Socially Responsible Investment Review

March 2013

Human rights and conflict

The presence of companies operating in conflict areas can be influential and consequently they have particular responsibilities. Many consider how to protect and uphold human rights in such situations, recognising that staff training is necessary, particularly where security personnel are involved. We have looked into how we can better assess companies and encourage good corporate behaviour around this issue. This project has helped structure our approach further and builds on our work on caste discrimination and other oppressed people groups. A Position Paper has been agreed and following the adoption of a Policy Statement both will be made available on our website.

Banks

Allegations of money laundering in Mexico led to US regulators imposing a $1.9bn fine on HSBC. A meeting with the company confirmed that inadequate due diligence and poor oversight in Mexico had allowed an ineffectual compliance regime to thrive. In response HSBC has made fundamental changes in its business model and we were re-assured that the actions taken should prevent a recurrence of similar problems. It is pleasing to note that HSBC has not been investigated for LIBOR rigging, and its own investigations have revealed no malfeasance in this area. We also participated in a further Church Investor Group (CIG) meeting with Barclays to monitor its progress in making the cultural and behavioural changes necessary to restore trust in it.

Glencore Xstrata Merger

The CFB holds shares in Xstrata whose merger with Glencore, another mining company, has been approved by shareholders. Our analysis indicates serious concerns as far as environmental management is concerned. Therefore JACEI feels it will need reassurance in relation to commitments that may be made by the merged Group to meet Xstrata�s standards of corporate responsibility. It accepts that evidence of this may take time to emerge and is content for engagement to continue for a limited period, prior to a further review.

Israel/Palestine

Further engagement with Veolia took place until our holding was sold on investment grounds. It had been part of our European index-tracking portfolio, but the sale was triggered when it ceased to be a constituent of the FTSE Euro 300 ex UK Index.

Tax Justice

There is growing concern in society about corporate tax avoidance. This is a complex area affecting governments and international institutions. JACEI commissioned a paper exploring practices that enable companies apparently operating profitably in the UK to pay little or no corporation tax.

Climate Change

Following their failure to respond to the 2012 Carbon Disclosure Project survey request, we wrote to Capita and Elementis. Their replies indicated strong management of climate change risks, with Capita noting that it was among the first in the FTSE100 to publish a complete carbon footprint. Both are committed to publishing as much as is required under the CDP survey. We await a response from Spirent Communications to a similar request.

Access to Medicines Index

We are a signatory to the Access to Medicines Index which assesses pharmaceutical companies by various criteria including R&D activities, pricing schemes, patents and licencing policies. We were concerned to see that AstraZeneca�s had slipped down the rankings in the latest Report. We wrote to the company seeking explanations and it s plans to improve performance.

Access to Nutrition Index (ATNI)

We have become signatories to the Access to Nutrition Index, a new investor initiative to benchmark the leading food companies on their nutrition related policies, practices and performance. It is hoped this may lead to the provision of more nutritious products and provide a tool for investors to measure the risks arising from failing to respond to the developing health and well-being agenda.

Bellway

The residential housing industry has an important role to play in helping to meet the Government�s ambitious emissions targets. We hosted a CIG meeting with Bellway, the UK�s fourth largest house-builder, to learn how the sector is meeting challenging energy, waste and water reduction targets. It also helped us understand how sustainable communities are being created on industrial brown-field land and the impact of the new planning regime on sustainability.

Corporate governance and UK Stewardship Code

We continue to take an active position on excessive remuneration, and opposed several UK remuneration reports that failed our stringent tests on performance and excess. We assisted in amending the CIG UK voting template. As a consequence we have toughened our stance on board diversity and ensured that voting is consistent with CIG�s collective engagement on carbon emissions reporting and reduction. From 1 May our European portfolio will be voted by ISS. Following a revision of the UK Stewardship Code by the Financial Reporting Council, we have also updated our statement about the Code. This can be found on our website.