Socially Responsible Investment Review

September 2013

Retail supply chain and Bangladesh

The collapse of the Rana Plaza factory building in Bangladesh earlier this year, with the loss of hundreds of lives, continues to be a focus of our engagement. Many UK and European retailers signed the Accord on Fire and Building Safety in Bangladesh. This commits the apparel industry to a legally binding framework of independent inspection and improvement of factory premises. We met Primark (owned by Associated British Foods), which had contracts with suppliers in the building and has signed the Accord. Primark was also the first retailer to offer compensation to those affected by the collapse, and put in place emergency relief at the time of the tragedy. Unfortunately, US companies have yet to sign the Accord and, with our US partners, we have signed an investor letter urging them to do so.

Climate change - 'Aiming for A'

We continue to encourage companies to improve their disclosure as well as reduce greenhouse gas (GHG) emissions. We are working with other institutional investors in the Aiming for A project. This focuses on encouraging high-impact companies to achieve an 'A' performance rating for reducing emissions. We have led the engagement with the 'B' rated Royal Dutch Shell. We were encouraged by the progress it has made in controlling gas flaring in Nigeria and plans for carbon capture and storage in Canada, but continue to look for further improvement.

Climate change - power generation and fossil fuels

We have explored the relationship between climate change and the power generation sector in a new position paper, soon to be available on our website. We look at the GHG emissions from different fuels and at how government policy to reduce emissions may affect the sector. A new policy will follow.

We signed a letter along with other socially responsible investors urging George Osborne, to set a 2030 Decarbonisation Target for the UK economy as part of the forthcoming UK Energy Bill.

Some campaign groups advocate the sale of fossil fuel-based investments on the basis that the GHG reduction measures required will leave some energy reserves redundant. We are working with the Church Investors Group on this issue. Its Climate Change Position Paper states: "We share both the frustration of campaigners that fossil fuels continue to be burned in quantities that will cause dangerous climate change and the goal of a successful transition to a low carbon economy � [however] we caution against over-simplifying climate change as an ethical investment issue." Both this and the briefing paper, Framing the Debate, address fossil fuel divestment and are available on the CIG website.

Extractive industries

We met with Glencore Xstrata to discuss the new management structure for managing sustainability performance and how it may impact health and safety. Glencore Xstrata shares were acquired following the merger via a holding in Xstrata. We are assessing whether the combined group meets our sustainable investment criteria and aim to meet Glencore Xstrata again in November after the launch of its 2013 sustainability report.

Pornography

The availability of violent and pornographic content continues to be of concern. We met with BT to understand how it provides access to legal content whilst protecting children. We were reassured to learn that BT has no appetite to brand or market pornographic content, and has controls in place that force consumers to 'opt in' to receive legal pornographic content in the home. BT also stressed that the industry continues to work hard to close down illegal Internet content, very little of which now emanates directly from within the UK.

Living Wage

The growing public debate around poverty in work and the squeeze on wages during the recession has illustrated the relevance of the Living Wage campaign. We continue to encourage companies to adopt and become accredited Living Wage employers, but with mixed results. Land Securities confirmed that all directly employed staff are paid the Living Wage and are committed to do so for all service partner teams. The response from Whitbread was less encouraging as they resisted the call to implement the Living Wage on the grounds it would hurt their competitiveness. We have written to AstraZeneca asking it to become a Living Wage employer, but they are yet to respond

Bribery allegations

GSK faces bribery allegations in China. With other church investor colleagues, we attended a company briefing, but for legal reasons GSK was unable to offer in depth comment. However, it recognised the seriousness and unacceptability of the charges and expressed determination to operate in a transparent and ethical way. GSK is working with the Chinese authorities. It has appointed an internal investigation team to look into the charges and an independent review of GSK practices in China.

Corporate governance

We have simplified our reporting format and UK and European voting disclosure is now set out in a similar way. More data is available online and we can provide further information on individual voting outcomes on request. We continue to oppose excessive remuneration, voting against many UK company remuneration reports during the third quarter, including those of BT Group, Vodafone, British Land and Tate & Lyle.

Ecumenical working

The Church Investors Group (CIG) held a successful conference in June, once again bringing together international church investors. This included a meeting with Anglo American, which discussed challenges in the South African platinum mining sector, African enterprise hubs, and its impressive HIV/AIDS programme, the largest private sector treatment programme in the world. There was a major seminar on the implications of climate change for investors and Blueprint for Better Business reported on an initiative to encourage a return to moral principles by business leaders. CIG is developing an international strategy that will make international engagement more effective.