Reports and analysis

In collaboration with BNP Paribas Investment Partners, Novethic has released the results of its survey “Institutional investors’ perspective on their responsibility for corporate ESG policies”. The survey reveals a strong sentiment of responsibility among major French and UK investors, but with varying degrees when it comes to tackling core issues. Although the French prioritise social issues and the English emphasise governance, both play down the environment as a major concern. The belief that this responsibility is fundamental to the long-term management of a company is held by 79% of UK investors, but only by 40% of French investors. Behind this same impetus, the survey highlights local differences: social factors are the number one priority for 48% of institutional investors in France, while governance carries it for 79% of UK investors.

http://www.businesswire.com/portal/site/home/email/headlines/?ndmViewId=news_view&newsLang=en&div=1399957226&newsId=20081209005558  

[Source: CSR Europe/ Novethic/ BusinessWire, 9 Dec 2008]

Asset managers may not be capturing enough of the available information about the companies they invest in, according to a paper issued by the influential Marathon Club, the London-based collaboration of pension fund trustees and industry specialists on long-term investment issues. In a practical report for trustees on issues to be learnt from the credit crisis, the club draws a number of conclusions. One is that fund managers are too reliant on normal channels of information and as a result they may be failing to capture what it calls “submerged information” that could be drawn out from more thorough long-term research and risk appraisal.

[Source: Responsible Investor website 11 Dec. 2008]

Part of RSA’s Civic Capitalism workstream, the project looking at the corporate system from the perspective of ordinary citizens. The report concerns itself in particular with costs and charges levied on pension plan members. It also looks at methods of improving transparency and accountability and at improving investor engagement. It suggests a new way of reporting costs and charges, suggesting a need for a fund management strategy that is more modest in its aims. By adopting what RSA calls a “long-term, low-friction investment strategy” and holding onto their investments, fund managers could save pension plan members as much as 20 per cent of the costs paid by pension plan members. Fees should be expressed in a different way: as a total over the lifetime of an investment, rather than an annual charge.  This would give ordinary investors a much better idea what they are paying.   The report argues that pension funds should take more advantage of the resources at their disposal by utilising new methods of social engagement. The report closes by announcing the RSA’s intention to create a business plan for a new type of pension fund: one that is both low cost and high accountability.   Ordinary investors RSA argues want a high-accountability, low-cost fund that offers reasonably secure returns at a decent level of risk. Countries such as Sweden and Holland manage to provide this, so there is a strong chance that Britain could as well.

[Source: RSA website, 29 Dec 2008]

Companies should work more closely with investors who see themselves as capital ‘stewards’ rather than with short-term speculators such as hedge funds, in order to strengthen long‐term relationships, according to a report by Tomorrow’s Company a leading London‐based think tank. The report argues that companies, and potentially regulators, need to “reinforce” the effectiveness of those investors who act in the company’s long-term interests. The report links this to the growing importance of ESG and SRI considerations as a driver in institutional investor strategy because of growing evidence that their inclusion can support long‐term performance and risk management.

http://www.tomorrowscompany.com/news.aspx#newsitem47 and http://www.responsible-investor.com/home/article/tommorrows_company/

De-merge the banks now in public ownership, launch a new People's Bank through a revived post office network, and rebuild an effective local lending infrastructure to support the real, local economy. Those are three of nef's key proposals for clawing our way out of the credit crunch. They dovetail with a range of other proposals - including the Green New Deal - that also address the energy crunch and climate crunch. nef's From the Ashes of the Crash makes 20 recommendations for breathing life into a phoenix-like new economy in response to Gordon Brown's call for 'fresh and innovative intervention that gets to the heart of the problem.' Support for some of nef's proposals is already gathering momentum, but as government initiative after government initiative fails - there is still clearly a need for decisive and innovative action - and an opportunity we can and must take to develop a new model for a real economy that works for people and the planet. 

Download the full report: http://www.neweconomics.org/gen/z_sys_PublicationDetail.aspx?pid=268

[Source: New Economics Foundation, 20 January 2009]

Launched on 15 January this World Economic Forum report explores a near-term industry outlook characterized by an expanded scope for regulatory oversight, back to basics in the banking sector, some restructuring by alternative investment firms and the emergence of a new set of winners and losers.  The report suggests that "Re-regulated banks are likely to become more like utilities as they refocus on core competencies. Moreover, bank strategies are less likely to overlap as individual competitive advantages are reaffirmed." Over the long-term, the report finds that a range of external forces and critical uncertainties have the power to significantly shape the industry. The study found that the two most critical uncertainties for the future of the global financial system are: 1) the pace of geo-economic power shifts from today’s advanced economies to the emerging world; and 2) the degree of international coordination on financial policy.  By employing scenario analysis, the report explores the impact of these and other key driving forces on the potential governance and structure of financial markets from today until 2020.  The report was developed in collaboration with Oliver Wyman and overseen by a steering committee of 20 leading industry practitioners and academics including David Rubenstein (The Carlyle Group) and John Thain (Bank of America Merrill Lynch). Additional regulatory expertise was provided by Clifford Chance LLP. [Source: WEForum.org, 24 Jan. 2009]

Report: http://www.weforum.org/pdf/scenarios/TheFutureoftheGlobalFinancialSystem.pdf

Long-term scenarios for the future of the global financial system - Key driving forces compendium: http://www.weforum.org/pdf/scenarios/Driving.pdf

‘Future Proof? Embedding environmental, social and governance issues in investment markets’ includes a detailed assessment of the investment industries progress thus far and a series of recommendations to advance mainstream ESG integration in investment decisions. See www.onvalues.ch  [Source: UKSIF, 27 Feb 09]