Ethics

Socially responsible investment review
March 2008

Our approach

The CFB continually monitors investments from a responsible investment perspective, applying specific policies to companies and sectors. We also make use of the Methodist Church’s Joint Advisory Committee on the Ethics of Investment (JACEI).

We conduct original research on themes such as the environment and human rights. CFB fund managers integrate financial and ethical analysis of companies to ensure a consistent approach.

CFB clients have access to all our ethical policies and background papers. We welcome input from clients on SRI matters. For further information contact Bill Lane on 020 7496 3630.

Defence

The CFB adopted a new policy statement on companies with military exposure last year. The position paper that formed the basis for discussions held by JACEI is now available. It contains ethical considerations of defence issues and also a history of CFB engagement on this issue. Please click on the following links for the policy statement and the position paper.

Smiths Group

JACEI applied the new policy on companies with military exposure to Smiths Group, a constituent of the FTSE 100 index. The company used to have a significant military aerospace business. However, the division was sold in 2007 leaving it focused on three areas: speciality engineering, medical devices, and detection systems. The remaining exposure to military sales was calculated at just below 11% of group sales and consisted of communication, radar, and navigation systems, and detection systems for nuclear, biological, and chemical risks. The Committee concluded that on balance Smiths Group was now an ethically acceptable investment. Nevertheless, it decided that it would revisit its opinion should the level of military exposure rise to 15% of group sales.

Daimler

JACEI also considered the military exposure of Daimler, through its shareholding in EADS, which is the lead partner in the Eurocopter and Eurofighter programmes. EADS is also exposed to the French nuclear weapons system via various joint ventures. Although Daimler’s military exposure is small, its involvement with nuclear weapons and the fact it had management control meant that, the Committee judged that an investment in the company was not acceptable on ethical grounds.

Lonmin

Following research into the platinum group metals miner, and applying the CFB policy on investment in extractive industries, Lonmin was judged to be an ethically acceptable investment. It was noted that Lonmin’s mines tended to be more mechanised than those of other platinum mining companies, which reduced the risk of injury. The company’s policies towards HIV/AIDS and engagement with local communities appeared advanced. We have also noted the essential nature of platinum in catalytic converters, helping to minimise environmental damage.

Anglo American

An Action Aid report made a series of allegations about community engagement and environmental damage around Anglo Platinum’s mines in South Africa. Anglo Platinum is a subsidiary of Anglo American. In particular the NGO claimed that water supplies had been contaminated from nitrate compounds from a mine. However, it appears that such compounds may well derive from pit latrines and raw sewerage. Further tests are being undertaken. The CFB is engaged in dialogue with Anglo American regarding Action Aid’s campaign.

ArcelorMittal

We noted Financial Times reports about an explosion that killed 30 people at an ArcelorMittal coal mine (Abaiskaya mine) in Kazakhstan in January. A review of the company is being conducted.

Marks and Spencer

The news that Marks and Spencer intends to move its CEO Sir Stuart Rose to the position of Executive Chairman, and for the time being leave the CEO position vacant, has received a mixed reaction. The Combined Code on corporate governance is opposed to such a move unless there are exceptional circumstances. It is not clear such circumstances apply in this case. However, investors are unlikely to have the opportunity to vote on the proposal and may simply have a vote on Sir Stuart’s reappointment to the board each year.

Children’s Issues

A paper has been produced reviewing the key ethical investment issues relating to children. These include the role of the food industry in combating the growing problem of childhood obesity, concerns about child labour in supply chains and ethical issues relating to children’s medicines.

Israel/Palestine

The CFB recently hosted a meeting with UK and US church investors to discuss the campaigns within the various denominations for disinvestment from companies considered to be supporting the Israeli actions in Palestine, with particular reference to Caterpillar. There was agreement to keep each other in touch with related company engagement programmes and any developments in the campaigns.

Church Investors’ Group

The Church Investors’ Group (CIG) issued a statement condemning the continued civil war and human rights abuses in Sudan and the part certain companies may be playing in prolonging the conflict. It also called for all parties to embark on constructive engagement, encouraged companies to follow the recommendations set out by the Sudan Divestment Taskforce and encouraged its members to reflect on their portfolios in the light of any involvement of invested companies in Sudan.

CIG held a trustee training day in February which was well attended. It examined the role of hedge funds and how churches can incorporate SRI into investment agreements.

For more information about becoming a member, please do contact us.