Ethics

Socially responsible investment review
December 2008

Our approach

We continually monitor 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). Details of our ethical policies and background papers can be found at www.cfbmethodistchurch.org.uk/ethics

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

Our 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.

Anglo American

We have been in regular dialogue with Anglo American in the past year on a number of issues, which we have covered in previous reviews. Most recently, we were part of a Church Investors Group delegation which met with the Chairman and other executives for an overview of the company’s work on corporate responsibility. The company faces significant challenges but we remain encouraged by its commitment to address them.

Royal Dutch Shell

We met with Royal Dutch Shell for an update. We covered health and safety practice, renewable energy research, the Corrib pipeline project, and operations in Nigeria.

Extractive Industries Transparency Initiative

We are an investor signatory to the Extractive Industries Transparency Initiative (EITI). This global scheme, supported by many governments and companies, encourages countries and companies to be transparent about the payments governments receive for exploration and production contracts with oil, gas, and mining companies. Transparency helps to promote good governance as people see the revenues governments receive and hold them to account over how they are spent. However, many countries have not yet implemented the Scheme.

Investors that support the EITI regularly encourage extractive industries companies to remain committed. We joined with other investors in the quarter to discuss the EITI with BP and Anglo American and welcomed their commitment.

Supply chains

Retail supply chain issues have regularly been in the news. In particular, War on Want produced another report highlighting salaries and working conditions in the Bangladesh garment industry, maintaining affected workers were producing goods for UK retailers including Tesco and Primark. However, as with a previous War on Want report, the supply companies were not identified so limiting potential for dialogue with UK retailers. The retailers themselves maintained their specific suppliers were regularly audited for ethical issues.

In addition, a BBC report recently maintained that a supplier to Primark (a clothes retailer owned by Associated British Foods) was using labour from illegal immigrants and paying below the minimum wage and also sub contracting work to a company with similar practices. Primark stated that it took the allegations seriously, particularly since it audited the supplier last year. This is the second time Primark has discovered a supplier sub contracting work without its permission.

Our US partner, the General Board of Pensions of the United Methodist Church, engaged with the large US retailer, Wal-Mart, on child labour issues in Uzbekistan.

These examples demonstrate the importance of continuing to engage with companies on supply chain issues. This is likely to be particularly relevant during the global economic slowdown when a decline in demand may have serious consequences for supply chain workers.

BSkyB

We continue to review BSkyB in the light of positive changes we have seen in the company. However, it still owns a small number of ‘adult content’ movie channels. We led a Church Investors Group discussion about the company. A common engagement approach was agreed and a CIG delegation is to meet the Chief Executive and Finance Director in February.

UK Equity Benchmark

The benchmark against which our UK equity portfolios are managed changed at the beginning of the quarter. The FTSE All Share index contains many companies that do not fulfil our socially responsible investment criteria. The new benchmark excludes these companies and compensates by increasing the weightings in companies in the same broad economic groupings. Clients will continue to be able to see performance compared to both the ethical benchmark and the FTSE All Share. Please do contact us if you would like more information.

Church Investors Group

At the November Church Investors Group (CIG) meeting, Unilever made a presentation on how they approached issues of corporate responsibility.

CIG received an update on the activities of the Institutional Investors’ Group on Climate Change (IIGCC). Many CIG members are also members of the IIGCC. The meeting received a report on water sustainability by the Ecumenical Council of Corporate Responsibility and discussed an SRI approach to oil sands and insurance company exposure to Burma. CIG members also commissioned a report on how a Christian approach to executive remuneration might be developed.