Ethical risk

The recent history of the ethicsThe risksThe opportunities

The ethics

Concerns amongst the churchesEthical investment is offered to the publicPrinciples turn out to be popularAn industry is bornThe ideas spread far and wideConcerned individuals press for moreCEIG is formed

The risks

Reputations can be worth moneyCustomers can act upon these thingsPeople have choices about who to work forCompanies need approval “Ethics” today and law tomorrow Investors begin to explore the linksDemand for transparency growsBut perhaps principles don’t always payRisk in ignoring these issues

The opportunities

For financial institutionsFor individual investorsFor pension scheme membersFor companiesFor churches and NGOsA chance to see new linkagesAre we missing some opportunities?

The birth of ethical investment

Traditional church concernsVietnam warApartheid in South AfricaEngagement and sanctionsEIRIS is launched

Making ethical options available

Stewardship Unit TrustMore funds with further developmentEnvironmental focus emergedWide range of approaches and productsThe rise of ethical financial advice

An industry develops

Expectations exceeded 1,000 times overGuides for the public appearUKSIF is formed (uksif.org)“In house teams” appear

The ideas spread far and wide

Engaging the mainstream The World of PensionsThe Netherlands, Sweden, Japan . . . . The Corporate World tooFTSE4Good

Pressing for more

Churches and South AfricaThree wise men take on the CommissionersNoisy defeat, but quiet victoryWe have CEIG stillCharities now pressed to disclosure more

The ideas spread far and wide

Engaging the mainstream Pension schemes state their policiesThe Netherlands, Sweden, Japan . . . . The Corporate World tooFTSE4Good

Relating to risk

Does it affect performance?Should fund manager take an interest?Even for “uncaring” investors?Previous a question of potential investor

costsNow a question of pricing assets

Can ethics mean business?

Increasing value of reputationsBrands and intangiblesGlobalising world is “smaller” If you want to be good, be careful

A company needs it’s stake-holders

Customers can act upon these thingsPeople have choices about who to work forCompanies need approval “Ethics” today and law tomorrow

Customers views: the BT study

Business strategy is to increase loyaltyCustomer satisfaction correlated with loyaltyDetailed study of correlations25% of that comes from CSR issuesBT goes searching for ways to reinforce“What’s it worth to be trusted?”

Choosing where to work

Growth in transferable skillsMultiple careers seem more commonShell identified new recruits as an issues“What do you do at work, Mum?”Nobody gets out of bed in increase EPS . . .Need good enthusiastic peopleStaff turnover costs thousands

Gaining approval

Planning permissionEnvironmental permitsLicensing productsOF EVERYTHING

Professional judgementScope of legislation generally

Investors begin to explore the links

ABI processDisclosure the routeAre the SEE risks and opportunities being managed?Role of the Board and information Integrated risks systemsAccountability to shareholders

Demand for disclosure grows

Company Law Review– Operating and Financial Review– Rather too much Board judgement– But “materiality” debate

EU process– Different views– Starting with voluntary approach– But “act as if you had to disclose”– Stakeholder forum

Global Reporting Initiative “Insider” information

So what sort of world is this?

Investors: pricing SEE factorsCompanies: check and tellSo that’s sorted then?But what if principles don’t pay?

– Tobacco still sells– You could spend “too much” on environment– Market won’t always reward your efforts

Individual ethics still countTo ban, or not to ban . . .

Ostrich Risk

Charities not thinking about their investmentsCompanies not thinking about their pensionsFinancial institutions not seeing brand implications

The opportunities

For financial institutionsFor individual investorsFor pension scheme membersFor companiesFor churches and NGOs“Joined up economics” for pension schemesWhat new opportunities do we need?

Financial institutions

Ethical options and customer loyaltyRisk and returns issues for whole businessA general branding issue in murky worldInstitutional Shareholder Committee processLatest changes to UK retail market

For the individual investors

Getting your own finances in orderEthical funds or choice of sharesOpportunities to raise issues

– With Fund Managers– With Financial Institutions

For pension scheme members

What’s in the SIP?Fit with employers position?Is it being implemented? Who are the fund managers?What are they doingAre there ethical options? Just pensions reports, EIRIS web-site

For companies

What is our own pension scheme doing?What are we saying in our annual report?Are their risks/opportunities we are missing?Are we aware of the value of trust?Do we want to be in Dow Jones/

FTSE4Good?

For churches and NGOs

Is our own house in order?Proper information, healthy debate, clear

decisionsCould our members and supporters do more?Are their links with our own work?Do we know things the City doesn’t?Are their opportunities to work with

Companies?

For Pension Schemes

Need to deal with members and employers views

Long term investors (USS, Hermes approaches)

Building value for the membersSEE factors probably are part of “World plc” Opportunities to “explore the future” “Benefit is a word with wide meaning”

For the concerned citizen

Company Law Review processEuropean level debatePressing for ethical financial advice Pushing forward Pensions rules

Opportunities for all?

Not clear enough about links with povertyWhat can multinational companies do about

poverty?What else can financial markets offer?Links with trade policiesBrandt report type thinkingConflict, environment, health, strong societies?

Where are we heading?

Many established ethical pathsGrowing awareness of risk and business linksEvery growing range of opportunitiesReal chance to change the way the world

does businessA surprising amount depends on individual

initiative