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From time to time members of the Institute request information which is not readily available in the accounts. Most frequently these requests relate to our investment policy and in broad terms this is governed by the regulations which the Charity Commission specify and which are implemented on our behalf by the Charities Official Investment Fund which brokers our investments. Tobacco, alcohol and armament companies are prohibited and so are investments in specific countries of the world.
Beyond this, however, additional safeguards are laid down by the Socially Responsible Investment Unit of the CCLA (Charities Church and Local Authority) which is the parent company of the COIF.
The Socially Responsible Unit (SRI) conducts research, operates an active corporate governance policy and adopts a strategy of engagement, whereby the Unit encourages companies to operate in an ethically and socially responsible manner.
Once a company environment or social report has been reviewed, the Unit aims to produce an internal company note focusing on the company’s non-financial impacts, which might include environmental performance, ethical trading, child labour, human rights, community initiatives and animal testing. These notes contribute to CCLA’s overall investment management process.
As part of CCLA’s constructive engagement strategy, the SRI Unit aims to provide companies with feedback on their social, environmental or CSR (Corporate Social Responsibility) reports. Feedback was given to First Group and Vodafone last year.
Engagement includes telephone conversations, correspondence and meetings with various stakeholders, in particular companies, Non-Governmental Organisations (NGO’s) and other SRI analysts.
Recently the SRI Unit has worked alongside other SRI investors to engage with both NGO’s and BP on the BTC (Baku-Tbilisi-Ceyhan) project, which is a controversial pipeline running through Azerbijan, Georgia and Turkey. This work is on-going and will be closely monitored by the Unit to ensure best practice is being met by the oil and gas companies involved in building and running the pipeline. Sakhal, another oil and gas project in Russia led by Shell, was discussed with environmental NGO’s. The Unit has also engaged with Travis Perkins on the issue of its timber sourcing policy. This followed publication of a Greenpeace document that focused on the illegal timber trade in Indonesia. Travis Perkins committed to audit its supplier’s operation in Indonesia, which resulted in some poor findings. Travis Perkins viewed this as incompatible with its own strategy and has ceased sourcing timber from its Indonesian supplier until improved accreditation can be guaranteed. The company is continuing to work with the supplier in raising its timber trading standards.
As well as reviewing the non-financial strategies of companies, CCLA carries out research on specific topics relevant to investors such as alcohol, armaments, human embryonic stem cell research and genetic modification. Following earlier correspondence in 2003, the SRI Unit carried out further work on mobile telephones and the accessibility of adult content via 3G licenses and continues to work with companies on this issue as they develop their 3G offer.
On-going dialogue with stores on their Christmas Day trading policy resulted in a letter being sent to Woolworths. They were the only large store group that chose to trade on this day in 2002.
The Unit continues to monitor and consider research associated with human embryonic stem cells and the implications for socially responsible investors investing in the pharmaceutical and healthcare sectors.
CCLA has signed up to the Investors’ Statement on Transparency in the Extractives Sector, an initiative which aims to promote better standards of accountability and transparency among oil and mineral producing nations and also joined the Responsible Investors Network, which meets on a bi-monthly basis to discuss current SRI initiatives. CCLA conducts routine informed shareholder voting on behalf of clients at all meetings of UK companies held in its portfolio. The approach to voting is based on agreed best practice guidelines, seeking to support management except where proposals are deemed either not to be in shareholder interests, or reflect poor corporate governance practice. CCLA routinely informs the Company Secretary of concerns with a view to inviting comment and dialogue.
CCLA opposed remuneration policy at Vodafone, Electrocomponents and FKI owing to various concerns including potentially excessive awards for median performance, criteria falling significantly below market best practice attached to long term incentive schemes, and poor disclosure.
Further information about the SRI can be obtained from: ethics@CCLA.co.uk