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investors pile on the pressure

May 2001

Pressure on businesses to improve their environmental and social performance increased last month as the Association of British Insurers said it would adopt guidelines on socially responsible investment (SRI) and a big fund manager announced it would vote against large companies that do not produce environmental reports.

The ABI guidelines, expected this summer, will ask directors to take account of social, ethical and environmental matters and ‘assess the related risks to the company’s value’. The guidance will draw heavily on suggestions from the SRI Forum, an informal grouping of investing institutions, companies and consultants that includes representatives from Baillie Gifford, Barclays, BP, Hermes and Legal & General.

‘The aim is not to prescribe specific behaviour but to ensure that risks are properly recognized and managed,’ said Peter Montagnon, ABI head of investment affairs.

The ABI plans were unveiled as Morley Fund Management announced that its voting policy would now require FTSE 100 companies to publish environmental reports.

Morley, the UK-based asset manager of CGNU, the UK’s largest insurance group, said that where FTSE 100 companies did not publish such a report, ‘and after consultation as to management intentions’, it would vote against AGM resolutions to adopt the company’s annual report and accounts.

It also wants FTSE 250 companies in ‘high risk sectors’ such as construction, oil and chemicals to produce an environmental report – and says it will abstain on any resolutions to adopt the report and accounts if they fail to do this. Morley, which manages assets of $152billion (£106bn), will review the situation each year and expects to take a ‘harder stance’ over time. It is keen to ‘work with companies’ on a position paper for the voting policy. It says it is the first fund manager to adopt such a policy.

Anita Skipper, Morley’s head of corporate governance, said the initiative had been taken for financial rather than altruistic reasons and predicted other institutions would follow suit.

Although Morley’s vote at an AGM is not likely to be decisive, Bob Collie, director of consulting at the investment advisers Frank Russell said: ‘As soon as a major fund management house is sending signals like that, management tends to listen.’




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