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May 31, 2005
Sustainable Asset Management Signs On to Eurosif Transparency Guidelines
by William Baue
Although SAM already practices comprehensive disclosure, its fulfillment of the European Social
Investment Forum guidelines reveals the strengths and weaknesses of standardization.
SocialFunds.com --
Zurich-based Sustainable Asset Management (SAM), which conducts research for the Dow Jones Sustainability
Indexes (DJSI), last week
became the latest socially responsible investment (SRI) firm to sign on to the European Social
Investment Forum (Eurosif) Transparency Guidelines.
Seeing as SRI firms promote comprehensive disclosure of economic, social, and environmental
policies and practices by corporations, they tend to have fairly comprehensive disclosure of their
own on these issues. The Eurosif guidelines, launched in November 2004, seek to formalize and
standardize such disclosure by SRI firms.
 "Although SAM's own standards have already
exceeded Eurosif requirements for some time, we believe the guidelines serve as a useful
orientation point for investors and offer greater transparency with regard to the different
investment processes adopted by individual fund providers," states SAM on its website.
SAM's answers
to the guideline questions do not significantly differ qualitatively compared to other SRI
firms--they are no better nor worse than the answers provided by F&C Asset Management or Henderson Global Investors in the UK, for example. What
distinguishes each firm's answers is that they pertain particularly to that firm.
SAM's
Transparency Guidelines answers reveal that the firm's social and environmental screening process
is audited annually by PricewaterhouseCoopers (PwC), as is its valuation of companies. SAM's admits in its
Transparency Guidelines answers that its screening process is inherently subjective, thus
amplifying the value of external verification, which lends a degree of objectivity. Also enhancing
the objectivity of its corporate ratings is SAM's own application of quantification as much as
possible.
"For example, the quality of a company's corporate governance, one of the
economic criteria for corporate sustainability, can be measured by indicators like the number of
independent board members, the diversity of the board, independence of the remuneration committee,
independence of the auditing committee, and the roles assumed by the chairman of the board and the
CEO," states SAM.
The standardization of the Transparency Guidelines also helps reveal
practices that SRI firms do not follow.
"SAM does not exercise any [proxy] voting rights
for the investment funds," its disclosure document reads.
Herein lies a weakness with
SAM's answers: the firm does not explain the reason why it does not actively vote proxies. Because
it is also an index provider, handling the Dow Jones Sustainability Indexes (DJSI)? Because its
clients prefer to handle proxy voting themselves? The answer is unclear, because it is not
provided.
In contrast, SAM goes into great depth about how it aligns its own operations
with climate change mitigation.
"In matching Switzerland's Kyoto Protocol commitment, SAM
has set its target to reduce greenhouse gases by 8 percent per employee by 2008," states SAM in its
Transparency Guidelines responses. "Reduction targets at SAM will be met by continuously switching
to renewably-generated electricity, offering public transportation at reduced rates to all
employees, promoting train travel for business trips under 400 kilometers and encouraging
teleworking and utilization of telephone conferencing."
"Beyond the provisions of the
Kyoto Protocol, SAM neutralizes its non-reducible CO2 emissions by financing a biomass
fuel-switching project in India, a project consistent with SAM's vision of corporate
sustainability," SAM's website continues. In 2001, SAM was the first company in Switzerland to
achieve the "Carbon
Neutral" status.
The fact that SAM is a Switzerland-based firm illustrates another
particularity of the Transparency Guidelines: they are geared toward European SRI firms. This did
not stop the Calvert Group, a US-based SRI
firm, from signing on to the Transparency Guidelines in February 2005. However, Calvert is the
only US-based SRI firm to do so thus far.
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SRI World Group, Inc. All Rights Reserved.
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