How we work with responsible investors
It’s almost 30 years since EIRIS was established as the UK’s first independent research service for ethical investors in 1983. A year later, Friends Provident launched the Stewardship Fund – the UK’s first ethical unit trust – with EIRIS research.
Since then a huge amount has changed. The number of UK green and ethical funds has grown to over a hundred, the amount of money invested ethically in the UK has topped £11Bn and ethical funds’ investment strategies have evolved beyond simple negative screens to encompass a variety of different techniques including thematic investing, best-in-class approaches and active ownership.
Throughout this period, the various ways in which EIRIS works with investors – both retail and institutional – has also evolved. Our investor research now covers over 3,300 FTSE-listed companies worldwide, including emerging markets. Additionally, we research 7,000 companies on a more focused basis.
We research over 80 different environmental, social and governance (ESG) areas including board practice, bribery and corruption, environment, climate change, human rights and supply chain labour standards – as well as traditional ethical issues. Furthermore, we have established an international network of research partners in Asia, Australia, Africa, Europe, Middle East and Latin America which further extends our research coverage and keeps us abreast of responsible investment issues at the local level.
Many of our UK clients use EIRIS research to screen on traditional ‘negative’ issues such arms manufacture, alcohol, porn and tobacco. However, we now work with more than 100 institutional and retail asset managers and asset owners across Europe, USA and Asia, as well as major investment banks, index providers, charities and not-for-profit organisations. In addition to screening, clients also use EIRIS’ research and expertise to manage ESG risks, identify investment opportunities, differentiate between sustainability leaders and laggards, and to embed ESG issues into their active ownerships strategies.
For example, F&C uses EIRIS’ screening services for its Stewardship range of funds but also uses EIRIS’ Convention Watch service to identify how well companies are upholding widely-supported principles enshrined in the UN Global Compact and addressing the associated material ESG risks.
Aviva Investors includes EIRIS among their independent research providers that help their internal analysts assess companies on their sustainability performance. These analysts combine EIRIS research with their own to determine which companies are eligible for inclusion in the investment universe for their sustainable and responsible investment funds. Aviva Investors was also the founding client of EIRIS’ Voting Service which provides voting recommendations to either ‘support’, ‘abstain’ or ‘vote against’ a company based on the quality of its disclosure on environmental and social risks.
More recently, Henderson Global Investors has started using research from EIRIS to screen its investment portfolios as well as to support its on-going engagement activities and best-in-class approaches related to some of their best known funds, including its Global Care Growth fund.
Towards the end of 2011, National Employment Savings Trust (NEST) appointed EIRIS as its ESG data provider. NEST is using data from EIRIS to analyse the potential ESG risks presented in the variety of assets it owns, to check that firms are being well-managed and to understand how they are shaping the societies and environments they influence. NEST is also working with us to monitor its appointed fund managers and to inform NEST’s voting and engagement activities.
2011 also marked the first year in which more than 50% of EIRIS income came from outside of the UK, reflecting the increasingly international nature of our business. For example, the Mexican Stock Exchange recently launched its new Sustainability Index with EIRIS research. This is in addition to our work with other major sustainability index providers including FTSE4Good and also the Johannesburg Stock Exchange. We are also currently working with a large US-based investment bank on a major project focused on risk profiling of emerging market companies.
In addition to our equity and corporate bond research, we continue to extend our research to cover other asset classes. EIRIS Sovereign Bond Sustainability Ratings assess the sustainability performance of around 70 government bonds and rank them according to more than 60 ESG indicators. Major investors across Europe integrate this research into their sovereign bond portfolios. We are also one of the few ESG research houses to work with private equity investors to help them identify and manage salient ESG risks in their portfolios.
The unique ownership structure of EIRIS means that any profits we make are gift aided to the EIRIS Foundation – a registered charity which exists to support the development of a more sustainable global financial system and to enable and encourage more people to invest responsibly. The Foundation funds free resources on ethical finance for consumers, financial advisers and charities, such as YourEthicalMoney.org and CharitySRI.org.
Providing screening services to charity and retail investors will always be a part of our DNA here at EIRIS, but there are now many more ways in which we work with other asset owners and asset managers in the UK and beyond. As more investors recognise the need for a long-term investment approach we will continue our focus on ESG risk factors such as climate change, the social implications of globalisation and corporate governance areas – each of which impacts on the long-term health and sustainability of financial markets around the world.
