Responsible Investor

RI round-up:  May 16

RI’s bite-sized round-up of the week’s major responsible investment news.

SRI assets held by French investors, both retail and institutional, rose by 30% from €17bn to €22.1bn euros in 2007, according to the annual market survey of Novethic, the Paris-based SRI research centre. The survey reveals that 66% of French SRI assets are now owned by institutional investors, a rise of 36% on 2006. Novethic says the use of dedicated institutional socially responsible investment portfolios grew at a faster rate than pooled investment funds, boosted in part by the decision of ERAFP, the French civil servants pension fund, to apply SRI criteria to 100% of its investments in 2007. Notably, SRI assets held by French company employee savings plans also grew by 22% during 2007 and now represent more than 6% of all French employee savings assets. SRI assets of retail investors increased by 19%. The report said six French asset management firms manage more than a billion euros each in SRI assets, mainly in the form of OPCVM mutual funds: Allianz Global Investors France (formerly AGF AM), AXA Investment Managers, BNP Paribas Investment Partners, Crédit Agricole (grouping C.A. Asset Management and I.DE.A.M.), Dexia Asset Management and Natixis Asset Management. To read the full survey (French only):
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Horst Köhler, president of Germany and former head of the International Monetary Fund, has said global financial markets have become “a monster” that must be put back in its place. In an interview with Stern, the German magazine, Köhler said bankers could be compared with alchemists who were responsible for “massive destruction of assets” and singled out excessive banking pay as a factor in the subprime crisis. Köhler said “The complexity of financial products and the possibility to carry out huge leveraged trades with little of their own capital have allowed the monster to grow…also responsible is the grotesquely high compensation of individual finance managers.”

Seperately, European Union finance ministers, described excessive executive pay as “scandalous” and said they would be discussing the issue in the coming months. Joaquín Almunia, EU monetary affairs commissioner, said: “When we talk about wage moderation and the need to link wage increases with productivity increases, then we also have to say something about levels of remuneration that sometimes don’t seem to reflect productivity.”
Governance in most listed companies in Japan is failing to meet the needs of shareholders, according to a white paper published by the Asian Corporate Governance Association (ACGA), and supported by a group of leading pension funds and asset managers with significant assets invested in the country. The paper says that despite improvements among some leading Japanese companies, others do not supervise corporate strategy effectively, protect management from the discipline of the market and failing to provide the returns necessary to protect Japan’s pension system. The paper makes recommendations in six areas: recognition of shareholders as owners of listed companies, efficient use of capital, independent supervision of management, pre-emption rights and third-party share placements, poison pill takeover defences and fairness and transparency in shareholder voting. Anna Krutikov, associate director, governance & sustainable Investment at F&C, said: “We believe these are the most pressing issues which relate to corporate governance in Japan today because they have an impact on the companies we invest in. It is still common for listed companies in Japan to be run as if management, and not shareholders, were the owners and changes are needed.” The white paper was endorsed by Aberdeen Asset Management, British Columbia Investment Management, CalPERS, Hermes Fund Managers, RAILPEN Investments, and the Universities Superannuation Scheme.

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