Ethical risk
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Transcript of Ethical risk
Ethical risk
The recent history of the ethicsThe risksThe opportunities
The ethics
Concerns amongst the churchesEthical investment is offered to the publicPrinciples turn out to be popularAn industry is bornThe ideas spread far and wideConcerned individuals press for moreCEIG is formed
The risks
Reputations can be worth moneyCustomers can act upon these thingsPeople have choices about who to work forCompanies need approval “Ethics” today and law tomorrow Investors begin to explore the linksDemand for transparency growsBut perhaps principles don’t always payRisk in ignoring these issues
The opportunities
For financial institutionsFor individual investorsFor pension scheme membersFor companiesFor churches and NGOsA chance to see new linkagesAre we missing some opportunities?
The birth of ethical investment
Traditional church concernsVietnam warApartheid in South AfricaEngagement and sanctionsEIRIS is launched
Making ethical options available
Stewardship Unit TrustMore funds with further developmentEnvironmental focus emergedWide range of approaches and productsThe rise of ethical financial advice
An industry develops
Expectations exceeded 1,000 times overGuides for the public appearUKSIF is formed (uksif.org)“In house teams” appear
The ideas spread far and wide
Engaging the mainstream The World of PensionsThe Netherlands, Sweden, Japan . . . . The Corporate World tooFTSE4Good
Pressing for more
Churches and South AfricaThree wise men take on the CommissionersNoisy defeat, but quiet victoryWe have CEIG stillCharities now pressed to disclosure more
The ideas spread far and wide
Engaging the mainstream Pension schemes state their policiesThe Netherlands, Sweden, Japan . . . . The Corporate World tooFTSE4Good
Relating to risk
Does it affect performance?Should fund manager take an interest?Even for “uncaring” investors?Previous a question of potential investor
costsNow a question of pricing assets
Can ethics mean business?
Increasing value of reputationsBrands and intangiblesGlobalising world is “smaller” If you want to be good, be careful
A company needs it’s stake-holders
Customers can act upon these thingsPeople have choices about who to work forCompanies need approval “Ethics” today and law tomorrow
Customers views: the BT study
Business strategy is to increase loyaltyCustomer satisfaction correlated with loyaltyDetailed study of correlations25% of that comes from CSR issuesBT goes searching for ways to reinforce“What’s it worth to be trusted?”
Choosing where to work
Growth in transferable skillsMultiple careers seem more commonShell identified new recruits as an issues“What do you do at work, Mum?”Nobody gets out of bed in increase EPS . . .Need good enthusiastic peopleStaff turnover costs thousands
Gaining approval
Planning permissionEnvironmental permitsLicensing productsOF EVERYTHING
Professional judgementScope of legislation generally
Investors begin to explore the links
ABI processDisclosure the routeAre the SEE risks and opportunities being managed?Role of the Board and information Integrated risks systemsAccountability to shareholders
Demand for disclosure grows
Company Law Review– Operating and Financial Review– Rather too much Board judgement– But “materiality” debate
EU process– Different views– Starting with voluntary approach– But “act as if you had to disclose”– Stakeholder forum
Global Reporting Initiative “Insider” information
So what sort of world is this?
Investors: pricing SEE factorsCompanies: check and tellSo that’s sorted then?But what if principles don’t pay?
– Tobacco still sells– You could spend “too much” on environment– Market won’t always reward your efforts
Individual ethics still countTo ban, or not to ban . . .
Ostrich Risk
Charities not thinking about their investmentsCompanies not thinking about their pensionsFinancial institutions not seeing brand implications
The opportunities
For financial institutionsFor individual investorsFor pension scheme membersFor companiesFor churches and NGOs“Joined up economics” for pension schemesWhat new opportunities do we need?
Financial institutions
Ethical options and customer loyaltyRisk and returns issues for whole businessA general branding issue in murky worldInstitutional Shareholder Committee processLatest changes to UK retail market
For the individual investors
Getting your own finances in orderEthical funds or choice of sharesOpportunities to raise issues
– With Fund Managers– With Financial Institutions
For pension scheme members
What’s in the SIP?Fit with employers position?Is it being implemented? Who are the fund managers?What are they doingAre there ethical options? Just pensions reports, EIRIS web-site
For companies
What is our own pension scheme doing?What are we saying in our annual report?Are their risks/opportunities we are missing?Are we aware of the value of trust?Do we want to be in Dow Jones/
FTSE4Good?
For churches and NGOs
Is our own house in order?Proper information, healthy debate, clear
decisionsCould our members and supporters do more?Are their links with our own work?Do we know things the City doesn’t?Are their opportunities to work with
Companies?
For Pension Schemes
Need to deal with members and employers views
Long term investors (USS, Hermes approaches)
Building value for the membersSEE factors probably are part of “World plc” Opportunities to “explore the future” “Benefit is a word with wide meaning”
For the concerned citizen
Company Law Review processEuropean level debatePressing for ethical financial advice Pushing forward Pensions rules
Opportunities for all?
Not clear enough about links with povertyWhat can multinational companies do about
poverty?What else can financial markets offer?Links with trade policiesBrandt report type thinkingConflict, environment, health, strong societies?
Where are we heading?
Many established ethical pathsGrowing awareness of risk and business linksEvery growing range of opportunitiesReal chance to change the way the world
does businessA surprising amount depends on individual
initiative