UN PRI cuts its teeth with first public investor campaign

Supporters say boost to Global Compact points the way to more sophisticated collaborations.

Signatories to the United Nations Principles for Responsible Investment (UNPRI) got their first taste of public action earlier this month when investors representing $2.13 trillion in assets, announced they were targeting companies paying lip service to human rights and labour issues as part of their commitment to the UN Global Compact.
Twenty of the world’s largest institutional investors from 10 countries joined the campaign, which was led by Morley, the UK asset manager. Significantly, it was the first overt investor collaboration to be organised via the UN PRI Clearing House, the private intranet website run by the PRI where investors can pool information and resources and sign up for powerful collaborations. Supporters of the PRI say such actions could become more sophisticated and start lobbying companies that haven’t signed up to international standards. The Global Compact pressure campaign was launched because of frustration among investors that a large number of corporate signatories were failing to report on progress in adopting its ten action principles. The Global Compact was launched in 2000 by Kofi Annan, former UN general secretary. Its corporate commitments range fromupholding union rights to the abolition of child labour. Investors say they feared companies adhering positively to the Compact were becoming frustrated at others taking a “free-ride”: vaunting membership but failing to deliver on action. Companies listed as overdue in reporting progress on the Compact include Standard Chartered, ArcelorMittal and Bouyges Telecom in France. In total, the investors wrote to chief executive officers of 103 companies in more than 30 different countries. The letter called on laggard companies to improve performance in adopting the Global Compact while praising others that had recorded ‘notable’ progress under the UN’s rating criteria. Of the companies, 30 were deemed as ‘non-communicating’ on progress by the UN, 48 were ‘inactive’ and 25 were singled out for ‘notable’ progress. Eight of the companies contacted were subsidiaries of larger groups where investors are urging the parent company to sign up to the Compact.
Steve Waygood, head of engagement at Morley, who also sits on the UN PRI Clearing House advisory committee, says the campaign is an indication of the future potential of the Clearing House mechanism as a cost effective means of large scale investor engagement: “The
Global Compact has set up a Communication on Progress (COP) mechanism to counter the “free-ride” problem and meet criticisms which were levelled at it initially over allowing companies to sign up without disclosing progress. The PRI is a common-sense, potent way of starting investor dialogue in support of this.”
Waygood said non communicating/inactive companies were predominantly based in emerging market countries and that the notably good companies tended to be European large cap groups, albeit with a surprising number of South American companies but just one US corporate: “We have already had a number of companies coming back to us and thanking us for highlighting the issue and giving us an update on their progress under the COP,” he said.
He said the initiative was planned as a one-off and that it hadn’t been decided yet whether any success of the campaign in boosting Global Compact progress would be publicly reported.
He suggested future collaborations might involve approaching other organizations with similar reporting goals to the Global Compact, such as the International Labour Organisation and the World Health Organisation, as well as other arms of the UN. In addition, he said the UN PRI could start looking at the question of whether corporate signatories to initiatives such as the Global Compact are better financial performers than their reticent peers, an area where little research has been done to date. The PRI’s first public campaign has not been without its teething problems. Initial press reports on the collaboration said the investor group hadtargeted Edelman, the US public relations firm, because of data on the Global Compact site indicating that Edelman was amongst the progress ‘laggards’. Richard Edelman, president and CEO of the Edelman, said: “I nearly fell out of my chair because Edelman was one of the first companies to join the Global Compact and for years was one of only five American companies on the Global Compact. Edelman has regularly provided updates to the Global Compact including our CSR report and we have recommended the Global Compact to many of our clients.”
In fact, the PRI investors had not written to Edelman, but also did not name the companies they had targeted.
Additionally, campaigners have pointed out that signatories to the UN PRI have actually blacklisted companies that are signatories to the Global Compact. Earlier this month, PGGM, the €88bn ($127bn) Dutch pensions giant, a UN PRI member, pulled investments worth €37m from PetroChina over the company’s involvement in human rights violations in Sudan. PetroChina is a signatory to the Global Compact, although it has made no reports on progress, according to the UN website. A pressure group called Global Compact Critics, said: “How can a company involved in human rights violations in Darfur possibly abide by the human rights principles of the Global Compact?
In a sign that the UN Global Compact aims to be more robust in kicking “free-riders” off its books, the organisation announced on January 28 that it had permanently removed 394 corporate participants from its online database.