Ethical Performance
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drug firms head SRI matrix

June 2002

Two pharmaceuticals companies have been ranked as the most ethically desirable FTSE100 investments in a ‘sustainability matrix’ developed by a major fund management firm.

AstraZeneca and GlaxoSmithKline have the best ratings in Morley Fund Management’s table, which ranks companies on the sustainability of their overall business and on their CSR ‘management vision and practices’.

The matrix, which Morley has produced after a year’s study of FTSE100 company performance, ranks companies from A down to E based on the degree to which they provide ‘sustainability solutions to social and environmental issues’.

The fund manager also ranks companies on a scale of one down to five according to their ‘management vision and practices’ with regard to sustainable development.

Morley then combines the two rankings to create a matrix with a best possible score of A1 and a worst of E5. No company has an A rating for sustainability solutions or a 5 rating, which denotes ‘management policies and practices incompatible with sustainable development and the concept of CSR’. Morley said it had created the matrix for three reasons: to construct an investable universe for its SRI funds, which account for less than one per cent of the assets it manages; to identify companies ‘best placed to respond to the challenge of sustainable development’, and as a basis for engagement with companies across all its funds, not just those run along SRI lines.

A spokesman said: ‘It means we’re now engaging with companies we would not normally look at in the course of our SRI research, like BAe Systems, which we recently upgraded in the matrix from D4 to D3 in light of its newly-published first CSR review.’

Morley claims the matrix enables it to identify those companies judged to have relatively good CSR management vision and practices, but relatively poor grades on sustainability.

Conversely, it also uses the matrix to identify companies that provide ‘sustainability solutions’, but have relatively poor CSR management vision and practices (see box).

Morley has created sustainability criteria for each industry sector and used these to assess individual companies. So, for example, one reason why HSBC Holdings has a lower rating (D3) than Lloyds TSB (C2) is because its corporate lending is said to involve greater environmental and social risks.

Two tobacco companies – Imperial Tobacco and Gallaher Group – receive the worst ratings.

Morley, a subsidiary of the CGNU Group, the world’s seventh largest insurer, will publish the matrix annually ‘as an act of transparency’ to give companies and investors a better idea of how it rates firms.


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