Ethical Performance
inside intelligence for responsible business


rating agencies will submit to new standard

April 2004

European socially responsible investment rating agencies have joined forces to create a quality standard in a bid to bolster confidence among investors and companies in the reliability and consistency of their research.

The agencies have used European Commission money to develop the voluntary standard, which they hope will improve the quality of research into the social and environmental performance of companies.

The standard has been created by 15 rating agencies, who will trial it over the next year. They include Avanzi (Italy), Centre Info (Switzerland), Eiris (UK) and Ethibel (Belgium).

Although initially envisaged as a European standard, there are hopes that it will eventually be used in other parts of the world. Several of the agencies already have close commercial links with SRI research bodies outside Europe.

The Corporate Sustainability and Responsibility Research Quality Standard sets out ten criteria for assessing companies. The agencies must:

source information from third parties as well as from the company
cover the operating units of a company, and not just its headquarters
rely on research methods that identify companies whose best practice or routine performance exceeds the bare minimum required by law.

They should ideally use a mix of quantitative and qualitative indicators, paying attention to what stakeholders say. Additionally, they should review their assessments at ‘reasonable intervals’ and clearly explain how they have been reached. Their researchers should be independent of companies, investors, and campaigners, and observe a code of conduct to ensure confidentiality.

Once the pilot is completed, agencies may submit themselves to an auditing process that could lead to certification.

The standard may go some way to answering criticisms that CSR and SRI research is now so variable in quality and methodology that it confuses both the investors who buy it and the companies that submit to it.

Stephen Hine, head of international relations at Eiris, which sits on the steering committee with Ethibel and the German-based agency Imug, said: ‘We are asking companies and funds to be transparent, so we need to put our own house in order. This is very much a response to the age-old question, “Who will guard the guards?”.’

The standard was intended to raise the quality of research, not to standardize research findings, Hine stressed. ‘Diversity of research is important because investor needs vary,’ he said.

A new report from the Nordic Partnership, a Scandinavian CSR network, says mainstream investors will not regard this type of research as credible unless it becomes more consistent. Torgny Krook, senior vice-president of Nordea Bank, a member of the Partnership, said this ‘would help investors, as well as the companies themselves... to navigate what is seen as something of a jungle’.


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