Fund managers fail to practice what they preach on SRI

Three quarters of the biggest UK fund managers do not disclose policies relating to environmental and social issues, despite increasing demands for such policies in the companies they invest in, according to research by FairPensions, the industry pressure group. The survey of the UK’s top twenty fund managers running £7 trillion ($10 trillion) in assets, showed Scottish Widows, Barclays Global Investors, Goldman Sachs and State Street provided scant information. Top performers included F&C, followed by Hermes, Morley and Insight, who all demonstrated high transparency and commitments to engagement on responsible investment, according to the report. Alex van der Velden, executive director of FairPensions, said: “Investors need to know how fund managers are responding to the financial risks associated with such important issues as climate change and human rights. Environmental and social issues can lead to heavy losses which are then passed on to investors.” He said many fund managers were failing to meet best practice codes set up by their own industry, such as the 2007 Statement of Principles of the Institutional Shareholders’ Committee: “Our findings demonstrate a clear gap between rhetoric and reality. The survey demonstrates that although many organisations are getting togrips with corporate social responsibility, fund managers are still behind the times in this critical area.”
Separately, Novethic, the French research centre on socially responsible investment, has called for a debate on the classification of the growing market of thematic investment funds in areas such as water and clean technology to decide whether they can be classed as socially responsible.
Novethic said there was a danger of funds marketing themselves as responsible by investing in companies producing renewable energy products that also polluted the environment in another division of their business. In a survey of fund managers with themed environment funds, 66% of respondents said they belonged to the category of planet protection, sustainable development or socially responsible investment. However, Novethic said such criteria should only be applied to funds investing 100% in companies proposing sustainable development solutions or applying a thorough policy of environmental, social and governance criteria to stock selection, which was not always the case for the responding funds. Novethic has created a class of “themed SRI funds” that combine these standards.