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Failure to sign principles leads to loss of business

October 2008

Three investment management companies have lost contracts to manage £185million ($332m) of global equities because they are not signatories to the United Nations Principles for Responsible Investment (PRI).

The UK’s Environment Agency has taken the money, part of its Active Pension Fund, away from Capital International, State Street Global Advisors and Legal & General, which had been running mandates of £67m, £108m and £10m respectively.  

The Agency said it had done so as a result of a review of financial performance, but also due to its drive to have its assets managed by PRI signatories.

While the sums involved are small – the pension fund is worth £1.5billion overall – this is nonetheless the first time an institutional investor has publicly switched provider on such grounds, according to PRI executive director James Gifford.

‘A number of our pension fund signatories have told us they are taking responsible investment capability very seriously when selecting managers – and that they’re communicating this to current and potential managers’, he told EP. ‘But to our knowledge, the UK Environment Agency is the first to do so publicly.’

After a tendering process that considered 50 investment management firms, three-year mandates have now been awarded to three PRI signatories: RCM (£100m), Generation Investment Management (£50m) and Impax Asset Management (£35m).

The agency said the new managers were selected for ‘their strengths in a combination of areas’, including their integration of ‘financially material environmental risks and opportunities’ and their active participation in the UN initiative, which more than 140 asset owners now support.

Gifford added that the switch was ‘very good news’ for those trying to push SRI into the mainstream. ‘We are delighted that such strong messages are being sent to the investment manager community, not just in support of the PRI itself, but about the need for mainstream investment managers to have substantial responsible investment capability’, he said. ‘We’re also hearing from many potential investment manager signatories that client demand is one of the key drivers for signing the PRI and building their responsible investment capability.’

The PRI’s recently published 2008 progress report found that 38 per cent of asset owner signatories – pension, insurance and endowment funds – said they had reviewed relationships with service providers based on their SRI capabilities last year, or intended to do so in 2008. This is a higher proportion than in the previous year.

Howard Pearce, head of environmental finance at the Environment Agency, told EP: ‘We’ve now been quite clear that when we go out for new mandates  we will expect the investment managers to be members of the PRI. As we come up to replace managers, that’s the line we’ll take. I’ve heard that a number of other funds are looking at taking this line too, and I expect there will be more of this kind of thing in the near future.’




UK Environment Agency | Global | SRI

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