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There is a sea change happening in the way in which pension funds are re-examining fiduciary duty. I wrote about the changes on the IPO front here. http://thevaluealliance.com/Blog/?p=60
But there are larger changes happening that provide hope as well.
Over the course of 2012, it’s become evident that social policies are receiving increasing attention by boards and by investors who care about responsible investing.
Tragedies seem to be driving some of the change. Newtown represents the most recent in this scrutiny of corporate social issues but the momentum this year was already growing. Think Apple/Foxconn, Hershey — and more recently, the Wal-Mart supply chain disaster responsible for the deaths of 112 people trapped in a Bangledesh factory fire last month.
In the wake of the Newtown massacre, CalSTRS received some press for its Cerebus’ investments in a gun manufacturer.
Chief Investment Officer, Chris Ailman, through his press office wrote me that “CalSTRS has been screening investments through its ESG [environmental social governance]standards and the 21 Risk Factors since their passage in 2008. CalSTRS has also developed an ESG committee with representatives from all the asset classes. They vet all our investments for compliance with CalSTRS’ ESG standards. Since 1978, CalSTRS has used a written policy, the Statement of Investment Responsibility (SIR), to navigate the complex landscape of ESG issues. The long history of this document is testimony to the national leadership of CalSTRS among pension funds in addressing ESG matters through a written policy.”
Many pension funds, like CalSTRS, are still in the race in clearly defining what the S means (as well as the E and G in some cases) and in establishing strong monitoring systems. But today there are many more pension funds working toward that goal than in the past. (See also http://thevaluealliance.com/Blog/?p=56) Members of ICCR are among those leading the pack.
In 2010, Geoffrey Mazullo, Principal at Emerging Markets ESG, and I attempted to conduct research on pension fund monitoring of socially responsible investing for the Journal of Environmental Investing. We came away with the distinct impression that there was more emphasis and discipline needed.
Both boards and investors of other peoples’ money need to recognize the standards to which they should be holding companies.
The second pillar of the UN guidance on human rights addresses “corporate responsibility to respect human rights, which means that business enterprises should act with due diligence to avoid infringing on the rights of others and to address adverse impacts with which they are involved.”
How many boards and investors make a standard practice of holding companies accountable to addressing the adverse impacts with which they are involved? For example, layoffs in a town or pollution in a corner of it? Or other adverse effects that they haven’t caused but are involved with?
More on what is being done is here: http://management.fortune.cnn.com/2012/12/19/newtown-business-leadership/?section=magazines_fortune
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