Better returns for business.pdf - Oxfam New Zealand

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SIXTEENInvestor engagement has also led to changesin company performance, with particularlynoteworthy examples relating to accessto medicines (where investors lent strongsupport to Oxfam’s Cut the Cost and Novartiscampaigns), labour standards (whereinvestors encouraged companies to improvetheir monitoring and management of labourstandards in their supply chains) and climatechange (where investors have encouragedcompanies to reduce their greenhouse gasemissions). 23While, in the main, investors have tended tofocus most of their attention on issues wherethere is a clear business case for action,there have also been examples of investorswilling to move beyond those situations wherethe business benefits clearly outweigh thecosts. For example, Boston Common AssetManagement (US) and Storebrand (Norway)supported Intermón Oxfam in their call forSpanish oil company, Repsol to commit todisclosing its payments to governments, andsupported the inclusion of binding country-bycountrydisclosure in a potential new accountingstandard to be adopted by the InternationalAccounting Standards Board (IASB) for theextractive sector in 2010. 24 In June 2010,Chevron investors, representing $10 billion inshares, supported a shareholder proposal filedby Oxfam America, calling on the company todisclose its payments to governments. 25Some investors have – individually orcollectively – done benchmarking to assesscompanies’ relative performance as part oftheir engagement strategies. Examples includethe climate change, biodiversity and labourstandards benchmarks developed by InsightInvestment, 26 the Carbon Leaders DisclosureIndex produced by the Carbon DisclosureProject, 27 the ICCR benchmark 28 and the Accessto Medicine Index. 29 The key feature of theseindices is that they create additional incentives(i.e. beyond those in conventional costbenefitassessments) to improve companies’performance, with the potential for enhancedbrand and reputation benefits to the leaders inthese benchmarks. The other important featureis that they provide a structured basis for adialogue between companies and their investorsaround how specific issues are being managed. 30TO DATE, FEW SHAREHOLDERRESOLUTIONS RELATING TO COMPANIES’ENVIRONMENTAL AND SOCIALPERFORMANCE OR REPORTING HAVEBEEN FILED.It is interesting to note that, particularlyamong European investors, relatively littleuse (in relation to social and environmentalperformance) has been made of formalshareholder rights. To date, few shareholderresolutions relating to companies’ environmentaland social performance or reporting have beenfiled. In contrast, in the United States, the use offormal voting rights is much more widespread.For example, in 2008 alone, over 50 climatechange-related shareholder resolutions werefiled. Almost half of these resolutions weresubsequently withdrawn when the companiesmade commitments to set targets to reduce theirgreenhouse gas emissions. 31 It appears that themajor reason for the difference is that Europeaninvestors, generally, seem to have better accessto and relationships with company boards andso are more willing to engage in dialogue withcompany management. Lodging a resolution orvoting against management is generally seen asan action of last resort.
SEVENTEENRole 4: Influencing public policyMany of the most significant poverty reductionand development challenges result fromweaknesses in public policy frameworks. Whileinvestor engagement can do much to encouragecompanies to take a more proactive approachto these issues, the reality is that effective actionis in many cases constrained by limitations inpublic policy. Investors have recognized thisproblem and a number have sought to work withpolicy makers to address these gaps. Two goodexamples are investors’ support of the ExtractiveIndustries Transparency Initiative (EITI) 32 and thepublic policy work of the Institutional InvestorsGroup on Climate Change (IIGCC). 33EITI is a multi-stakeholder initiative involvingoil and mining companies, governments, civilsociety organisations and institutional investors.It seeks to promote fiscal transparency and goodpublic governance in countries with a historyof misusing extractive revenues. It does thisby enlisting both the extractive companies thatoperate there to declare their tax, bonus androyalty payments, and the recipient governmentsto declare what payments they receive. Bymid-2009, 76 investors with some $13 trillion ofassets under management had explicitly backedthe EITI by signing an ‘investor statement’.MANY OF THE MOST SIGNIFICANTPOVERTY REDUCTION ANDDEVELOPMENT CHALLENGES RESULTFROM WEAKNESSES IN PUBLICPOLICY FRAMEWORKS.This investor support is widely recognizedas having played an important role in gettingcompanies to sign up to the EITI and to reportinformation in line with the requirements of EITI.The Institutional Investors Group on ClimateChange (IIGCC) is a forum where morethan 50 European pension funds and assetmanagers representing around €50 trillion actcollectively to use their ‘significant collectiveinfluence to engage in dialogues with policymakers, investors and companies to acceleratethe shift to a low carbon economy.’ 34 Amongother activities, the IIGCC has sought to makea constructive contribution to internationalclimate change negotiation processes, callingfor a strong global climate change treaty withambitious emission reduction targets. 35These kinds of voluntary initiatives can havesignificant benefits both by encouraging positiveaction and by helping to establish the needfor effective regulation and enforcement bygovernments of coherent public policies thatprotect human rights and promote povertyreduction. In Oxfam’s view, responsibleinvestors have a clear interest in supportingstate regulation on these issues as it createsa level playing field for all companies andestablishes clear company performancestandards while encouraging good practice andinnovation.3.2 Responsible investment entering themainstream of the investment industryThe argument that investors have social andenvironmental responsibilities is increasinglyaccepted in the investment industry. This ismost clearly seen by the number of signatoriesto the UN-backed Principles for ResponsibleInvestment (PRI). As of the end of October2010, 827 investors, with the responsibilityfor more than $25 trillion of assets, andrepresenting 15 per cent of total global markets,had become signatories to the PRI. 36
Page 4: 1. Introduction“We can’t afford
Page 7 and 8: SEVENThe fact that the project was
Page 9 and 10: NINEOxfam is a rights-based organiz
Page 11: ELEVENWhile the debates around acce
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Page 21 and 22: TWENTY ONE4.1 Introduction4.2 Struc
Page 24 and 25: TWENTY FOURThe lack of transparency
Page 26 and 27: TWENTY SIXBox 5. Integrating living
Page 28 and 29: TWENTY EIGHTConsensus around perfor
Page 30 and 31: 5. Conclusions and recommendations
Page 32 and 33: THIRTY TWOTO CREATE DEMAND AND IMPR
Page 34 and 35: THIRTY FOURInstituting proper incen
Page 36 and 37: THIRTY SIXGovernment leadership of
Page 38 and 39: THIRTY EIGHTThe other issue that wa
Page 40 and 41: FORTYAs a final reflection on the q
Page 42 and 43: FORTY TWOCivil society organisation
Page 44 and 45: FORTY FOUREndnotes1 See www.busines
Page 46: FORTY SIXOxfam acknowledges the con

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