Ethical Performance
inside intelligence for responsible business


SRI is popular because the market demands it

May 2001

People acknowledge the power of global business and want more say on the principles under which it operates, says The Rt. Hon John Gummer

A secretary of state for the environment is never more powerful than when he stands shoulder to shoulder with the chancellor of the exchequer. I found that out most clearly when working with Ken Clarke over the landfill tax. It was literally breaking new ground – creating an income stream to generate environmental benefits while penalising environmental bad practice. Crucially, it also created new business opportunities.

Governments in their policy-making have increasingly seen the interconnection between environmental and financial performance. Yet, it always surprised me how slow big business and the financial community were to link these issues together. Now the whole concept of socially responsible investment, whether by private individuals or big institutions, is on the move as never before.

News that there is to be an even more clearly defined tessellation between the environment, business, and the FTSE 100 has added to that awareness. Many company chairmen will have received ministerial letters about the ‘naming and shaming’ of those perceived to be the villains of the environmental piece. Pension fund trustees, too, will have been wrestling to construct a statement about which ethical principles determine their investment policy – an exercise which has had the happy by-product of forcing them to look more closely at how these principles work into financial performance.

In this AGM season, there is an unprecedented number of shareholder resolutions about social and environmental issues. It’s no longer just the big oil or mining companies on the radar screen. Every quoted company is in the frame. Having been in Seattle during the rioting, one saw that above all the riot was not about hating the multinational company, but about a feeling of disenfranchisement – that the people outside had no control over what the big companies within the convention centre were up to. Friends of the Earth subsequently chose to build a sandbag wall around the centre in The Hague. This was not just about climate change – it was also a symbol of exclusion.

Environmentalists have properly been playing on this widespread feeling of disenfranchisement. People acknowledge the power of global business and want more say on the principles under which it operates. No wonder more shareholders are looking closely at what they can do and realising that they have a vote. The ethical investor is recognising that social responsibility can produce financial returns and avoid damaging liabilities. Doing good and doing well are two sides of the same coin.

The Rt. Hon John Gummer, former UK environment secretary,
is chairman of the Storebrand Principle Investments Advisory Committee.
+44 (0) 207 960 7910



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