Can we invest ethically?
Picture this: India. Delhi. 2005. A multinational company is looking for skilled employees for five vacancies. It outsources recruitment to a local firm that asks candidates a standard set of questions. One question is "What do your parents do for a living?" The answer reveals where the candidate sits in the caste hierarchy.
Fast forward a year to 2006: A HSBC shareholder attends his bank's AGM in London. He raises the problem of caste discrimination occurring across multinational corporations in India. The chairman agrees this is an issue that needs tackling. HSBC meets with the Dalit Solidarity Network to discuss strategies. Proactive policy follows.
What has the church got to do with any of this? Well, churches in the UK have combined assets of £12bn. That is a sum that wields some power in the investment world. The Methodist church's Central Finance Board (CFB) looks after £1.1bn of those assets. The Ministers Pension Fund accounts for just over a quarter with a further £140m managed for non Methodist bodies under the Epworth name. In June 2010, CFB published its ethical policy on caste discrimination. It stated that companies "should be able to report to shareholders the progress made in enhancing the employment opportunities of scheduled castes within the context of recruitment and in career development". That's just one example. There are many more.
One of the speakers lined up for National Ethical Investment Week is MP Stephen Timms, former financial secretary to the Treasury. On Wednesday 10 November he is scheduled to talk at UCL faculty of laws on the relational business charter that rates companies in terms of their contribution to building social capital, their sustainability and the extent to which they run themselves as a community. Timms also spoke at the CFB's 50th anniversary in October. He highlighted the Guide for Christian Investors on The Ethics of Executive Remuneration (pdf) commissioned by the Church Investors' Group and published in March this year. The guide points out that the pay of FTSE 100 CEOs is on average over a hundred times that of the average salaries within those companies. "At Tesco," the Guide tells us, "the total salary package of chief executive Sir Terry Leahy adds up to £6,267,360. This compares with an average employee salary of £11,918, a staggering differential ratio of 526:1." Richard Higginson and David Clough, authors of the guide, argue that it's difficult to justify a ratio in excess of 75.
So, what happens next? If Tesco is on your doorstep and you've run out of milk, will pay ethics stop you from nipping around the corner for a pint of semi-skinned? It may do for some. For others, bodies like CFB are the institutions they rely on to take their concerns forward. We want them to fight the battle on our behalf. TV ratings showed 4.2 million people watched BBC's Primark Panorama documentary in 2008, but not every ethical concern about a company will reach a mass consumer audience in this way. We expect our investor groups to be informed and to take action. Disinvestment is not the first or only solution. A successful ethical investment policy involves a company improving its behaviour as a result of dialogue.
Right now, the environmental element in ethical investment is gaining momentum. Holden & Partners will be launching its fourth annual Guide to Climate Change Investment on Wednesday to coincide with National Ethical Investment week. The pressure is on everyone to make the transition to a low-carbon economy with a legal imperative to do so. There is a need to improve low-carbon investment opportunities as trillions of dollars are required to close the climate investment gap. Many of us want to gain from what we invest in. We might also want to value it too.