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Responsible Investment : what it is, what it’s not, and why it matters

Responsible Investment : what it is, what it’s not, and why it matters. Emily Kenway Head of Projects, ShareAction. Increasing interest in responsible investment. Media interest – Comic Relief, Church of England Fossil fuel concern – divestinvest.org Post-2008: oversight and protect

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Responsible Investment : what it is, what it’s not, and why it matters

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  1. Responsible Investment: what it is, what it’s not, and why it matters Emily Kenway Head of Projects, ShareAction

  2. Increasing interest in responsible investment • Media interest – Comic Relief, Church of England • Fossil fuel concern – divestinvest.org • Post-2008: oversight and protect returns • Understanding of mission potential

  3. What responsible investment isn’t Definitions: • Ethical investment – positive/negative screening of companies e.g. ‘sin stocks’ • Impact investing - investments made into companies, organisations, and funds to generate social and environmental impact alongside a financial return. Both have a role to play, but RI provides a broader toolbox & addresses other issues.

  4. What responsible investment is • Responsible investment is not about changing what you invest in; it is about using your voice as investors. • Can include screening and impact investing, but it also emphasises engagement. • Engagingwith investments managers and • assets to ensure: • Value is created sustainably • Social impacts are positive • Environmental impacts are not detrimental

  5. Why do it? Aims: Protect your reputation Protect your assets Further your mission “giving away money is not the only means of supporting our beneficiaries … [we aim to] ensure that, as far as reasonably possible, our endowment is managed in a way which is consistent with what our beneficiaries are trying to achieve, in terms of creating a just and fair society” - Head of Finance, JRCT, Civil Society June 2012

  6. Demystifying engagement • Engagement= pursuing constructive dialogue • Investment managers: • Oversight • Clarity about your charity’s aims • Investee companies: • Attending AGMs • Letter-writing • Direct meetings with companies

  7. Does it work? • Yes! • Benefiting financial value: • Environment Agency research investigated link between corporate environmental governance and financial performance > 85% of cases demonstrated +ve correlation • 2012 study by London Business School, Boston College and Temple University > institutional investors who engaged with companies on sustainability issues experienced a higher level of return, particularly in the year after engagement.

  8. Does it work? Impacting companies and their practices: Living Wages Calculated annually as the minimum wage needed to cover the bare essentials of life. Multiple engagement methods used. Thousands more now take home enough pay to support themselves.

  9. Corporate lobbying • Ensuring companies pursue political lobbying programmes which do not contradict public statements on issues such as emissions reduction • Calling to companies’ attention potential conflicts • AstraZeneca no longer funds controversial legislation group ALEC. • Modern Day Slavery • Child labour, sex trafficking, and forced labour (UN definition) • Government commitment: Modern Slavery Bill • Joint committee recommends company reporting on mitigation efforts.

  10. How do you do it? Consider: Governance / investment constraints Staffing Internal education & inclusion Communicating with investment managers Themes of relevance to mission New report in October 2014 taking you through the steps to a tailored and thought-through RI policy.

  11. Prioritisation is key

  12. Obstacles… Internal capacity Engagement can be lighter or heavier; select key themes of manageable number; joining networks and outsource; have confidence in your managers and direct them clearly 2. Concerns about financial value Responsible investment does not need to narrow your universe of holdings. 3. Concerns about clout Novelty counts; social capital; collaborate

  13. Obstacles… 4. Unresponsive managers They shouldn’t be…; you’re not the only client asking; Managing for Good survey at www.shareaction.org/charityinvestment. 5. Lack of expertise Managers should speak on your terms; you already know it; use available resources e.g. www.shareaction.org/charityinvestment and PRI

  14. Thank you! Emily Kenway Email: emily.kenway@shareaction.org Website: www.shareaction.org

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