Memorandum submitted by the UK Social
Investment Forum (UKSIF)
1. UK SOCIAL
INVESTMENT FORUM
1.1 The UK Social Investment Forum
(UKSIF) is the UK's membership network for socially responsible
investment (SRI). UKSIF's primary purpose is to promote and encourage
the development and positive impact of SRI amongst UK based investors.
UKSIF believes that all material social, environmental and ethical
(SEE) issues should be integrated into standard investment practice
and that individual investors should be able to reflect their
values in their investments.
1.2 The Forum was launched in 1991
to bring together the different strands of SRI nationally and
to act as a focus and a voice for the industry. UKSIF's 200+ members
and affiliates include retail and institutional fund managers,
financial advisers, SRI research providers, consultants, trade
unions, banks, building societies, community development finance
institutions, NGOs and individuals interested in SRI. Information
on the UK Social Investment Forum is available at www.uksif.org.
2. UKSIF FINANCIAL
SERVICES MEMBERS
AND INTERNATIONAL
DEVELOPMENT
2.1 UKSIF members provide and use financial services,
and related services, which support international development
in a range of ways. Examples include:
2.2 Investment in the shares of international
companies operating in developing countries
2.2.1 These investments may be held
in segregated mandates or in pooled investment vehicles such as
ethically-screened funds. In some cases, social responsibility
criteria are used to select the investments held. In others, the
investment institution engages with these companies as responsible
owners in order to monitor and, where necessary, improve their
policies and practices in relation to developing countries. Screening
and engagement may be used to deliver long-term shareholder value,
for example by reducing potentially material social, environmental
and ethical risks (see 3.3 below), and/or to address the personal
values of investors.
2.2.2 The Just Pensions programme (described
below) addressed the important but challenging agenda of influencing
corporate behaviour by means of working with institutional investors
on international development and socially responsible investment.
2.3 Providing finance for microcredit, fair
trade and similar purposes
2.3.1 For example, Barclays has recently
launched its Microbanking Service in Ghana; the Co-operative Bank
and Standard Life were members of the $75 million Global Commercial
Microfinance Consortium launched in November 2005; Shared Interest
provides trade finance for fair trade as well as raising £5
million in a series of micro-credit bonds to support micro-credit
lending; the International Development Investment Unit of Triodos
Bank finances fair trade and microcredit in developing countries.
2.3.2 Shared Interest will shortly be publishing
their first Social Accounts. Conclusions from the draft version
of these accounts include:
— Ethical Funds which finance trade
achieve a multiplier effect. Even though some of Shared Interest's
members' capital is invested in the UK for liquidity purposes,
the value of trade flows financed was 110% of the value of members'
capital invested. In addition, providing finance in this way to
364 fair trade exporters (producers) facilitates their trade with
38 importers (buyers) potentially benefited the lives of some
half a million artisans, workers and growers.
— Fair trade finance does impact the
lives of the poor—if not so much the poorest. Plotting trade
finance payments against UNDP's Human Development Index (HDI),
Shared Interest found that most payments (c.66%) went to medium
HDI countries. Low HDI countries received c.16-18% with the balance
going to the poorer parts of HDI countries or to processors or
wholesalers in developed countries. This lower percentage to low
HDI countries was to be expected because the poorest lack the
infrastructure to engage competitively in international trade.
2.3.3 It is likely that there would be investor
appetite for appropriate opportunities to channel further finance
into microcredit, fair trade and similar purposes. Such opportunities
include further major investments such as November's consortium
fund.
2.4 Taking account of social and environmental
issues in project finance
2.4.1 UKSIF members such as Barclays and
HSBC are among the financial institutions that have adopted the
Equator Principles, the voluntary guidelines for managing social
and environmental issues in project financing.
2.5 Providing other support
2.5.1 For example, Triodos Bank is helping
six developing country banks in which they have an investment
to introduce sustainable reporting under the Global Reporting
Initiative (GRI) guidelines. This enables these banks to communicate
performance results and impacts with regard to the social, economic
and environmental aspects of their agenda as well as the financial.
3. UKSIF EVIDENCE
FROM THE
JUST PENSIONS
PROGRAMME
3.1 One of the principal aims of Just Pensions
was to educate and influence UK pension funds and other institutional
investors about the importance of international development issues
in their practice of socially responsible investment, with the
aim of thereby influencing the behaviour of companies investing
in or trading with less developed countries.
3.2 Just Pensions was initiated in
autumn 2000 by the development charities Traidcraft and War on
Want as a two-year project funded by the Community Fund. It became
a programme of the UK Social Investment Forum in 2002. The 2002-2005
Just Pensions programme received core funding from the Department
for International Development (DFID).
3.3 Just Pensions produced a range
of material about pension investment and international development.
These are available at www.justpensions.org. Materials include:
— A series of independent surveys on
responsible investment by UK pension funds.
— Eleven "sector notes",
compiled with asset managers, to help trustees to understand potentially
material social, ethical and environmental risks in key FTSE industry
sectors. Each includes an international development focus.
— "An Assessment of SRI Engagement:
A Study on Supply Chain Labour Standards" (December 2005).
The study outlines the circumstances in which SRI engagement is
most likely to be effective in contributing to corporate change,
both generally and specifically on supply chain labour standards
issues. It concludes by highlighting key best practice recommendations
for asset management houses.
— Policy submission to the Department
for International Development "Making Socially Responsible
Investment work for the Poor" (January 2002). This paper
sets out the kinds of issues that need to be addressed in answering
the central question: `How can the SRI trend be made to work most
effectively to achieve poverty reduction in developing countries?'
3.4 An independent evaluation of the
Just Pensions programme was carried out by Ashridge in the second
half of 2005. Its report will be available on www.justpensions.org
from late February 2006. The evaluation concluded that
— Trustees believe that there is a
strong need for organisations to raise awareness and understanding
on integrating international development and social/environmental
issues into investment practice.
— Trustees believe that change in investment
practice is occurring, although this is difficult to achieve,
takes time and requires influencing a broad range of groups.
— Given the challenges involved, Just
Pensions has been an effective programme.
— A sustained commitment will be required
for a further five to ten years, working across the investment
community, to deliver the changes needed. This needs to place
raising awareness and understanding about international development
issues within the context of raising awareness and understanding
of the importance of integrating social/environmental issues more
generally into investment practice.
3.5 Responding to this requirement
for a sustained commitment addressing a broad range of social/environmental
issues, UKSIF plans to launch a follow-up programme in Spring
2006 to continue to influence pension funds and institutional
investors. This will use and build on the materials and learning
from Just Pensions.
February 2006
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