Better returns for business.pdf - Oxfam New Zealand

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TWENTY FOURThe lack of transparency in the investmentsectorThe third major structural issue is the generallack of transparency in the investment industry.The vast majority of asset owners and assetmanagers provide little or no information ontheir approaches to responsible investment;in most cases, disclosure is confined to arelatively general high-level policy. Whilethere has been some progress (e.g. 40 percent of PRI signatories now publish theresponses they provide to the annual PRIimplementation survey), 45 very few institutionalinvestors provide a coherent and completeaccount of: (a) how they give effect to theirpolicies; (b) what resources they allocate toresponsible investment; (c) what engagementthey conduct, and what outcomes result fromthis engagement; (d) how they take accountof ESG issues in their investment processesand the investment results that such a focushas provided, and (e) whether and underwhat conditions they collaborate with otherinvestors 46 . The consequence is that it is simplynot possible to assess whether an investor’sresponsible investment commitments have hadany impact on investment performance or socialor environmental outcomes.Lack of transparency presents two importantchallenges to the investment industry. First,given that transparency is one of the coreprinciples of the PRI, there is a real riskthat companies will push back on investordemands for more disclosure on the groundsthat investors themselves are not transparentabout how they use this information. Second,the systemic lack of transparency runs the riskof undermining the credibility of initiatives suchas the PRI. If the PRI is not seen as a credibleinitiative, this will, in turn, limit the value ofthe PRI to investors. A similar argument canbe applied to individual investors. Withouttransparency on implementation, their rhetoricand policy commitments will simply not be seenas credible.“Transparency is crucial. Bothasset owners and managers shouldhave a publicly available strategythat underpins their principles andESG approach. They should bepublicly transparent on their valuesand performance so that peoplecan differentiate between them.”Giuseppe van der Helm,Executive director of VBDO andPresident of EUROSIF4.3 Technical barriersThe Better Returns in a Better World projectidentified a number of technical barriersthat limit the ability of investment managersto account fully for poverty reduction anddevelopment issues in their investmentprocesses. These fall into two categories:• Practical difficulties in valuing these issues and,even in situations where they can be valued,ensuring: (a) they are given appropriate weightin investment decisions, and (b) they havedesirable social outcomes.• The general absence of clear normativeframeworks (whether defined in regulation or inwidely supported codes and standards) againstwhich company performance can be assessedand which can form the basis for dialoguebetween companies and their investors.MOST ASSET OWNERS AND MANAGERSPROVIDE LITTLE OR NO INFORMATION ONTHEIR APPROACHES TO RESPONSIBLEINVESTMENT. THIS MAKES IT VERYDIFFICULT TO ASSESS WHETHER THEIRRESPONSIBLE INVESTMENT STRATEGIESHAVE HAD ANY IMPACT ON PERFORMANCEOR SOCIAL OR ENVIRONMENTAL OUTCOMES.
TWENTY FIVEPractical Challenges in Valuing and IntegratingPoverty Reduction and Development IssuesInvestors face some very real practicalchallenges in integrating poverty reductionand development issues into their investmentdecisions.WHILE THERE IS NOW AN EXTENSIVEAND ROBUST LITERATURE ON THEINVESTMENT IMPLICATIONS OF CLIMATECHANGE AND OTHER ENVIRONMENTALISSUES, SOCIAL ISSUES (HUMANRIGHTS, POVERTY, DEVELOPMENT)HAVE RECEIVED NOTHING LIKE THESAME LEVEL OF ATTENTION WITHINTHE INVESTMENT COMMUNITY.However, the answer is not simply to arguethat investment banks should produce moreresearch on these issues. A number of practicalhurdles would need to be overcome before highquality and credible research can be produced.These hurdles include:• The general weaknesses in corporatedisclosures on social issues.• The lack of clear – and accepted – correlationsbetween commonly used measures of corporatesocial performance (e.g. the existence ofhuman rights policies, supply chain auditing)and measures of financial or investmentperformance.• The difficulties in predicting the socialconsequences of environmental issues (see, forexample, the water example in Box 6).There is a general absence of investmentrelevantresearch and financial tools that canbe used by investors to assess the financialsignificance of these issues. While there isnow an extensive and robust literature on theinvestment implications of climate changeand other environmental issues, socialissues (human rights, poverty, development)have received nothing like the same level ofattention within the investment community. Theconsequence has been that many investmentmanagers are simply not aware of the nature,scale and risks associated with developmentissues. The general absence of such researchpresents another problem as it suggests toinvestment managers that these issues are notrelevant to their investments; put another way,the absence of research reinforces investmentmanagers’ prejudices about the lack of financialrelevance of these issues.• The difficulties in assigning a financial value toparticular social impacts, (see the example ofliving wage in global supply chains in Box 5).
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
Page 15 and 16: FIFTEENRole 2: Stock selectionInves
Page 17: SEVENTEENRole 4: Influencing public
Page 21 and 22: TWENTY ONE4.1 Introduction4.2 Struc
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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