Context and general remarks

Steurer & Margula: SRI in EU Member States CSR HLG Meeting on 31 March 2008

SRI in EU Member States: Government initiatives,

expectations by the financial sector and conclusions

Presentation given at the meeting of the EU High-Level Group for CSRBrussels, 31 March 2008

Dr. Reinhard SteurerSharon Margula MA

RIMAS - Research Institute for Managing SustainabilityVienna University of Economics and Business Administration

www.sustainability.euwww.sustainability.eu/csr-policies


Context and general remarks

1. The project: „Analysis of national policies on CSR, in support of a structured exchange of information on national CSR policies and initiatives“ is commissioned by DG Employment (Tender No VT/2005/063)

2. The subjects: of the three analyses were identified in the CSR HLG meeting on 30 May 2006

3. Parts of the study (re-arranged): Introduction to SRI (including SRI ratings) Survey of SRI initiatives Instead of case studies: Description of SRI initiatives found

Survey of SRI experts from the financial services sector Synthesis


Orientation

Part I: SRI Initiatives in Europe

1. Setting the scene

2. Methodological remarks on the survey

3. What instruments did we find in the survey? Overview and examples

Part II: Expectations of the financial services sector

4. Methodological remarks

5. Key messages

Part III: Conclusions

6. Focussing on rating methods and the importance of transparency

Part IV: Wrap-up

7. Project review and outlook


Orientation







5. Key messages



Part IV: Wrap-up



SRI in Europe: Setting the Scene

SRI is a concept that combines investors’ financial objectives with their concerns about social, environmental and ethical (SEE) issues (Eurosif, 2006)

SRI is the application of CSR and SD principles in investment decisions --- it embeds CSR in the functioning of shareholder capitalism

The SRI market: Market share of SRI: 10-15% of total investments in European

funds under management; Investments in European sustainability or SRI funds: up 30%

between 2005 and 2006 SRI or sustainability stock indices (DJSI, FTSE4Good)


Methodological remarks

1. Literature review:Instruments of CSR Policy and typology of instrumentsStudies on SRI initiativesSRI ratings




2. Survey of public administrators (via HLG for CSR)• 12 Nov 07 - 18 Jan 08• 90 contacts• 24 EU MS reached• 16 EU MS provided information on SRI initiatives


Institutional affiliation of interview partnersInstitutional affiliation of interview partners

Ministry of Labour and Social Affairs:

7 (44%)

Ministry of Economic Affairs:

3 (19%)

Ministry of Finance:2 (12%)

Other governm. institutions:

4 (25%)




2. Survey of public administrators (via HLG for CSR)• 12 Nov 07 - 18 Jan 08• 90 contacts• 24 MS reached• 16 MS provided information on government initiatives

3. Countries covered:• 7 MS provided relevant information on SRI initiatives• Several countries and initiatives excluded because no

specific SRI focus (SD strategies, CSR strategies in general, initiatives on reporting)


Countries covered in the survey

Green: explicit SRI initiatives

Orange: no specific SRI initiatives



1. Literature review:Instruments of CSR Policy and typology of instrumentsStudies on SRI initiatives

2. Survey of public administrators • 12 Nov 07 - 18 Jan 08• 90 contacts• 24 MS reached• 16 MS provided information on government initiatives

3. Countries covered: • 7 MS provided relevant information on SRI initiatives• Several countries and initiatives excluded because no

specific SRI focus (SD strategies, CSR strategies in general, initiatives on reporting)

4. Accuracy and completeness of the results: • Non-governmental initiatives on SRI not covered


OrientationOrientation







5. Key messages



Part IV: Wrap-up



CSR policy instrumentsCSR policy instruments

1. Informational or endorsing instruments:Campaigns, guidelines, trainings

2. Partnering instruments: Agreements, networks, PPPs, dialogues

3. Financial or economic instruments: Subsidies, grants, prices/awards

4. Legal (mandating) instruments:Laws, regulations, decrees

5. „Hybrid instruments“Strategies, action plans, platforms, centres

Source: Fox T, Ward H, Howard B. 2002; World Bank; http://www.iied.org/pubs/pdf/full/16014IIED.pdf

CSR policies study on awareness raising, see www.sustinability.eu/ csr-policies


Overview of SRI initiativesOverview of SRI initiatives

Informational instruments

Financial or economic

instruments

Legal instruments

Hybrid instruments

Government-sponsored guidelines (1)

Information resources, e.g. websites, studies,

reports, etc. (2)

Tax incentives (3)

Economic incentives, e.g. loans, grants, subsidies, etc. (1)

Laws (6)

Governments applying SRI to public funds (1)

All SRI initiatives are economic

incentives for CSR


Focus of SRI initiativesFocus of SRI initiatives

Environmental only: (7,7 %)

Social and environmental:

(38,5 %)

Sustainable Development

(26,9 %)

Ethical (23 %)

Social only: (3,9 %)


Target groups of SRI initiativesTarget groups of SRI initiatives

0

10

20

30

40

50

60

70 Pension Funds; 42,9%

Private Investors;

28,6%Broad Spectrum

of Investors; 21,4%

Employees; 14,3%

Companies incl. Banks;

21,4%

R. Steurer

spp statt aware


OrientationOrientation







5. Key messages



Part IV: Wrap-up



Type Informational: guideline

Initiative Sustainable Money Guide

Country The Netherlands

PurposePromote transparency by providing information on SRI, screening/rating methods and available SRI funds

Focus Sustainable Development, social and environmental

Target group Private investors

Successful?Helped to popularize SRI Reduced lack of transparency

Challenge Updated only every two years --- not always up-to-date

Websitehttp://www.imprimadebussy.com/ireports/default.asp?app=DGG&doc=dgg2006&bhcp=1


Type Legal: regulation

Initiative Public Pension Funds Act (2000/192)

Country Sweden

PurposeRequires all Swedish National Pension Funds to dispose an annual business plan on how SRI principles are taken into account

Focus Environmental, ethical

Target group Pension funds

Successful?Exact wordingInvestigation committee: Evaluation report in Nov 08Joint Ethical Council of funds promotes SRI

Challenge Updated only every two years --- not always up-to-date

Website http://www.ap3.se/en/


Type Economic: tax incentive

Initiative Community Investment Tax Relief (CITR)

Country UK

PurposeGenerate income in less developed communities by providing tax incentives to those who invest in eligible businesses

Focus Sustainable development

Target group Private investors or companies

Successful?Aims to realise win-win: investors benefit from tax incentives, less developed communities from investments

Website http://www.hmrc.gov.uk/specialist/citc_guidance.htm


TypeHybrid: Government agency applies SRI to public funds (legal basis, informational activities, platform for SRI)

Initiative Pension Reserve Fund (FRR)

Country France

PurposeInvest capital in line with five SRI principles developed by the FRR

Focus Sustainable Development

Target groups Public, retirees, companies

Website http://www.ap3.se/en/


Discussion of Part I





Comments on SRI in

general?

Questions of clarification?

Comments on SRI initiatives?


Orientation







5. Key messages



Part IV: Wrap-up




Purpose: complement survey on SRI initiatives and learn what SRI experts expect from governments

Interviewed persons: 5 SRI experts from 5 different financial services companies from 5 different European countries

Time: 17 Jan 2008 – 29 Feb 2008

Limitations: Only 5 experts interviewed; results give an impression (rather than a representative picture) of what governments should do regarding SRI


Key messages (1 of 3)

Personal experiences with government initiatives on SRI: Legal disclosure requirements for pension funds Disclosure requirements for all companies (annual reporting)

Frontrunners in Europe: Norway (petroleum fund), UK, France, Belgium and the Netherlands

Additional types of initiatives not considered in the survey: Disclosure/reporting requirements SRI by governments, or “lead by example”



Most relevant SRI initiatives (i.e. effective but difficult to adopt) Legal disclosure/reporting requirements (5 mentions) (Economic/fiscal instruments are seen critical)

Most practical SRI initiatives (i.e. effective and politically feasible) Informational instruments, like guidelines for SRI, and

communicating own SRI practices to the public Disclosure requirements for pension funds

Key target groups for governmental SRI initiatives Pension funds International bodies like the UN and the OECD



Key drivers behind SRI Mainstream investment community Environmental and social pressures Not among them: governments (named only once)

Key challenges and obstacles for SRI Conflicting time perspectives (exception: pension funds) The “business case” for SRI is still contested

How governments can help in this respect Inform key actors and stimulate debate on SRI (with

conferences, seminars, etc.) Adopt legal CSR disclosure and reporting requirements Lead by example





How governments can help in this respect Inform key actors and stimulate debate on SRI (with conferences, seminars, etc.) Adopt legal CSR disclosure and reporting requirements Lead by example



Most practical SRI initiatives (i.e. effective and politically feasible) Informational instruments, like guidelines for SRI, and communicating own SRI practices to the public Disclosure requirements for pension funds




Frontrunners in Europe: Norway (petroleum fund), UK, France, Belgium and the Netherlands Additional types of initiatives not considered in the survey:

Disclosure/reporting requirements SRI by governments, or “lead by example”

Illustrating the importance of disclosure requirements…





How governments can help in this respect Inform key actors and stimulate debate on SRI (with conferences, seminars, etc.) Adopt legal CSR disclosure and reporting requirements Lead by example



Most practical SRI initiatives (i.e. effective and politically feasible) Informational instruments, like guidelines for SRI, and communicating own SRI practices to the public Disclosure requirements for pension funds




Frontrunners in Europe: Norway (petroleum fund), UK, France, Belgium and the Netherlands Additional types of initiatives not considered in the survey:

Disclosure/reporting requirements SRI by governments, or “lead by example”

Illustrating the importance of disclosure requirements…


Discussion



5. Key messages

Comments on key messages?



Orientation







5. Key messages



Part IV: Wrap-up



Four (plus one) conclusions

Government initiatives on SRI: scarce in numbers but significant in qualitative terms

North-South and West-East divide: Governments that lead in other CSR policy areas are likely to lead also in the SRI context

“Walk the talk” or “lead by example”: not only on SPP but also regarding governmental investment decisions

Regulations on CSR reporting and disclosure: key instruments to foster SRI (but: separated in research, in the compendium, and the selection of the policy analyses – see next slide)


Thematic preferences for three CSR policy analyses

0

2

4

6

8

10

12

14

16

Awareness Codes ofConduct

Reporting SRI Procurement Labels

Scores "no"

Scores "yes"


Why reporting requirements are so important for SRI

Professional SRI decisions are not based on subjective choices, but on objective criteria and assessments

SRI ratings or screenings conducted “in-house” or by agencies employ

SRI rating strategies that make use of Rating criteria


SRI rating strategy Definition/Criteria

Negative screeng/ simple exclusions

Excludes single sectors (such as arms, alcohol, tobacco) or companies from particular countries (human rights violations)

Ethical exclusionsExcludes companies based on a large number of negative criteria and/or filters (as opposed to just tobacco or weapons)

Positive screeningInvests in companies with a commitment to CSR, or that produce “positive” products and/or services

Best-in-classSelects leading companies from sectors in terms of CSR performance

Norms-based screening

Selects or excludes companies with regard to their compliance with international standard, such as the UN Global Compact, OECD or ILO guidelines

Pioneer/thematic screening

Invests in selected sectors/companies that play a key role in the transition to SD (renewable energies etc.)

EngagementAttempts to raise awareness for CSR and SRI among companies,

Integration Includes SRI considerations in traditional financial analyses


Why reporting requirements are so important

Professional SRI decisions are not based on subjective choices, but on objective criteria and assessments

SRI ratings or screenings conducted “in-house” or by agencies employ

SRI rating strategies with particular Rating criteria

Disclosure of sufficient and valid information on CSR is the basis for SRI ratings in particular, and SRI in general

No legal requirements for CSR/SD reporting, no consistent and reliable basis for SRI decisions


The fifth conclusion …

Government initiatives on SRI: scarce in numbers but significant in qualitative terms

North-South and West-East divide: Governments that lead in other CSR policy areas are likely to lead also in the SRI context

“Walk the talk” or “lead by example”: not only on SPP but also regarding governmental investment decisions

Regulations on CSR reporting and disclosure: key instruments to foster SRI (but: separated in research, in the compendium, and the selection of the policy analyses – see next slide)

Governments in the EU are followers rather than driving forces behind the SRI agenda

Perception of SRI experts, Few governmental SRI initiatives, Hesitant regarding CSR reporting requirements.


Discussion



Comments on conclusions?


Comments on SRI ratings?


Orientation







5. Key messages



Part IV: Wrap-up



Some figures on the CSR policies study conductedSome figures on the CSR policies study conducted

HLG meetings attended 5 (since spring 2006)

CO2 emissions caused ?

Staff worked on studies 6

Initiatives documented 85 on CSR Awareness Raising

103 on SPP

14 on SRI

Types of initiatives found 4 + 1


Overview of SRI initiativesOverview of SRI initiatives

0

10

20

30

40

50

60

Informationalinstruments

Partneringinstruments

Financial oreconomic

instruments

Legal instruments Hybrid instruments

%

CSR Awareness raising

Sustainable Public Procurement (SPP)

Socially Responsible Investment (SRI)

Few partnering instruments despite voluntary character

of CSR policies

Indirectly, all SPP initiatives are about

economic incentives for CSR

Informational instruments used most in context of

CSRLegal, not mandating instruments

Strategies, platforms,

centres


Some figures on the CSR policies study conductedSome figures on the CSR policies study conducted

HLG meetings attended 5 (since spring 2006)

CO2 emissions caused ?

Staff worked on studies 6

Initiatives documented 85 on CSR Awareness Raising

103 on SPP

14 on SRI

Types of initiatives found 4 + 1

Survey contacts > 200

Institutional affiliations 7 different types of ministries


Institutional affiliations in different CSR policy fieldsInstitutional affiliations in different CSR policy fields

0

10

20

30

40

50

60

Ministry ofEnvironment

Ministry ofLabour & Social

Affairs

Ministry ofEconomic

Affairs

Ministry ofFinance

Mixed form ofministries

Ministry ofForeign Affairs

Othergovernmental

institutions

Otherstakeholders

%

CSR Awareness raising

Sustainable Public Procurement (SPP)

Socially Responsible Investment (SRI)

Economic ministries more important than

environmental ones

CSR policies mainly located in social policy

domain

CSR policies mainly located in social policy

domain (except for

SPP)


[email protected]

RIMAS - Research Institute for Managing Sustainability

Vienna University of Economics and Business Administration

www.sustainability.eu

www.sustainability.eu/csr-policies

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Documents

Context and general remarks