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FTSE 100 firms respond well to ABI guidelines

March 2003

Two-thirds of FTSE 100 companies have made either a ‘full’ or ‘adequate’ response to the Association of British Insurers’ socially responsible investment guidelines launched in October 2001.

The ABI believes the statistics show companies have generally responded ‘positively’ to the guidelines, which say board directors should ‘take regular account of the significance of social, environmental and ethical matters to the business of the company’ and publish the information in their annual reports (EP3, issue 7).

The ABI found that 29 per cent of FTSE 100 firms fully complied with its guidelines, and a further 37 per cent complied adequately.

However, the performance of smaller enterprises was much weaker. Of the 583 companies monitored, only a third were judged to have fully or adequately complied with the guidelines, and almost the same percentage had not complied at all. The ABI conceded that smaller companies had been slower to respond.

By sector, chemical companies were the most likely to comply, with nine out of ten firms having done so fully or adequately, followed by electricity and water businesses (78 per cent).

The worst performer was the information technology sector, where no firms fully complied and only six per cent complied adequately.

Mary Francis, director general of the ABI, said she was generally pleased with the response. ‘It shows that companies do recognize the business risks associated with environmental, ethical and social issues’, she said. The ABI will now focus on raising the association’s ‘disclosure expectations’ and on engaging with companies ‘where we believe the business risks are still not sufficiently acknowledged’.

The ABI says it will expect higher standards of disclosure over time, with more details of verification ‘as companies and investors become more familiar with the guideline approach’.

It will concentrate on retailers, where supply chain management ‘can have a large impact on a company’s reputation’.

Other priorities for the ABI include encouraging smaller companies to respond to the guidelines and helping ensure that financial analysts take more account of the degree to which companies are, or are not, complying.

The ABI, whose 400 members own about 20 per cent of the shares listed on the London Stock Exchange and account for 97 per cent of insurance business in the UK, monitored how companies in all sectors were responding by analyzing the annual reports of nearly 600 firms, including 91 of the FTSE 100.

 




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