Ethics

Socially responsible investment review
June 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). Its report to the 2008 Methodist Conference is now available.

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.

Tesco

Tesco attracted media attention during the quarter as the television chef Hugh Fearnley-Whittingstall an AGM resolution calling upon Tesco to ensure its chicken suppliers followed company guidelines on animal welfare and that their practices be audited. While Tesco maintained it was already acting in accordance with the resolution, it recommended shareholders vote against.

We discussed the resolution with both a representative of Mr Fearnley-Whittingstall and Tesco itself. Our conclusion was that the resolution should be supported and the Tesco holding was voted accordingly. The resolution was rejected at the AGM but 8.9% of total votes were in favour and 9.8% were abstentions, which should be regarded as a significant. We will continue to follow this issue.

We also asked Tesco questions about its relationship with US unions, where it is subject to a campaign for union recognition. It is important for companies to take the correct approach to such issues at an early stage. We believe Tesco needs to re-examine its engagement methodology. We are seeking a meeting with the company to discuss supply chain issues in the near future.

Anglo American

We attended the launch of the Anglo American’s 2007 annual ‘Report to Society’. We particularly welcomed the decisive action by the new CEO to improve health and safety, which has resulted in a substantial drop in fatalities.

We also met with Anglo American, to discuss issues raised by an Action Aid report on the impact of mining in South Africa. The NGO claimed that nitrate compounds found in community water supplies originated from waste from nearby mining. Subsequent testing by Anglo American has indicated that the mine was not involved and that the most likely cause of pollution was raw sewerage. Nevertheless, Anglo American provided clean water and water purification equipment to the community concerned.

Anglo American appears to be committed to tackling the challenges facing it as a large mining company operating some very old and deep mines. Further meetings are planned to monitor progress.

BSkyB

We have not considered investment in BSkyB to be appropriate on ethical grounds since 1995, when the company acquired a stake in the new Playboy Channel. However, the character of BSkyB has changed and it now offers channels to a broad customer base. It no longer has a stake in the Playboy Channel and does not invest in any other ‘adult content’ production companies, although it owns seven ‘adult content’ film channels. There is also some concern about a small exposure to gambling. While it is not a high impact company in terms of carbon emissions, it has taken action in a prominent way. JACEI is reviewing whether its current advice towards the company remains appropriate.

Primark/Associated British Foods

We have followed closely the reports that child labour has been used to produce clothes sold by Primark, a business owned by Associated British Foods. The company stated that it had not been aware that children were employed and had ended its relationship with the companies concerned on the grounds that its code of practice had been breached. Primark also stated that it would be funding development projects that should assist the communities affected. This situation demonstrates again the problems which can occur with supply chains and it also demonstrates that companies are very sensitive about this.

Chevron

We continue to work closely with the General Board of Pensions of the United Methodist Church (United States) on US companies. We voted for a shareholder resolution calling upon the US oil company Chevron to clarify its policy when operating in countries with human rights violations, such as Burma.

Church Investors’ Group

The Church Investors’ Group (CIG) met in June. It launched its paper on usury (available at www.churchinvestorsgroup.org.uk) and discussed the ethics of nuclear power. It also received a presentation from Marks and Spencer on its corporate responsibility practice.

CIG released a position statement on investment in Sudan which we fully endorse. Meanwhile Reed Elsevier has finally sold its defence exhibitions business, an action we had been calling for through the Church Investors Group.

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