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July 08, 2003
Eurosif Releases Transparency Guidelines for European SRI Funds
by William Baue
Eurosif asks socially responsible investment firms to disclose their policies and procedures around
SRI issues.
SocialFunds.com --
Late last week, the European Sustainable and
Responsible Investment Forum (Eurosif) released a pilot version of its Transparency Guidelines, a voluntary
initiative for the retail socially responsible investing (SRI) sector in Europe. The project aims
to inform consumers about SRI while also encouraging accountability amongst SRI asset managers and
research providers.
 "The European Commission, combined with
industry players, and the press and media, said 'wouldn't it be great if we had a better
understanding of what is an SRI fund?'" said Matt Christensen, Eurosif's executive director. The
project is co-financed by the European Commission, Friends Provident/ISIS Stewardship Funds,
Henderson's European Fund, and Jupiter Green Funds.
"A number of different groups said
it would be great if there was a guideline that starts to create a uniform approach toward
disclosing information about these funds so people can learn and know what they're getting," Mr.
Christensen told SocialFunds.com.
The guidelines amount to a series of questions for SRI
asset managers to answer regarding their investment criteria, research process, engagement
approach, and voting policies, among other issues.
For example, questions on the
research process ask whether research teams are in-house or external, whether there is external
verification of the research, and whether research includes stakeholder consultation. Evaluation
and implementation questions ask for disclosure of how asset managers make disinvestment decisions
on SRI grounds, and whether and how they communicate disinvestments to investors and affected
companies.
"The intention is that best practice will spread across pan-European SRI
funds, allowing the investor to gain greater confidence in the SRI products," said Mark Campanale,
associate director of SRI business development for Henderson Global Investors. Henderson
served on the UK SIF Steering Committee for UK input into the Eurosif transparency guidelines.
While many European SRI firms already disclosed much of this information, the new guidelines
create a single reporting platform.
"By SRI funds being more transparent about the
principles and processes they follow in a standardized disclosure format, it allows the consumer to
compare various products and to make a more informed choice," said Claudia Kruse, an analyst with
ISIS Asset Management, which
similarly served on the steering committee.
The influence of the guidelines may not end at
the borders of the SRI community, nor at national borders.
"Although the guidelines are
specifically designed for SRI funds alone, over the long term they may encourage non-SRI funds to
improve their transparency as well," Mr. Campanale told SocialFunds.com.
Mr. Christensen
does not expect this influence on mainstream mutual funds to take effect immediately, but rather
over a two-to-three year period.
"A great part of the guidelines' value lies in the fact
that they are being applied across various countries, attempting to further international
integration and the development of a common set of standards and principles," added Ms. Kruse.
The guidelines also ask asset managers to disclose their proxy voting policies and practices,
echoing the recent decision by the Securities and Exchange Commission (SEC) requiring all U.S.
mutual funds to disclose their proxy voting guidelines and votes.
"Perhaps there is no
direct relationship between the two tools; however, it is all pointing to a growing expectation
amongst regulators, advisors and investors to understand how money is being managed, and how
investor rights (such as voting) are being exercised," said Mr. Campanale.
Through the end
of this year, as many as ten European SRI firms will follow these pilot guidelines in order to
road-test them.
"The real litmus test will be their practical application, which is why we
have agreed to pilot them," said Ms. Kruse. "Any shortcomings and pitfalls will surely surface
during the trial period and can subsequently be rectified."
The question of how the
guidelines will be verified remains unanswered as yet.
"Will they be self-policing, or
will there eventually be some sort of verification arm involved with monitoring their usefulness
and the ability of people to actually be following the guidelines?" Mr. Christensen said.
The experiences of the pilot process may offer some help in answering these questions.
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