Finance for a Sustainable Recovery

This Blog is now Closed

noreply@blogger.com (Penny Shepherd) — Thu, 18 Mar 2010 14:31:00 +0000

In 2010, UKSIF is championing sustainable capital markets by influencing and supporting public policy and investor behaviour on:

Responsible Ownership through effective implementation of the Stewardship Code and related measures

Financing a Low Carbon and Sustainable Economy through green bonds and other socially useful financial innovation

Further Innovation and Cultural Change in financial services to better meet the long term needs of providers and users of capital and advance sustainable development at the same time

For more on our support for sustainable capital markets, please visit the regulation, standards and public policy section of the UKSIF web site.

Thank you to all who participated in the debate in 2009.

Progress towards Sustainable Capital Markets

noreply@blogger.com (Penny Shepherd) — Sun, 20 Dec 2009 17:11:00 +0000

This blog was launched nine months ago to track progress in building more sustainable capital markets. Now seems a good time to reflect on this year’s developments. From a UK perspective, which are the most significant signals of future change?

Here is my list of the key trends from 2009:

• Civil society starts to demand a more accountable finance sector

Eg. Anger at remuneration levels, Deepening of NGO research and campaigns

• Politicians, regulators and industry leaders increase support for good governance of asset owners and more responsible ownership of assets

Eg. Lord Myners’ emphasis on “ownerless corporations”, The Pensions Regulator’s governance campaign, the Walker Report’s Stewardship Code recommendations, Personal Accounts Delivery Authority Investment Consultation responses

• Modern green and ethical retail investors and their advisers seek positive ways to make money and make a difference with some of their investments

Eg. YouGov research for National Ethical Investment Week 2009, Conservatives commit to “Green ISAs”

• Stock exchanges deepen their focus on support for sustainability

Eg. World Federation of Stock Exchanges publishes interactive “Exchanges and Sustainable Investment” report, UN hosts sustainable stock exchanges event

• Bonds and other financial instruments for sustainable infrastructure move up the agenda

Eg. HSBC’s Vaccine Bond, second and third issues of World Bank green bonds, the Climate Bonds Initiative

In twelve months time, will these still seem like the key developments in 2009?

A great Lord Mayor's speech

noreply@blogger.com (Adam Ognall) — Tue, 17 Nov 2009 14:54:00 +0000

In his banquet speech last night, the new Lord Mayor called for a re-established social contract between financial institutions and the society they serve.

He suggested that the contract recognise “on the one hand that the UK benefits from financial services, and on the other that we need to do whatever it takes to serve the interests of the individual as well as those of the wider economy”.

The Lord Mayor’s speech also identified that climate change “may be an even greater threat” than the economic crisis. He called for the City to consider, post Copenhagen, how it can build on its leadership in sustainable finance to “do yet more to bring our expertise to bear on building sustainable solutions.”

If this is an early indication, we can expect much from the new Lord Mayor's year in office.

We’ll be back after National Ethical Investment Week!

noreply@blogger.com (Penny Shepherd) — Tue, 10 Nov 2009 13:47:00 +0000

The UKSIF team are rather busy this week, co-ordinating the second National Ethical Investment Week to spread the word about green and ethical investing to consumers, financial advisers and charities.

Our research has found that half of Britons with savings and investments would like to make money and make a difference. We are flagging up that today’s green and ethical investments are a great way to do this – particularly in the run-up to the Copenhagen summit.

For example, we are offering financial advisers “Summit to think about” at Money Marketing Online.

But, as a result, we won’t be posting any more to this blog until the week is over.

Have a happy National Ethical Investment Week 2009.

Global Centre Report: A Missed Opportunity for Green Leadership?

noreply@blogger.com (Penny Shepherd) — Tue, 10 Nov 2009 13:37:00 +0000

Yesterday saw the launch of “Asset management: the UK as a global centre”, a report produced under the joint chairmanship of the Chancellor of the Exchequer and the Chair of the UK’s Investment Management Association.

There is a major missed opportunity in the report. This can be summed up in three words - “carbon”, “climate” and “green”. I searched the PDF for all of them. Each returned “No matches were found”.

So, within a month of the Copenhagen Summit, this significant report on future UK leadership in asset management doesn’t even mention the challenge of redirecting capital towards low carbon industrial and social transformation.

Welcoming the report, Financial Services Secretary Paul Myners said he looked forward to “… the prospect of on-going engagement with the industry on .. the role of markets in society and ethical and moral dimensions to investment”. Lets hope he addresses this!

Capital and Control

noreply@blogger.com (Penny Shepherd) — Mon, 26 Oct 2009 12:45:00 +0000

The flow of reports and comments in the run-up to both Copenhagen and the final recommendations of the Walker Review continues this week.

“Catalysing low-carbon growth in developing economies: Public Finance Mechanisms to scale up private sector investments in climate solutions” is the latest on “capital” for the low carbon economy. It was launched today by UNEP in partnership with an impressive range of pension, investment and insurance organisations.

Meanwhile, on effective shareholder ownership and “control”, I was struck by this piece “not more regulation, more Responsibility” from Colin Melvin of Hermes in Sunday’s Independent.

Is more focus on “having fun” part of the way forward for the finance sector?

noreply@blogger.com (Penny Shepherd) — Wed, 21 Oct 2009 11:38:00 +0000

As the recent Tomorrow’s Company report “Tomorrow’s Innovation, Risk and Governance” highlights, creating an effective organisational culture is an essential part of building successful and sustainable organisations in the finance sector and elsewhere.

So following my post on the Archbishop of Canterbury’s speech, I was fascinated by this contribution from Cognitive Policy Works on the role of fun (aka motivational psychology) in “saving the world”.

OK, so maybe fun isn’t quite the right term – but what we do need today is more focus on values and culture in the finance sector – and fun isn’t a bad place to start!

Archbishop highlights a shared cultural crisis

noreply@blogger.com (Penny Shepherd) — Mon, 19 Oct 2009 10:54:00 +0000

Creating a more responsible finance sector requires rebuilding its connection to the wider world and rediscovering a sense of both responsibility for the future of the natural world and joy in making a positive contribution. Or at least that was my conclusion after reading a powerful speech by the Archbishop of Canterbury on climate change delivered last week.

The Archbishop talks about a shared cultural crisis that “could be summed up rather dramatically by saying that it’s a loss of a sense of what life is … a web of interactions, mutual givings and receivings”. He talks about “our calling to nourish” life and secure “a future for all living things”.

He says “a good deal of the talk and activity around the financial collapse has the marks of .. ‘displacement activity’ – precisely because it fails to see where the roots of the problem lie; in our amnesia about the human calling” and “whatever we do to combat the nightmare possibilities of wholesale environmental catastrophe has to be grounded not primarily in the scramble for survival but in the hope of human happiness”.

Even if – like me - you don’t share his religious lens, the speech contains valuable and inspiring insights. Many thanks to UKSIF Vice Chair Helen Wildsmith for pointing me to it.

Green Bonds and a UK Green Investment Bank: New public policy resource

noreply@blogger.com (Penny Shepherd) — Thu, 15 Oct 2009 09:46:00 +0000

Green Alliance has just launched a useful new section of its website called Green Finance UK. This aims to cover the developing public policy debates on Green Bonds and a UK Green Investment Bank. Worth checking out!

Reforming Ownership and Capital Markets

noreply@blogger.com (Penny Shepherd) — Tue, 13 Oct 2009 13:39:00 +0000

UKSIF has recently submitted responses to the Walker Review of Corporate Governance of UK banks and other financial institutions and to HM Treasury's 'Reforming Financial Markets' consultation. We have also responded to the second consultation in the 2009 Review of the Combined Code. All three responses can be found here.

Learning from corporate responses to environmental regulation

noreply@blogger.com (Penny Shepherd) — Tue, 13 Oct 2009 09:14:00 +0000

How can financial institutions best respond to today's regulatory debate?

The article 'Why sustainability is now the key driver of innovation' from September's Harvard Business Review has already been blogged about elsewhere (e.g. here).

But I think it is still worth highlighting that banks and financial institutions could find its model useful in rebuilding trust and profitability. C.K. Prahalad and colleagues propose this five stage model:

Stage 1: Viewing Compliance as Opportunity

Stage 2: Making Value Chains Sustainable

Stage 3: Designing Sustainable Products and Services

Stage 4: Developing New Business Models

Stage 5: Creating Next-Practive Platforms

What should a CSR manager do?

noreply@blogger.com (Penny Shepherd) — Tue, 18 Aug 2009 11:23:00 +0000

My piece in Ethical Corporation calls on CSR managers to play their part by building relationships with their pensions managers and helping them to work with their peers to shift the investment paradigm.

CSR managers looking for an example of good practice by a pension fund today could learn a lot from the Environment Agency Pension Fund's 2009 "Responsible Investment Review" or more generally from its web page on "How we manage our pension funds".

No more business as usual

noreply@blogger.com (Penny Shepherd) — Mon, 17 Aug 2009 10:17:00 +0000

I have just contributed an opinion piece "Responsible investment: No more business as usual" to the Ethical Corporation website.

It is based on my article in Green Alliance's pamphlet "From crisis to recovery: New economic policies for a low carbon future".

Ethical Corporation is doing a series of opinion pieces from members of their editorial advisory board - of which this is just one. FTSE's Will Oulton, for example, has contributed "Green investment grows up".

Call for ESG Disclosure from "Across the Pond"

noreply@blogger.com (Adam Ognall) — Fri, 24 Jul 2009 09:14:00 +0000

Earlier this week, a coalition of over 50 investment firms and professionals led by the US SIF called on the Securities and Exchange Commission (SEC) to require listed companies to report on ESG issues.

They asked the SEC to mandate annual reporting on sustainability indicators in accordance with the GRI framework and on other material ESG matters.

This follows Eurosif’s call on European institutions in April to require disclosure of ESG data by listed companies.

These initiatives give additional support to the view that improved reporting will help strengthen financial markets and foster sustainable business practices.

Where is PADA's "Investment Impact Committee"?

noreply@blogger.com (Penny Shepherd) — Thu, 23 Jul 2009 13:03:00 +0000

This question is promped by the Annual Report of the Personal Accounts Delivery Authority (PADA).

In Appendix A, you will find details of PADA’s Advisory Committees – the "Consumer Representative Committee" (from Age Concern to Which?), the "Scheme Management and Trustee Advisory Committee" (the pensions professional bodies) and the "Employer Representative Committee" (CBI, etc.).

But where is the "Public Interest Committee" or the "Other Stakeholders Committee"? Or even just the "Investment Impact Committee"? For example, although Personal Accounts will become an investor with global impact, there is no representation for the Climate Group, the Ethical Trading Initiative or indeed for the investor relations functions of the businesses whose shares Personal Accounts will hold to pay our future pensions. Some mistake surely?

From Crisis to Recovery: Reshaping Capital Markets

noreply@blogger.com (Penny Shepherd) — Thu, 16 Jul 2009 13:40:00 +0000

I have contributed a chapter on sustainable capital markets to a new Green Alliance pamphlet “From crisis to recovery: New economic policies for a low carbon future".

In it, I describe our policy recommendations to tackle the underlying issues that drive today’s dysfunctional investment approaches. We think this needs not just better regulation but also improvements to leadership, cultural norms and external scrutiny.

Specific proposals include:

Pension funds and other major investment owners should be required to report on how they implement their sustainable investment policies
Publicly owned investment holders should be required to be responsible owners and report annually on their progress
Greater transparency should be demanded of both companies and institutional investors
The objectives of financial regulators should enable them to take greater account of the wider public interest, including sustainable development.

It would be great to have your comments on these suggestions and the rest of the chapter.

Walker Review consultation document published

noreply@blogger.com (Penny Shepherd) — Thu, 16 Jul 2009 13:35:00 +0000

Recommendations from the Walker Review have been published in a consultation document today.

UKSIF will be responding over the summer to this and to last week’s HM Treasury report “Reforming financial markets”.

Do please respond to these too. Deadlines are 30 September (HMT) and 1 October (Walker).

"Investing in a Sustainable Recovery" Initiative

noreply@blogger.com (Penny Shepherd) — Thu, 16 Jul 2009 13:15:00 +0000

Details about the “Investing in a Sustainable Recovery” initiative are now available on the UKSIF web site.

There is a short description and notes from its first two roundtables. The third roundtable in May focused on “green bonds” and discussed a paper on “climate bonds” by Sean Kidney and colleagues.

The Initiative is convened by Tomorrow’s Company, UKSIF and the HSBC Climate Change Centre of Excellence, and supported by The London Accord and Network for Sustainable Financial Markets. Participation is by invitation only to institutional investors in fixed income and other asset classes, and relevant policy influencers.

Game-changing Lessons from Microfinance

noreply@blogger.com (Adam Ognall) — Fri, 10 Jul 2009 14:28:00 +0000

The Microfinance Club UK event I attended last night suggested to me a number of lessons and parallels for financing a sustainable recovery in the UK that we can draw from microfinance.

The event was the launch of a new book by Elizabeth Rhyne of Accion, 'Microfinance for Bankers and Investors'. Her key message is that where banks are sluggish and fail to innovate, others move in. She provides a number of case studies of retailers and technology providers who have been such game-changers. For example Vodaphone in Kenya and the Mexican electronic retailer, Grupo Elektra which in five years has attracted 8 million credit clients to its in-store banking business.

The event also discussed the impact of the financial crisis and the new report by CSFI which identifies that the greatest risks to microfinance stem from the current crisis; bad loans, shortage of liquidity etc.

Elizabeth Rhyne argued that microfinance was also suffering because stability preservation had taken precedence over the access agenda in public policy responses, with consumer protection not being taken seriously.

This concern has driven innovation, with a number of microfinance institutions coming together to launch The Campaign for Client Protection, to ensure that financial providers take concrete steps to protect low income customers from harmful products and to ensure they are treated fairly.

Practical Regulation for "Desirable Social Objectives"

noreply@blogger.com (Penny Shepherd) — Thu, 02 Jul 2009 15:48:00 +0000

Over the last few weeks, UKSIF has been responding to consultations on financial reform and on information disclosure by pension funds.

I notice that, speaking in China recently, FSA Chairman Adair Turner said “We need above all to see markets not as ends in themselves, but as tools to achieve desirable social objectives. Financial markets have major and important roles to play in ensuring the allocation of capital to most efficient uses. But they will not operate perfectly and smoothly without effective regulation and oversight.”

The UKSIF web site now contains our response to the Turner Review, our recommendations to the 2009 Review of the Combined Code, and our comments on the Office of Fair Trading’s Financial Services Strategy.

We also responded to the DWP “Review of Disclosure of Information Requirements applying to Occupational, Personal and Stakeholder Pension Schemes” to call for government action to require greater transparency by pension schemes about responsible investment policies and their implementation. This built on the low level of transparency identified in our “Responsible Business: Sustainable Pension" 2009 report published earlier this month.

Our consultation responses have all focused on practical regulation and oversight measures to achieve desirable objectives for the real economy, society and the environment.

UKSIF-Oxfam Meeting with Financial Secretary: Common Priorities for Financial Reform

noreply@blogger.com (Penny Shepherd) — Wed, 01 Jul 2009 13:29:00 +0000

A joint delegation of responsible investors and leading NGOs met recently with Financial Secretary Stephen Timms MP. It was led by Paul Abberley, Chief Executive of Aviva Investors London and convened by Oxfam GB and UKSIF.

The delegation demonstrated how a common agenda is emerging between responsible investment leaders and major NGOs on priorities for financial reform to achieve a sustainable recovery. We discussed priorities for both UK and International/G20 action.

Our list of priorities is now available, as “Financial Reform for a Sustainable Recovery: NGO and Responsible Investor Priorities”, on the UKSIF web site.

Inspiration not just Regulation: FT Sustainable Banking Award winners

noreply@blogger.com (Penny Shepherd) — Fri, 05 Jun 2009 14:34:00 +0000

Congratulations to Triodos Bank, crowned as “Sustainable Bank of the Year 2009” at last night’s FT Sustainable Banking Awards, and to runner up Standard Chartered.

As the deadline for comments on the Turner Review approaches, it is good to have both as inspirations for the future of banking and – to declare an interest - as UKSIF members.

Some of us remember the early days of Mercury Provident (founded 1974), the tiny UK industrial and provident society that merged in 1995 with its Dutch sibling (founded 1980) to bring the Triodos Bank name to the UK. Its early supporters will feel vindicated by this proof that new entrants can indeed establish a different vision of banking.

Equally, Standard Chartered, founded 1853 and 1863 to meet British Empire banking needs, shows that incumbents can adapt to today’s new challenges; while the candidates and winners for “Emerging Markets Sustainable Bank of the Year 2009” and the other awards together give a powerful glimpse into a positive future for banking across the globe.

But my fear is that well-intentioned financial reform may inadvertently prevent the emergence of the 21st Century’s equivalents to Mercury Provident. Today’s challenge for financial regulators is to support innovation and inspiration as well as controlling the dysfunctional.

Photographs from the event (available here) include former UKSIF Vice Chair Charles Middleton accepting the award on behalf of Triodos Bank and the table I shared with fellow guests from emerging market winners Itaú Unibanco (Brazil) and Industrial Bank (China) and others.

Are you ready for Learning-by-Doing?

noreply@blogger.com (Helen Wildsmith) — Sun, 17 May 2009 20:30:00 +0000

The problems we are blogging about are "wicked". There are no elegant solutions to be found and implemented, and our current problems are symptoms of even bigger ones.

UKSIF and NSFM are thinking of introducing more of the change agents who are grappling with these systemic issues to techniques that help people learn more quickly and/or deeply from the work they are doing. Some people will prefer to take the tools and use them with a trusted critical friend, others will prefer to work in small groups that meet regularly for an agreed period.

Some of us might want to focus on Mike Hulme’s challenge in his new book Why We Disagree About Climate Change. He believes that we should move on from seeing climate change as a wicked problem to: "us[ing] the idea of climate change to rethink how we take forward our political, social, economic and personal projects over the decades to come … as resource of the imagination … it may teach and empower us to embark on different projects from those that come easily to us".

Targets to budgets: bridging the divide between science and finance

noreply@blogger.com (Adam Ognall) — Fri, 01 May 2009 10:59:00 +0000

Scientists are thinking more about how they communicate to decision-makers on climate change. Prompted by frustration over a lack of action despite compelling evidence, some are calling for a ‘common climate language’.

This is very welcome. The difficulty of translating the possibilities and probabilities of scientific projection to the certainties and time frames used by capital markets is a significant barrier to these markets fully integrating climate change.

A new study published this week may point to one way of tackling this.

The study, led by Myles Allen of Oxford University grimly finds that the world has already burned half the fossil fuels necessary to bring about a 2˚C rise in average global temperatures.

With this research, his team argues for the current range of targets and timetables on climate change to be re-framed as an available budget (‘we can only burn another x tonnes of carbon’).

This got me wondering…

...would a shift of narrative from targets to budgets help investors and their regulators understand the impact (and possibilities) of climate change?

Whilst this might be dismissed as trivial semantics, such shifts – as pointed out in this piece - may be the key to ‘greening our brains’.

Beyond regulation: PIRC and Aviva Investors on ownership and capital market reform

noreply@blogger.com (Penny Shepherd) — Tue, 28 Apr 2009 13:59:00 +0000

I am more and more convinced that apparently robust interventions like improved regulation will deliver effective ownership and sustainable capital markets only if there is associated cultural change. This is not an argument against regulation – but it is an argument against regulation alone.

It is good to see a range of proposals now coming forward on responsible ownership and capital market reform – but one test is how they will change cultures and norms so that new behaviours are “what we believe in doing around here” rather than “what our compliance department says we have to be seen to do”.

Anita Skipper, Corporate Governance Director at Aviva Investors and Alan MacDougall and his colleagues at PIRC have both just published thoughtful contributions to the debate.

Introducing PIRC’s “Manifesto for corporate governance and capital market reform”, Alan says “Too many institutions fail to take their ownership responsibilities seriously, therefore post-crisis reform must consider their role too. There can be no return to business as usual.” The manifesto aims to “stimulate debate and spark further ideas, but most importantly to begin the process of pulling together ... radical but realistic policy reforms”. PIRC is seeking comments on its suggestions.

Anita’s piece “Corporate governance and the economic crisis: what can shareholders do differently?” appears in Aviva Investors’ The Investors Journal (Volume 3). (NB. To get access, just click either “I am a private investor” or a more appropriate category.)

She highlights barriers to good governance including “Lack of client interest”, “Human behaviour” and “Managing conflicts of interest”. Her solutions include “More client focus on governance” and “Focus on culture”.

Importantly, she says “With the right corporate culture in place, companies, boards and fund managers are more likely to make the “right” decisions, irrespective of any weaknesses of accountability, regulation, accounting standards and conflicts of interest.”