Responsible Investor

RI round-up Feb 27, 2008

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

UK investor associations have renewed a call for companies to align director pay with performance in order to avoid what they called: ‘rewards for failure’. In an update on their joint statement on executive contracts and severance, first elaborated five years ago, the UK National Association of Pension Funds and the Association of British Insurers, said: “With the economic cycle apparently turning, now is a good time to remember that severance arrangements which reward underperformance damage the standing of business and undermine the integrity of executive remuneration, making it harder to reward success.” In the new statement of eight principles, the investor groups urged remuneration committees to consider giving director contracts of less than the standard one-year term to reduce the liability for payouts if an executive fails to perform. It said: “Compensation for risks run by senior executives is already implicit in the absolute level of remuneration, which mitigates the need for substantial contractual protection.” The guidance paper also said that remuneration committees should ensure that policy and objectives on directors’ contracts are clearly stated and include reference to pension arrangements.
Institutional investors in the International Corporate Governance Network will next month meet representatives of sovereign wealth funds in a bid to encourage them to be more transparent and act as “conscientious shareholders”. Peter Montagnon, chairman of the ICGN, said sovereign wealth funds could do one of three things: be passive, politically motivated, or be conscientious investors and has urged the latter.

EU Trade Commissioner Peter Mandelson has called for a voluntary global code of conduct for sovereign wealth funds to ensure transparency and good governance. Mandelson told Agence France Presse: “We in Europe should welcome such investment from China and other wealth funds, and not reject it. But we need everyone to agree a code of conduct and principles governing the behavior of these wealth funds, which provides for transparency and good governance.’
Zurich-based Sustainable Asset Management (SAM) more than doubled assets under management during 2007 with business growing by CHF 4.7bn (€2.9bn) to reach CHF 8.5bn by the year end. It followed new fund launches during 2007 in the US, which it said had attracted interest from large foundations and family offices. The manager said it had also recorded strong demand in Japan, Hong Kong, Singapore and Taiwan. It started 2007 with an SRI mandate from ERAFP, the French civil service pension amounting to 100-400m for the period 2007-2011. Reto Ringger, founder and CEO of SAM: “The solution or, as it were, adaptation, to global warming represents an enormous challenge and in this century it will become the most significant economic tasks and opportunity. As one of the first, and today leading, providers of sustainability investment solutions, SAM is strongly positioned to develop new investment products and benefit from this long-term megatrend.” SAM said it estimated that the volume of assets amount of money managed in sustainability and theme-based funds was still under 1% of total investable capital. It predicts that the intensive search for technical climate 


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