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LSE investor service is put on the backburner

July 2006

Efforts by the London Stock Exchange to establish a central database of information on companies’ social and environmental performance look to have run into trouble.

Weaker than anticipated interest in the Corporate Responsibility Exchange (CRE) – coupled with cutbacks at the LSE related to an ongoing takeover bid by the US stock exchange Nasdaq – appears to have undermined the project.

The small in-house team that ran the CRE – including its head Georg Braun – has been laid off, effectively putting the initiative on the backburner. There are also fears that it could be killed off altogether if Nasdaq’s pursuit of the LSE is successful.

When it was set up in 2004, the CRE was hailed as a solution to ‘questionnaire fatigue’ arising from demands on companies for CSR data from analysts, investors, researchers, index compilers and rating agencies. The idea was that it would enable businesses to submit such information just once, with the data distributed to investors for an annual fee of around £20,000 ($36,900).

However, only around 150 companies have been providing data to the CRE, and just two organizations – Ethical Investment Research Services and Business in the Community – are known to have signed up as end users of the information.

One source close to the CRE told EP: ‘Things don’t look good, and the project has fallen some way short of initial ambitions. It had the potential to achieve critical mass and become the de facto aggregator for CSR data in the UK, but that has not happened. You have to ask questions about the capability of the LSE to take it forward.’

Another source said: ‘Basically it’s all gone very quiet. The business model relied on getting lots of investors and researchers to pay large amounts of money to use the service, and that has not worked so far.’ One investment-side supporter of the CRE also told EP: ‘It would be ironic, after all the complaints about questionnaire fatigue, if this system were to fail because of lack of support.’

Former Insight Investment head of investor responsibility Craig Mackenzie, who was a member of the LSE working party that developed the CRE, told EP there were concerns about the consequences of a successful Nasdaq bid. ‘The CRE has always been a promising initiative and I hope the current pursuit by Nasdaq doesn’t undermine or kill that potential, because I think we really do need it,’ he said.

The LSE said the CRE was ‘alive and well’ despite the changes, and is being administered by an in-house business unit called IR Solutions. ‘The CRE is still there, but we’ve updated the system and we’ve been working with customers on that,’ it said. However, it declined to say how many investors had signed up to the service.

See also page twelve




Further Information
http://www.londonstockexchange.com/en-gb/products/irs/cre/
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