News
EIRIS recommends governance steps to tackle investor concerns at Vedanta
22 July 2010
Responsible investment research specialists, EIRIS, has today published a series of best practice recommendations designed to address investors' concerns about environmental, social and governance (ESG) practices at Vedanta Resources (the FTSE 100 mining Company with interests in India and around the world).
Vedanta Resources is facing growing international scrutiny from investors and NGOs for its plans for a bauxite mine and the expansion of its Lanjigarh alumina refinery. Responsible investors have been engaging with the Company and some have disinvested because of concerns over stakeholder-related risks.
EIRIS' report Improving Vedanta Resources' governance of responsible business practice provides details of allegations against the company relating to human rights issues, indigenous rights, bribery and corruption and also environmental issues.
The report also draws on best practice from amongst other mining companies who face similar ESG risks in order to propose ways in which Vedanta can strengthen its approach to responsible business practices.
Click here to download a copy of the report.
JSE & EIRIS appoint South African research partner for 2010 SRI index review
6 July 2010
The Johannesburg Stock Exchange (JSE) and UK-based responsible investment research specialists EIRIS today announced the appointment of local research partner the University of Stellenbosch Business School (USB) to conduct the company analysis for the 2010 JSE Socially Responsible Investment (SRI) Index.
Launched in 2004, the JSE SRI Index is a broad-based triple bottom line and governance index which has become a widely accepted gauge for good corporate citizenship for companies. The index employs a broad range of listing criteria which reflect global SRI standards while accommodating issues peculiar to South Africa such as Black Economic Empowerment and HIV/AIDS.
The 2010 SRI Index review process, which commences within the next couple of weeks, will be undertaken by EIRIS in conjunction with the business school's Unit of Corporate Governance in Africa headed by Daniel Malan. "The involvement of a local partner is a significant step forward in the building of capacity in South Africa around ESG knowledge and research," says Corli le Roux, Head of the SRI Index at the JSE.
As part of the process of transferring knowledge and building capacity, the Unit will handle the research of a large percentage of companies this year, while the remainder will be handled by EIRIS. "The intention is that in due course the Unit will be responsible for the bulk of the research. The JSE continues its relationship with EIRIS, which remains responsible for the oversight of the entire research process and the final quality assurance of the analysis. As far as companies are concerned, the process will remain unchanged," adds Le Roux.
"We have been looking for opportunities to build a local partnership as the index has become more established. Around the world we find that our local partnerships deliver better local knowledge and provide valuable research insights," said Peter Webster, Executive Director of EIRIS.
"We are very pleased to be able to contribute to skills development in South Africa regarding this increasingly important aspect of the investment process. The Unit for Corporate Governance in Africa at the USB has an established track record in the field of corporate governance and as investors around the world widen their governance concerns to include social and environmental issues we look forward to working together to address that demand in South Africa," he continued.
"We are looking forward to working with EIRIS, an acknowledged global expert in responsible investment. We also anticipate synergies to develop between different research processes, which can only benefit South African companies," says Malan. The Unit of Corporate Governance has conducted related research on behalf of the Public Investment Corporation.
New guidance launched to help more charity trustees invest responsibly
29 June 2010
A new guide Socially Responsible Investment - A practical introduction for charity trustees is launched today to help the increasing number of trustees who are adopting or updating responsible investment strategies on behalf of their organisations.
Jointly launched by the EIRIS Foundation and Charity Finance Directors' Group (CFDG), the free guide provides practical advice and presents case studies of charities that have adopted a responsible investment approach to help other charities to align their principles with their investment practices.
Alastair Hanton, Chair of the EIRIS Foundation said: 'EIRIS has been working with charities in this area for more than 25 years. This new guide will prove indispensable to trustees embarking on a Responsible Investment strategy. Investing responsibly offers trustees the opportunity to reduce investment risks and also to ensure that on every level their organisations are contributing to the building of a fairer society'.
Caron Bradshaw, Chief Executive of CFDG, said: 'As the big society agenda develops charities will increasingly be looking for ways to creatively deliver their objectives. Socially responsible investment can help in provide significant mission related, reputational and even financial benefits. This toolkit is a meaningful contribution to the development of trustees' strategy and we are very happy to partner its launch'.
Click here to download a free copy of Socially Responsible Investment - A practical introduction for charity trustees.
EIRIS report reveals €1.2tn of unmanaged climate change risks amongst Europe's top companies
24 June 2010
Latest research from EIRIS, the London-based non-profit responsible investment research specialists, shows that leading European companies representing €1.2 trillion by market capitalisation are failing to address the various climate change risks they are exposed to.
Climate change has the potential to seriously impact shareholder value and will affect businesses across every sector of the economy, especially in the medium to long term.
The EIRIS 2010 European Climate Change Tracker Report focuses on the activities of 300 companies listed on the FTSE Eurofirst Index and analyses both the extent of their climate change impacts and also the quality of their responses to climate change.
EIRIS' research focuses on key parameters which enable investors to understand the extent to which efforts to tackle climate change are embedded within a company's culture. Research parameters include product impacts, long-term targets, executive remuneration and disclosure.
Key research findings
Poor performance, regional differences
- EIRIS identifies over a third (41%) of Europe's largest 300 companies as having a significant climate change impact. Of this 41%, approximately two thirds (64%) are failing to adequately manage the climate change risks they face. Most of the worst performers are in sectors with the highest climate change impact.
- Corporate responses to climate change vary between European countries. The best performing companies are from the most economically powerful European countries, namely the UK, Germany and France.
Product impacts
- Although 97% of the European companies with potential product impact have a product policy commitment, only 10% of these have targets in place to address impacts arising from products.
Remuneration
- Performance-based compensation can incentivise company leaders to improve corporate climate change performance. 62% of very high and high climate change impact companies are already linking performance-based remuneration with emissions reduction initiatives.
Long-term targets
- Long-term targets (more than 5 years) are a key to the effective management of climate change. 55% of large climate change impact companies in the FTSE Eurofirst 300 have long-term targets in place.
- High impact industries like oil & gas and electricity contain the lowest proportion of companies with long-term climate targets in place.
Peter Webster, Executive Director at EIRIS said: 'Externalities such as climate change pose major risks to the global economy, yet many investors are still not fully aware of these risks, nor do they know what to do about them. Climate change impacts arising from companies' products can be very significant yet very few companies have targets in place to address these impacts. It's important that investors focus on the bigger picture and consider both indirect and direct emissions.'
'We urge investors to exert their influence and engage for long-term targets, identify and respond to portfolio risk, encourage companies to consider product strategies and their product impact on climate change and increase their investment in climate change solutions' he continued.
EIRIS research also identifies a number of improvements in the strategies that companies have put in place with regard to their climate change impact. For example, it is encouraging to see some evidence that regulation and the increasing engagement activity of investors on climate change is driving companies to focus more attention on the climate change risks and opportunities they face.
The full version of EIRIS' 2010 European Climate Change Tracker report can be downloaded here.
EIRIS has recently launched Climate Change Toolkit Products to help investors assess their portfolios and design investment strategies in response to the challenge of a carbon-constrained economy.
A printable PDF of this press release is available here.
Investors in China, Egypt and Vietnam face greatest ESG risks
14 June 2010
Research published by EIRIS, the London based non-profit responsible investment research specialists, shows that amongst leading emerging market economies, China, Egypt and Vietnam perform the worst in terms of Environmental, Social and Governance (ESG) indicators.
The 2010 version of the EIRIS Country Sustainability Profiles for investors in sovereign bonds includes a comparison of those emerging market countries that will play a key role in driving global economic development over the decades ahead. The countries analysed for the comparison were Brazil, China, Egypt, India, Indonesia, Mexico, Pakistan, Philippines, Russia, South Korea, Turkey and Vietnam.
Co-Head of Research at EIRIS, Carlota Garcia-Manas said: ‘The poor performance of China, particularly in the area of Governance but also scoring low on environmental indicators, should be of particular concern to investors given that its economy is due to overtake the USA’s as the world’s largest over the next 20 years.’
The three best performing emerging market countries were South Korea, Brazil and Mexico. Both Mexico and Brazil scored higher on Environmental indicators than Canada and the United States, showing that it is possible for emerging markets to experience rapid growth and to mitigate ESG risks.
The case of Thailand shows the importance to investors of integrating ESG factors into their decisions about investing in sovereign wealth bonds. Thailand’s political stability indicator score has declined every year for the five years that EIRIS has been publishing its Country Sustainability Profiles. In 2009 the credit rating agencies downgraded the status of Thailand’s sovereign credit ratings, citing the inability of the government to prevent civil unrest. The ratings agencies have recently sounded warnings about additional downgrades in response to continuing political instability in the country.
Of all 68 countries surveyed on the 49 environmental, social and governance indicators the three best performers were Sweden, Austria and Switzerland.
The EIRIS Country Sustainability data is delivered in such a way that it can be manipulated by users to create their own views and weightings for particular issues to give the investor a bespoke rating, ranking and profile for each country.
A printable PDF of this press release is available here
UK ethical investment hits record high of £9.5 billion
1 June 2010
Figures released today by EIRIS, the London based non-profit sustainable investment specialists, show that the amount of money invested in Britain’s green and ethical retail funds (i.e. those funds open to the general public) reached £9.5 billion*.
The £9.5 billion represents approximately three quarters of a million investors in ethical funds, up from around 200,000 investors in 1999 when around £2.4 billion was invested ethically in the UK.
The last ten years has also seen the universe of UK ethical retail funds expand considerably. There are now almost 100 green and ethical funds available to UK investors - a decade ago there were just a couple of dozen.
Growing consumer interest in ethical finance is backed up by the findings of EIRIS’ recent Ipsos/MORI survey national consumer which explored post credit-crunch attitudes to ethical finance and found that 44% of the British public are interested in finding out about the ethical credentials of the next financial product or service that they buy. Three-quarters of those interested also said they are likely to take this into consideration when next buying a financial product or service.
Mark Robertson, EIRIS spokesperson said ‘2010 is a critical year for rebuilding public trust in UK financial institutions. It’s clear that increasing numbers of consumers are turning to those financial institutions which offer financial products that make money whilst making a positive difference to the world’.
‘The world is changing fast and many of the issues targeted by green and ethical investment funds such as the need to tackle ageing populations, reduce levels of obesity, address the global power shortage, tackle water scarcity and climate change are creating attractive business opportunities, which in turn are creating great investment opportunities which consumers can take advantage of’ he continued.
Growing consumer interest in issues like climate change, human rights, fairtrade and poverty is set to drive demand for green and ethical investment which will be further boosted by the recent launch of the UK’s first ever consumer website dedicated to ethical finance, YourEthicalMoney.org. This independent, non-profit website provides free advice to help anyone wanting to learn about how and where their money is invested, search for green and ethical financial products, or find out how they can help make finance more sustainable.
* Figures based on total assets under management datat collected from UK green and ethical funds as at 31st December 2009
A printable PDF of this press release is available here
South Korean companies embrace sustainability: but human rights and board independence remain key challenges
22 April 2010
A new report launched today on the Corporate Social Responsibility (CSR) reporting practices of 10 major South Korean companies finds strong reporting on environmental issues but reveals a relatively poor understanding of and reporting on social issues, especially human rights and other stakeholder concerns.
The report Unlocking Investment Potential: ESG Disclosure in Korean Companies is an initiative of the Emerging Markets Disclosure Project (EMDP) Korean team and aims to further emerging market investors' understanding of Korea's Responsible Investment (RI)/Corporate Social Responsibility (CSR) landscape; explore trends in Korean companies' environmental, social and governance (ESG) reporting; and promote greater ESG disclosure. The report is authored by the Korean CSR Research Service (KOCSR), global sustainability research house EIRIS and Responsible Research based in Singapore.
Since 2006, the number of South Korean companies publishing CSR reports has increased rapidly, with some even using the Global Reporting Initiative (GRI) reporting framework for guidance. However, investors and other ESG/CSR experts have expressed concerns over the quality and lack of materiality in corporate reporting; only a tiny fraction of these glossy brochures deliver greater transparency on ESG risk to investors.
The EMDP Korea report is a baseline study on the status of CSR and RI in Korea, as well as ESG reporting trends amongst a sample of 10 South Korean companies: Hynix, Hyundai Motor, KEPCO, KT, LG Chemical, LG Electronics, POSCO, Samsung Electronics, Shinhan Financial Group and SKT. The EMDP project team will use the report findings as a basis for initial engagement with these companies, with a specific focus on those areas that are identified as weak on ESG disclosure.
Key findings
- Many Korean companies, even larger listed ones, do not publish CSR reports, and it is hard to find any reporting within the financial service sector and amongst holding companies
- However, for those reporting, environmental disclosure is strong. All of the companies analyzed cover environmental issues in some depth and some display excellent reporting on the following: environmental policies, management systems, global coverage, board-level responsibility for environmental issues, quantitative emission data and quantitative reduction targets
- Reporting on human rights is mostly ignored, with disclosure on the issue being non-existent or superficial. Many commentators also find a worrying imbalance between the treatment of workers in South Korea and the treatment of the company's employees in overseas subsidiaries
- Most companies disclosed on at least three indicators relevant to corporate governance. However, on the issue of separation of chairman and CEO, only five companies met this challenge, a pattern similar to that found at other large Korean companies
- Korean companies exhibit poor reporting of policies on political donations, which is a corruption issue very specific to Korea, where 'facilitation payments' to bureaucrats have emerged as a new form of bribery. Each of the 10 companies analyzed disclosed some information on their anti-bribery activities, but few disclosed political donations.
Based on the report's findings, the groups recommend that Korean companies begin to incorporate more systematic stakeholder involvement into their ESG strategies, monitor, audit and report social performance, and disclose political contributions.
Created in 2009, the EMDP Korean team was the first Asian team to come together under the EMDP and is under the leadership of two co-leads, Lauren Compere, Managing Director, Boston Common Asset Management, representing the overall project and Joo-wonPark, Executive Director of Korea CSR Research Service (KOCSR) representing the Korean partners. In addition, global supporting partners include global ESG research providers EIRIS and Responsible Research (Singapore), and Korean supporting partners include Eco-Frontier, KoSIF (Korea Sustainability Investing Forum), Korea Corporate Governance Service, Solability and Sustinvest.
"Over the years, while we have found some Korean companies responsive to global investor concerns on sustainability issues, including those we have engaged with directly, most Korean companies avoid direct engagement with shareholders on these issues," said Lauren Compere, Managing Director, Boston Common Asset Management and EMDP Co-Chair. "We hope that the unique collaboration of global and local partners represented by the EMDP Korean team will help us raise the bar for Korean companies on ESG disclosure and encourage them to more fully integrate shareholder engagement on these issues into their CSR practices."
Peter Webster, Executive Director at EIRIS said, "Strong and effective management of ESG issues can be used as a proxy for strong corporate governance and can also serve as an indicator of a company's overall management quality. Global investors need more systematic ESG disclosure from Korean companies to enable them to minimize their risks to earnings and derive long-term sustainable value within their holdings."
"We are delighted to be collaborating with our global partners by providing them, through our ESG research, the information they need on current ESG disclosure trends to push Korean companies to improve their sustainability disclosure," said Joo-won Park, Executive Director of KOCSR. "We hope that the ESG Scorecard which we developed will be helpful for other EMDP country teams for their baseline study."
Click here to download a full copy of the research.
Meet the YourEthicalMoney.org web team at the UK Aware Green & Ethical Lifestyle Show at London Olympia
EIRIS will be exhibiting its YourEthicalMoney.org consumer website on sustainable finance at the UK Aware Green & Ethical Lifestyle Show this coming Friday 16 and Saturday 17 April 2010 at London Olympia.
YourEthicalMoney.org provides free, independent and unbiased information on all aspects of ethical money finance and is fast becoming the UK's definitive one-stop-shop for sustainable finance.
So far over 10,000 consumers and financial advisers have visited the website to learn about how and where their money is invested, search for green and ethical financial products, and find out how they can make a positive difference with their money.
Tickets for UK Aware's Green & Ethical Lifestyle Show are normally £15.00 at the door, but EIRIS can offer discounted tickets for only £6.00 as part of our participation in the event. Click here for further details.
Do drop by and say hello - we will be at Stand 77
Urgent change in corporate culture needed to tackle bribery
07 April 2010
New research published today into the activities of some of the world's biggest companies finds that the vast majority of them are failing to tackle bribery. In the UK many companies are unprepared for new legislation on bribery.
The study, conducted by London-based sustainability consultancy EIRIS, focuses on those companies which have operations in sectors and regions identified as being at highest risk from bribery. Of the 625 global businesses analysed, 85% lack adequate anti-bribery policies and 94% lack adequate management systems on bribery. Levels of transparency and openness on bribery are also extremely poor with less than 1% of companies adequately reporting on the issue.
EIRIS' research is published as the UK Bribery Bill continues to make its way through Parliament. If enacted, it will introduce new legislation making both companies and individuals criminally liable for a failure to prevent bribery. The bill proposes a defence where the company can show that it has implemented 'adequate procedures' to prevent bribery.
EIRIS' research shows that many UK companies remain startlingly ill-prepared for this new legislation. It finds that 56% of UK companies lack adequate anti-bribery policies, 78% lack the adequate management systems to tackle bribery, and none of them adequately report on the issue.
Key findings:
- Corporate failure to tackle bribery on a global scale. Approximately one third of the 2000 companies listed on the FTSE All World Developed Index have a high exposure to risks linked to bribery and corruption, but one company, Terna (Italy), achieved an advanced assessment for its approach to bribery in EIRIS' analysis - a reflection of the company's sophisticated anti-bribery policy and extensive disclosure.
- Companies in the oil and gas sector display the most advanced response to bribery. Possibly a result of the close scrutiny this sector has faced from civil society groups, investors, regulators and other stakeholders.At the other end of the scale real estate is the high risk sector which displays the poorest performance on bribery.
- Companies which are more highly exposed to bribery are more aware of the risks they face and are doing more to address these risks than those companies that are less exposed.
- Investors can play a crucial role to play in shaping the anti-bribery agenda through their engagement with companies, rewarding good practice and highlighting areas of concern.
Evidence suggests that specific country regulations and stock exchange listing requirements are having a positive impact in encouraging more companies to counter bribery. In the US where companies are required by the Sarbanes Oxley Act to implement a code of ethics for relevant staff and whistle blowing procedures, 52% of North American companies are assessed by EIRIS as having an intermediate assessment for countering bribery risks. No North American companies are assessed by EIRIS as showing no evidence of tackling bribery.
This is in stark contrast to other companies based in countries which lack relevant legislation on bribery such as Hong Kong and Singapore where nearly half (49%) of companies fail to display any evidence of taking significant steps to counter bribery.
Robert Barrington, Director of External Affairs at Transparency International UK, said 'Corruption risk is increasing for almost all companies - and therefore their investors. Throughout the world, the legislative framework is tightening and efforts at enforcement have been stepped up, most recently reflected by the Bribery Bill in the UK. Global trading and markets have brought much greater exposure to corrupt environments than in the past, but most companies are ill-equipped to deal with this challenge.'
Sachi Suzuki, report author and Research Analyst at EIRIS, said 'It's clear that a new approach to bribery is needed. UK companies must do much more if they are to avoid falling foul of new bribery rules which could be enacted before the next election. Corporate failings on bribery of this scale pose significant risks to investors and leave companies exposed to risks of unlimited fines, reputational damage, restricted access to markets and difficulties in raising capital.'
Click here to download a full copy of the research.
EIRIS launches enhanced ESG proxy voting service
12 March 2010
London-based responsible investment research house, EIRIS, has launched an ESG proxy voting service. The new proxy voting service provides investors with ESG-specific voting recommendations for their investments.
The service supports investors through all phases of voting activity and provides ESG voting recommendations, support for investor engagements and assistance with reporting on voting and lobbying activity.
Mark Robertson, Communications & Development Manager at EIRIS said “Complementing proxy voting services with high quality, independent research on ESG issues from a dedicated specialist enables investors to build portfolios with expert input and advice to protect and enhance long-term value and returns. EIRIS’ new proxy voting service will enable clients to actively implement the UN Principles of Responsible Investment by incorporating ESG issues into ownership policies and practices (Principle 2) and by seeking appropriate disclosure on ESG issues (Principle 3)".
Click here to find out about the EIRIS Enhanced ESG proxy voting service.
European companies fail to link executive pay to ESG performance
26 January 2010
EIRIS has partnered with Eurosif (European Sustainable Investment Forum) to publish new research highlighting critical challenges and opportunities for companies and investors in relation to remuneration, incentives and long-term sustainability.
Research highlights and recommendations for investors and regulators include:
• 29% of FTSE Eurofirst300 listed companies have some commitment to linking remuneration to performance on environmental, social and governance (ESG) issues – although concerns exists around the extent to which performance targets are set as ‘soft targets’ thereby guaranteeing a minimum level of bonus
• Financial institutions account for 23% of the FTSE Eurofirst300 index but only 16% of financial institutions have an ESG-linked remuneration system
• Shareholders should engage with companies by voting against unacceptable remuneration packages and calling for and taking part in shareholder dialogue in determining remuneration policy,
• Regulators should promote active dialogue between companies and shareholders by legislating for a binding “say on pay” vote and setting appropriate guidelines to promote good remuneration practices and disclosure.
In the aftermath of the global financial crisis, remuneration policies and specifically the level of
bonuses of senior executives of companies and traders continue to hit the headlines. Investors and regulators have expressed concern that remuneration structures may have contributed to excessive risk-taking and are asking for a stronger focus to be placed on long-term reward schemes and sustainable growth.
Stephanie Maier, Head of Research at EIRIS said “As calls from investors, regulators and
NGOs to link extra financial ESG issues to executive remuneration increase, our research
shows that relatively few European companies are currently doing so. Furthermore,
approximately half of the companies that link remuneration to ESG issues do not clarify which
ESG areas are linked to the remuneration. ESG targets should be quantified, time-bounded,
verifiable and stretching.”
Matt Christensen, Executive Director of Eurosif, said “ESG issues are increasingly recognised as being linked to a company’s long-term financial stability. It is therefore critical that ESG concerns be integrated into a company’s business strategy, including directly in their remuneration guidelines.”
The report was presided over by a steering committee of financial analysts and foundations to
debate the issues and develop concrete ideas for recommendations going forward. The steering committee included representatives from CM-CIC Asset Management, Ethos Foundation, Groupama Asset Management, Henderson Global Investors, MACIF Gestion, PhiTrust Active Investors, Robeco and Société Générale Gestion.
To download a full copy of the research report click here.
