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Three year PRI lobbying campaign on corporate anti-corruption policies bears fruit

Some of world’s largest pension fund groups back transparency push.

A novel corporate engagement by 21 signatories of the UN-supported PRI to improve anti-corruption policies at 21 global companies with limited disclosure and major risk exposure to the problem has led to encouraging results with 16 improving their scores against a methodology developed by Transparency International, the NGO. The PRI signatories involved in the corporate engagement, which collectively manage $1.7 trillion in assets, included some of the world’s biggest pension fund organisations such as Australia’s Council of Superannuation Investors, Sweden’s AP government buffer pension funds, the New Zealand Superannuation Fund, and BC Investment Management, which runs pension assets for more than 500,000 public sector employees in British Columbia, Canada. The investors said that ten companies involved in the three-year collaboration had improved their transparency score by four-fold, and the leading company improved its score by six-fold. They said the results of the engagement would enable investors to better assess and manage their exposure to the financial, operational and reputational impacts of corruption risks in their portfolios. F&C Asset Management and Hermes Equity Ownership Services led the investor group. A goal of the project was to encourage companies to report in line with international reporting frameworks such as the International Corporate Governance Network’s Statement and Guidance on Anti-Corruption Practices and the UN Global Compact’s Reporting Guidance on the 10th Principle Against Corruption. Companies were asked to improve their disclosure of how they managed bribery and corruption risks and were then tested on the efficacy of their risk management.The 21 companies were selected due to their poor public disclosure of anti-corruption risk management and high levels of corruption risk because of the nature of their businesses in sectors including materials, telecommunications services, capital goods, aerospace/defence, construction, media, utilities and food markets. A methodology developed by Transparency International, called Transparency in Reporting on Anti-Corruption (TRAC), was used to assess companies against fifty indicators relating to their anti-corruption strategy, policy and management systems. Ann Byrne, CEO of the Australian Council for Superannuation Investors, said: “As long-term investors we have a responsibility to address the impact that bribery and corruption has on investment returns, market volatility and uncertainty in company performance. Companies involved in allegations of corruption and bribery are often characterised by poor corporate governance processes, the failure of internal processes to protect the integrity of stakeholders and an inability to successfully implement and monitor company codes of conduct. As such, ACSI is pleased to participate in this collaborative initiative which proactively engages in dialogue with companies on these issues.”
A group of 12 investors collaborating through the PRI will broaden the previous engagement out to target up to 50 firms across a wider range of sectors and countries to better understand their ability to manage and reduce corruption-related risks and their capacity to improve practices and transparency.