspective to produce a member communication that accurately paraphrases and describes the Statement of Investment Principles rather than merely reproducing its text. The principle should be phrased in a way that does not preclude this.

Thank you for the opportunity to comment on these principles. This response has been developed based on the Forum's mission to support and encourage the development and positive impact of socially responsible investment. It does not, of course, necessarily reflect the views of every Forum member.

Penny Shepherd MBE
Executive Director
UK Social Investment Forum
May 2001
 

UPDATE - see Response To Consultation Docs, April 2002

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Response to Company Law Review Consultation Document: Completing the Structure

UKSIF submission: March 9, 2001

 

Our comments address specifically the role of the standard setting body and the issue of the "materiality judgement" for the OFR.

In reply to Question 3.5, we agree that the relevant standards body should have power to issue guidance on all aspects of preparation of the OFR. However, we do not support the proposal that this be non-mandatory. In our response to your previous consultation document, we said that we believed that standards for the OFR should be afforded equivalent weight to standards for financial disclosure. We continue to hold this view.

As an organisation of both shareholders and other investment stakeholders, we remain most concerned that the "materiality judgement" on what will be disclosed in the OFR remains with directors and that there is no requirement on them to disclose information deemed material by investors or other stakeholders. We strongly urge the Review to reconsider the "materiality judgement" issue during their final deliberations.

If the Company Law Review is not willing to require mandatory disclosure of information defined by the standard setting body, we would strongly suggest that, at a minimum, standards for deciding what non-mandatory information is reported in the OFR should be treated equivalently to the current standards for corporate governance in the Combined Code. Here the standard clearly defines good practice and companies are required, in their Annual Report, to explain their position when they deviate from it. This approach enables the investment community to compare corporate performance and exercise influence when they feel that the directors' judgement in deciding to deviate from the standard is flawed.

Thus, the standard might define that it is good practice to report carbon dioxide emissions over a certain level and give a calculation mechanism. Equally, it might recommend how and when to report on corporate activities impacting indigenous peoples. We propose that if the directors did not deem any particular reporting requirement to be appropriate for their company then they should be obliged to disclose this with the reason why.

In our view, such an approach would be a viable way to protect investor interests in the reputation of a company only if the standard setting body represented effectively the range of company stakeholders.

UK Social Investment Forum

The UK Social Investment Forum is the UK's membership network of stakeholders in socially responsible investment. Our 250+ members include providers of ethical and socially responsible investment funds, other financial institutions, socially responsible investment research consultancies and independent financial advisers. We provide the secretariat for the All-Party Parliamentary Group on Socially Responsible Investment. This response has been developed based on the Forum's mission to support and encourage the development and positive impact of socially responsible investment. It does not, of course, necessarily reflect the views of every Forum member.

Penny Shepherd MBE
Executive Director
UK Social Investment Forum
March 2001

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