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Ethical Watch
It's time to be socially responsible about investment
terminology, says ALAN STEELE
Last month's author, Peter Derrick, added to the increasing debate
surrounding ethical investment by saying "the trouble with ethical investment
is the word 'ethical' "(PT, October). At Hounslow LBC, in our investment
deliberations we have consciously avoided this term, preferring the use of
"socially responsible investment", which more accurately describes many of the
issues that are being addressed.
The term also hints at the longer timescale over which these issues
must be debated and over which companies, customers and investors must make
changes . This may seem to be playing with words but in many cases the term
"ethical" results in unnecessary emotional debate with the issues being lost
not so often the case where the more measured description "socially
responsible" is used.
Our approach has been to avoid the tokenistic response of some the
£5 million invested in a green fund etc., - and to recognise that
socially responsible investing must be an all-encompassing, total issue running
through the whole of our pension fund's investment strategy.
We have learnt that this is an issue that can only be developed over
time, there is not a quick fix - but there has been a tremendous move forward
in the last few years, particularly because of the emphasis from public sector
pensions funds. I have also learnt that once the debate is started it cannot be
put aside and you must continually address the issue and bring forward new
initiatives that deliver further the aim of social responsibility at the heart
of all of our decisions. inaction is not acceptable, especially where
councillors are actively involved and interested.
At Hounslow there has been an increasing number of developments. Taken
separately they may appear isolated, but when put together they are gradually
developing a consistent overall policy that fund members are accepting as being
a coherent, socially responsible investment strategy.
For instance, we now have in place:
- Full annual reporting to all fund members via a readable annual
report and a well-attended annual meeting
- Non-voting employee and pensioner representation on the investment
panel
- A consistent voting policy, under constant review, used for all UK
share holdings and growing awareness of the more complex issues to be decided
at company meetings
- Procedures to ensure that we respond to the governance debate
- Development, with Manifest and a number of other interested
parties, for understanding and evaluating environmental governance through a
two -layered approach in companies and across sectors
- Having our fund managers accept our socially responsible stance, as
well as debate and understand the issues at senior levels.
Each pension fund is unique and what works in one place may not in
another. But what is unquestionable is that socially responsible investment is
here to stay, and there is increasing pension fund member pressure on the
issues. Funds that fail to recognise this do so at their peril.
Alan Steele, Borough Treasurer, Hounslow LBC
Public Treasurer
November, 1999
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