incommunicado

Spice, a British utility support services provider, was one of the 859 companies that were delisted by the UN Global Compact in February this year. The company was expelled because it had failed to send a progress report to the Global Compact Office. Every business participant in the Compact is required to submit its first Communication on Progress within one year from the date of joining the initiative.
Unfortunately for Spice, it was mentioned in the Financial Times as a company that had "failed" the UN Global Compact. Other companies named and shamed in the Financial Times' article were Visteon, Global Alumina, Lionbridge Technologies and Altana.

According to Environmental Analyst, Spice has been quick to reapply for membership. Spice told Environmental Analyst that it "has submitted all the necessary paperwork to the UN Global Compact initiative including the annual Communication on Progress". Last year, Spice failed to respond to a carbon emissions survey of FTSE 350 companies organised by the Carbon Disclosure Project.

According to on-line magazine Responsible Investor, the United Nations Joint Staff Pension Fund (UNJSPF) has requested just over US$ 200,000 in budget to pay for a consultant to help implement a responsible investment program after the appointment of a dedicated internal officer for responsible investment was rejected by its general assembly. The fund said the consultant would develop "responsible investing language and requirements" as well as review existing proxy voting services. The market value of the fund’s assets is about US$ 36.6 billion.

The UNJSPF - a signatory to the UN-backed Principles for Responsible Investment - had sought to boost its internal investment staff following a decision against the outsourcing of investment management operations, leaving 90 percent of scheme assets run in-house. The assembly's budget committee approved just five of a requested 14 positions at a vote before Christmas. The move came despite an internal UN report saying there are "fundamentally unsound and potentially dangerous" levels of staffing in the UNJSPF's investment department. The fund began the process of the process of establishing a policy on responsible investment and defining a plan to implement it in 2008. It aims to incorporate environmental, social and governance criteria into its investment analysis and decision-making process.

Responsible Investor reveals that the fund's Investment Management Service was initially asked to implement the initiative "from within existing staff capacity". The UNJSPF said in its most recent budget submission that it would "direct the projects with the goal of adopting environmental, social and governance policies that are consistent with the UN Principles for Responsible Investment and the Global Compact, without compromising the four investment criteria of safety, profitability, liquidity and convertibility".

Source: Responsible Investor (10/1/2010).

© Photo by Jorge Proctor.

The UN Global Compact and the Organization of Economic Co-operation and Development (OECD) have recently begun to enhance their collaborative efforts, particularly in countries that have both Global Compact Local Networks and National Contact Points (NCPs) for the OECD Guidelines for Multinational Enterprises.

Following its participation in the 2009 Annual Meeting of the National Contact Points, the UN Global Compact asked its Local Network Focal Points in countries that adhere to the OECD Guidelines for Multinational Enterprises to actively explore collaborative opportunities with NCPs. Additionally, Focal Points were encouraged to seek advice and guidance from NCPs, particularly regarding follow-up procedures for OECD Guidelines implementation.

In an exchange of letters between Georg Kell, executive director of the UN Global Compact, and Manfred Schekulin, chair of the OECD Investment Committee, a mutual interest in closer cooperation was indicated. Following a letter from Mr. Kell in September 2009, Mr. Schekulin agreed that intensifying linkages between Global Compact Local Networks and NCPs was a desirable goal and suggested that "possibilities for achieving this should be further explored". Mr. Schekulin additionally invited the UN Global Compact to consult in the ongoing process of updating the OECD Guidelines.
The OECD Guidelines for Multinational Enterprises embody what OECD governments have agreed are the basic components of responsible corporate conduct. They cover a range of issues such as labor and human rights, the environment, bribery and corruption and information disclosure. Though voluntary for companies, governments that have endorsed the Guidelines are essentially conveying that they expect multinational corporations to follow these principles and standards of good conduct in their operations worldwide. Thirty OECD member states have adhered to the Guidelines, along with 12 non-member countries. Civil society organizations can submit a "specific instance" (complaint) about alleged breaches of the Guidelines to a government's NCP.

In the first week of November further collaboration between the OECD and the Global Compact will occur through the First Asia Pacific Trade and Investment Week in Bangkok, hosted by the United Nations Economic and Social Commission for Asia and the Pacific (UNESCAP). This will include a meeting of Global Compact Local Networks led by Marinus Sikkel, in charge of UNESCAP's regional support hub for the UN Global Compact and former OECD Investment Committee Chair. Also that week, the OECD-UNESCAP Conference on Corporate Responsibility will be held, with discussion focused on synergies between these two international corporate responsibility instruments and the upcoming updating of the OECD Guidelines.

© Photo by hastingsgraham.

In an article published yesterday on Ignites, Beagan Wilcox Volz writes that MFS has signed on to the UN Principles for Responsible Investment (UNPRI). The principles provide "a menu of possible actions for incorporating environmental, social and governance (ESG) issues into mainstream investment decision-making and ownership practices". The initiative was set up in 2005 by the United Nations Environment Programme Finance Initiative (UNEP FI) and the UN Global Compact.
According to Ms. Wilcox Volz, MFS said that its approach to managing money and interacting with clients will not change. Becoming a signatory is "an affirmation of what we have already been doing rather than a change in approach going forward," said a spokesman for the firm.
Other US asset manager signatories that explicitly bill themselves as practicing socially responsible investing (SRI) have signed on to the principles, such as TIAA-Cref, Calvert, Domini Social Investments and Pax World. But other large U.S. asset managers - which, like MFS, do not call themselves SRI shops - have also signed on, including BlackRock, JPMorgan and Russell Investments. 
The activist group Investors Against Genocide, interviewed by Ms. Wilcox Volz, questions "the seriousness" of some firms' commitment to UNPRI because of their continued investments in oil companies that are linked to the genocide in Darfur.

The MFS Emerging Markets Debt Fund, for example, held $5.8 million in Petronas as of the end of October, according to a regulatory filing. It is not clear whether the fund still holds those investments.

The activists say companies such as Malaysian Petronas and Chinese PetroChina have ties to the government of Sudan, which is accused of committing genocide and using its oil revenues to fund purchases of arms. Investors Against Genocide has waged a very public campaign to pressure fund firms to divest from these companies.

When asked by Ignite if divestment from companies linked to the genocide in Darfur would be part of becoming a signatory to UNPRI, the MFS spokesman responded via e-mail, "No. The aim of the Principles is to help investors integrate consideration of ESG issues into investment decision making and ownership practices."

The MFS spokesman further stated, "Our priority continues to be fiduciary duty to our clients and helping them achieve their investment objectives. ESG factors, to the extent material to a company, should be considered in assessing value… Our analyst team has considered ESG factors for some time."

BlackRock, another signatory to the principles, is a holder of PetroChina through its iShares subsidiary, says Eric Cohen, chairman of Investors Against Genocide.

The iShares MSCI Emerging Markets Index Fund held $266 million in PetroChina shares as of Nov. 30; the iShares FTSE/Xinhua China 25 Index fund held $363 million in PetroChina shares as of the end of October, according to regulatory filings.

"[O]ur fiduciary responsibility is to our funds' shareholders. This means that for our passively managed funds, we are obligated to track the funds' underlying target indices," a spokeswoman for the firm writes in an e-mail response to questions from Ignite.

She notes the firm's announcement of its development of a "genocide-free" iShares fund last November, partly based on conversations with Investors Against Genocide. The firm offers iShares clients socially responsible investments, "and thus we provide clients choice when making their investment decisions," she adds.

BlackRock became a signatory to UNPRI in November 2008, according to Alex Popplewell, managing director and head of socially responsible investment at the firm.
BlackRock completed its acquisition of Barclays Global Investors and its iShares unit from Barclays in December. Barclays is not a signatory to the principles.

The rate at which firms are signing the principles has increased recently, says Elliot Frankal, communications manager with the UN. From August of last year through January, there were 120 new signatories. In the same period a year earlier, there were only 62, he says.

There are currently 689 signatories in total and 359 of them are investment managers, Frankal says. About 60 US asset managers have signed on, according to the UN.

Paul Hilton, director of sustainable investment business strategy at Calvert, says the principles are gaining popularity in the US, particularly among pension funds. But with the pension funds on board, asset managers also see the benefit of signing on, because they do a lot of the money management for those funds.

"When there's business to be had, it certainly makes sense for asset managers to show they can do this," Hilton says. "At the heart of [the principles] is the belief that in looking at these extra investment factors, you can come up with better investments."

Regarding the criticism of certain investment manager signatories by Investors Against Genocide, Hilton says the most important thing is for the UN to get firms to sign on to its principles. "If you set the bar too high right off the bat, it makes it very difficult to get folks involved. I think over time, the intention is for [the principles] to become more stringent."

The UN also tracks the degree to which signatories adhere to the principles and this serves as an "accountability mechanism" for the initiative, says the UN’s Frankal.

The 2009 "Report on Progress" found that 77 percent of the investment manager signatories engage in screening of investments. “While ethical considerations are at the forefront in determining screens, so are other issues more directly related to risk and return,” the report says.

There is no fee to become a signatory, but there is a suggested, voluntary fee of $10,000 to help the UN support the signatories and promote the principles, according to the UN’s website.

Source: Ignites (9/2/2010).

On February 14, the Financial Times reported that an international coalition of investors sent letters to 86 major Global Compact participants, urging them to honor the Compact's reporting requirements. Each of these 86 laggard companies have failed to produce an annual Communication on Progress (CoP) on the implementation of the ten principles of the Compact. The investors in the international coalition were all signatories to the UN Principles for Responsible Investment (UNPRI). The coalition included funds such as Aviva Investors, Boston Common, and Nordea Investment Funds.

In the article in the Financial Times, Steve Waygood, head of research and engagement at Aviva Investors, said: "There are a lot of companies that have made very public commitments to report progress with the Compact. If they don't follow through with this, that hasn't reduced or mitigated risk, it has actually raised it. It raises the question as to whether it is a proxy for bad management." According to the article, Mr. Waygood "suggested some companies might simply be engaging in greenwashing - paying lip service to environmental issues - or bluewashing - signing up to UN initiatives merely to appear aligned with the organization, which has a blue logo."

It was the third time investors teamed up to send a reminder to lax Global Compact participants. In 2008, the engagement resulted in 33 per cent of laggard companies subsequently submitting their progress reports, in 2009 positive responses increased to 47.6 per cent (50 out of 105 companies), including from firms such as BHP Billiton, Severn Trent, The Gap and Louis Vuitton Moët Hennessy.

Unfortunately, the coalition of investors did not publish a list with the names of the 86 companies that were included in this year's campaign.