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

Emily KenwayHead 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 returns• Understanding of mission potential

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.

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.

Engaging with investments managers and assets to ensure:• Value is created sustainably• Social impacts are positive• Environmental impacts are not detrimental

Why do it?

Aims: 1. Protect your reputation2. Protect your assets3. 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

Demystifying engagementEngagement = pursuing constructive dialogue

Investment managers:• Oversight• Clarity about your charity’s aims

Investee companies:• Attending AGMs• Letter-writing• Direct meetings with companies

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.

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.

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 BillJoint committee recommends company reporting on mitigation efforts.

How do you do it?Consider:1. Governance / investment constraints2. Staffing3. Internal education & inclusion4. Communicating with investment managers5. Themes of relevance to mission

New report in October 2014 taking you through the steps to a tailored and thought-through RI policy.

Prioritisation is key

Obstacles…1. 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 valueResponsible investment does not need to narrow your universe of holdings.

3. Concerns about cloutNovelty counts; social capital; collaborate

Obstacles…

4. Unresponsive managersThey shouldn’t be…; you’re not the only client asking; Managing for Good survey at www.shareaction.org/charityinvestment.

5. Lack of expertiseManagers should speak on your terms; you already know it; use available resources e.g. www.shareaction.org/charityinvestment and PRI

Thank you!

Emily KenwayEmail: emily.kenway@shareaction.org

Website: www.shareaction.org