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April 19, 2001
Major UK Fund Manager to Require Environmental Reporting
by Mark Thomsen
Institutional investors are increasingly seeing the need for environmental disclosure.
SocialFunds.com --
Morley Fund Management, a major London-based asset manager, recently announced it would begin
requiring large UK companies to publish environment reports. This development follows on the heels
of last year’s government mandate for pension fund trustees to disclose their policies on socially
responsible investment. The UK could well argue that it has become the world’s leader in advancing
social investing.
Morley is the asset manager of CGNU plc, the UK’s
largest insurer and the world’s sixth largest insurance group. It manages assets in excess of £100
billion, over £42 billion of which is invested in UK equities. This is the equivalent of 2.5% of
the UK stock market. With this kind of market influence, Morley’s policy changes are sure to be
felt by a significant number of companies.
The firm believes there are increasing
environmental and social risks associated with companies, and that good corporate governance
protects shareholder value. “As investors, we increasingly believe that good environmental and
social practice is synonymous with good management of companies and, in turn, good share price
performance,” explained Keith Jones, Morley’s Managing Director.
The environmental reports
will be required through a new addition to Morley’s corporate governance policy. Most immediately
affected will be FTSE 100 companies. The FTSE 100 is a market capitalization index of companies on
the London Stock Exchange, somewhat analogous to the S&P 500. Morley expects all FTSE 100
companies, in all sectors, to have practices in place that minimize company environmental impacts.
The firm therefore expects these companies to publish a comprehensive environmental report.
"Identification of environmental risks and opportunities is becoming increasingly important for
institutional investors,” said Anita Skipper, Head of Corporate Governance at Morley. “We believe
that management ought to be actively considering steps to report publicly on their key
environmental issues.”
Where FTSE 100 companies do not publish such a report, Morley will
hold direct dialogues to ascertain management intentions. If the firm is not satisfied with
management’s reasoning, Morley’s new voting policy dictates it vote against the resolution to adopt
the company’s official Report & Accounts.
Regarding FTSE 250 companies in high risk
sectors, Morley still expects an environmental report. However, when such a report is not
produced, Morley plans to abstain on the resolution to adopt the Report & Accounts. The firm plans
to review this policy each year and anticipates it will take a harder stance over time, eventually
applying FTSE 100 company requirements to FTSE 250 companies as well.
Voting against the
Report and Accounts will raise awareness with company boards, but it does not mean Morley will not
invest in companies that do not publish an environmental report. Morley says it prefers to engage
companies in constant dialogue and persuade management that good social and environmental practices
add value.
Eventually, Morley will apply the new corporate governance policy to its global
investments, although a time frame has not yet been established. Britain may be getting poised to
exert its influence around the world yet again, this time through the unlikely venue of socially
responsible investing.
©
SRI World Group, Inc. All Rights Reserved.
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