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EIRIS Foundation

Service Providers Framework 2019

You are in Strategy and Governance » Policy on ESG beliefs

Policy on ESG beliefs

SG 01. Responsible investment policy

01.1. Describe how your organisation’s philosophy incorporates environmental, social and governance factors, and the link to your business offerings.

Our philosophy

Our vision is a financial and corporate system that encourages sustainable and responsible wealth creation and management. Our mission is to use research, analysis and influence to identify gaps, barriers, opportunities and enablers so that we can help organizations and individuals maximise their contribution to the responsible business and investment agenda. So ESG factors are central to all that we do.

We undertake and publish research into responsible investment and the social and ethical aspects of businesses in the UK and overseas and how those may be relevant to investment policies and we assist other charities by providing information and advice to help them choose investments which do not conflict with their aims or otherwise hamper their work. We look at the integration of environmental, social and governance (ESG) factors into all forms of investment, engagement with companies relating to holdings of equities, bonds and other investments, thematic investment in areas like green bonds or “impact investing” in enterprises with social, environmental or ethical objectives as well as screening investment portfolios.

In carrying out this work we are guided by some operating principles:

  1. Maintaining high standard of independence and rigour in our research with a focus upon the public interest
  2. Acknowledging the different investors will take different approaches to responsible investment and seeing our role as being to facilitate each investor's ability to achieve their own objectives in this field through reliable independent information, choices as to how that might be applied to their circumstances, and helpful advice.
  3. We will consult companies or investors who we research or work on (or a sample of them) and provide opportunities for review and further input before we publish information about them.

How this links with our business offering

We assist other charities with regards to responsible investment chiefly in two ways. The first approach is advice and assistance to charities in developing their own ethical or responsible investment policies. The Foundation’s charitysri.org website also continues to provide a resource for charities to consider different ways of developing their own responsible investment policies (depending upon their objectives and circumstances) and we plan to maintain and develop this going forward.

The second approach is to help charities identify ways in which other responsible investors (whether larger institutions, or their own members and supporters) can advance the charity’s objectives through the approach the investor’s approach to responsible investment. This can include identifying the environmental social and governance issues investors may incorporate in their engagement and risk management approaches as well as investments and strategies that could advance the charity’s objectives while assisting the investor in their pursuit of long term sustainable wealth creation. 

EIRIS has been one of six founding partners working on a Corporate Human Rights Benchmark (CHRB) which launched in December 2014. In March 2016 CHRB published its methodology for assessing the largest 100 companies in the extractives, apparel and food/agricultural products sectors on the basis of a widespread and global consultation with some 400 individuals and organisation as to the best way to assess human rights policies, practices and performance. The first benchmark using this methodology was successfully published in March 2017. In 2018 further results were published using a revised methodology and it was found that 40 out of 101 major extractive, agricultural and clothing or footwear companies ranked by the benchmark are failing to demonstrate respect for human rights on paper or in practice

On the basis of a grant from the Open Society Foundation (OSF) the EIRIS Foundation has continued to work on the Investment in Occupied Lands project which undertook research on Companies operating in Crimea and the Occupied Palestinian Territories (West Bank and Gaza Strip) with the help of the team at EIRIS Conflict Risk Network who are expert in exploring business and human rights issues in particular countries. The research for the www.businessinoccupiedlands.org database has been expanded to include private equity companies and also identifying ultimate listed companies in cases where the listed company we have identified is itself as subsidiary or associate of another listed company. The aim of the project is to encourage discussion and thought amongst investors and others about the responsibilities of business when operating in such disputed territories. As part of this project in 2018 we produced human rights due diligence guidance with a report entitled: Questions to help companies respect human rights in occupied territories

01.2. Indicate whether you have policies that formalise the incorporation of your ESG beliefs in your business offerings.

01.3. Indicate the components/types of your internal policy and provide the URL and/or an attachment of the document/s if they are publicly available.

Policy components/types

Public availability

01.4. Indicate how these are put into practice internally across the organisation.

01.5. Additional information [OPTIONAL]

Our philosophy has been reviewed as part of the strategy creation process on our trustee board, and the board will review both the strategy itself and the contribution that each product or service we offer makes to that strategy at least annually.


SG 02. Norms used to develop policies

02.1. Indicate what frameworks and guidelines you have used to develop your organisation’s policies. Tick all that apply.

02.2. Additional information. [OPTIONAL]

We have answered this question in terms of the methodologies we have developed for our investment in occupied lands project and our contribution to the Corporate Human Rights Benchmark.

The EIRIS Foundation uses research, analysis and influence to identify gaps, barriers, opportunities and enablers so that we can help organizations and individuals maximise their contribution to the responsible business and investment agenda. All of our work, whether our free resources or our revenue-generating activities and research, takes international standards into account.


SG 03. Policy offerings to clients

03.1. Indicate whether you offer standard, off the shelf, policies to clients as part of your product offerings, and/or whether you create tailored versions for individual clients.

Off the shelf
Tailored
Asset class-specific RI guidelines
Sector-specific RI guidelines
Screening/exclusions policy
Engagement policy
(Proxy) voting policy
RI guidelines set out within the Investment Policy Statement (IPS)
RI guidelines set out in a freestanding RI policy
Multi-year RI implementation project plan
Conflict of interest management policy
Stockbroker allocation policy
Securities lending policy
Other, please specify (1)
Other, please specify (2)
Other, please specify (3)
None of the above

03.2. Provide a brief description of the key elements, any variations, or exceptions applying to these policies.

We have answered this question mainly in relation to how we might advise a charity who seeking to set up their responsible investment policy. These would almost always be "tailored", although we have also made available some analysis of the mutual funds available to charities each of which is "off-the-shelf". Our website for individual investors (Your Ethical Money) is more focused on analysing the off-the-shelf policies available from different providers in the UK retail market.

Through our free resources we encourage individual investors and charities (and other asset owners including private individuals) to explicitly consider ESG in their financial decisions. 

Particularly in our work with charities we encourage them to consider a wide range of ESG factors when forming their investment policy. We advise them that the issues to consider will depend upon the values and work of their particular charity or organisation. This decision may also be influenced by their areas of expertise and the views of donors, supporters, staff and experts in these areas. We have an online "What’s right for your charity?" tool that may help them to form thoughts around what these issues should be. These issues can form the basis of positive screening, negative screening or engagement approaches – or a combination of these. 

03.3. Additional information. [OPTIONAL]


SG 04. ESG/RI in business offerings

04.1. Briefly describe how you include ESG/RI factors as part of your business offerings.

Business area

Active Ownership Services

How you include ESG/RI factors

Our ownership services are not traditional ones - we don’t give investors voting recommendations or provide similar services. As partners in the Corporate Human Rights Benchmark, we engaged with companies on behalf of the major investors who are backing the project financially and who also engage directly with the companies involved. This involves explaining the benchmark scores (and the rationale behind them) and answering questions about ways to do better. The benchmark explicitly aims to raise overall corporate performance in the field of human rights.

Our database of businesses in occupied lands (covering Crimea and Palestine) enables investors to find important information on where their investments might be at risk. We have produced a report to assist investors with regards to human rights due diligence entitled: Questions to help companies respect human rights in occupied territories

Our assistance to charities in developing their own responsible investment policies and in looking at ways they may wish to influence responsible investors to look at the issues central to their own mission will also focus on active ownership where appropriate.

Investment Consultancy

How you include ESG/RI factors

Our charity work is entirely focussed on helping them to incorporate ESG factors to their investment portfolios which aligns their investment activities with their missions. This decision may also be influenced by their areas of focus and the views of donors, supporters, staff and experts in these areas. These issues can form the basis of positive screening, negative screening or engagement approaches - or a combination of these. 

Our advisory services to individuals (yourethicalmoney.org) provides the information needed for individuals to align their investments with their values.  

 

Research and Data Provision

How you include ESG/RI factors

Since ESG is all we work on, all our research and data provisions are about ESG. Our current research projects focus on certain elements of ESG. So in the Corporate Human Rights Benchmark project, we research with the help of partners the human rights policies and behaviour of 100 leading companies - this is of course a key part of the Social facet of ESG. In the Investors in Occupied Lands project, we engage with investors on what due diligence should be for those who are invested in conflict zones. Our data base for UK retail investors (Your Ethical Money) is all about how ESG factors can be taken into account when investing in mutual funds, pensions, banks or insurance companies.

 

04.2. Indicate the roles in your organisation, and indicate for each whether they have oversight and/or implementation responsibilities for ESG/RI within the organisation.

Roles present in your organisation
Oversight/accountability for ESG/RI
Implementation of ESG/RI
Board
Directors
Chief Executive Officer (CEO), Chief Financial Officer (CFO)
Chief Operating Officer (COO), Chief Information Officer (CIO)
Other chief-level staff
Other heads of department
Dedicated ESG/RI staff
Other role, specify (1)
Other role, specify (2)
Other role, specify (3)
None of the above

04.3. Indicate how you ensure ESG/RI expertise for the roles where there are RI oversight/accountability or implementation responsibilities.

04.4. Indicate whether your organisation has any ESG/RI linked incentives for its employees.

04.6. Describe how you ensure that your employees incorporate ESG/RI into services through other mechanisms than ESG/RI linked incentives.

All of our work centers around ESG/RI. It is at the core of all of our products and services and we ensure staff are aware of this through clear communication and staff engagement with regards to our overall objectives and strategy. 

04.7. Additional information [OPTIONAL]


SG 05. Outsourcing of services

05.1. Indicate whether you outsource some of your services. Report percentage of services outsourced as percentage for that specific business area.

Business area

05.2. For each business area, describe what components you outsource to other organisations.

Advisory and Consultancy:

We work in partnership with Vigeo-Eiris to provide ESG rating when required. The figure of  aprox.10% is only indicative: some charities might have a large ESG data requirement, some none at all, depending upon their fund managers to obtain such data.

Research and data provision:

On the CHRB, we outsourced the detailed investigation of companies (mainly to CAER in Australia and ECODES in Spain and from February 2019 this will mainly be to Sitawi in Brazil and Ecodes in Spain plus the use of freelancers) and retained the project management, quality control and interaction with the researched companies. 

On the Investment in Occupied Lands project, we have made use of the skills of the Vigeo Eiris Conflict Risk Network to conduct the detailed analysis of the companies involved.

05.3. For each business area, describe how you ensure the organisation implementing your outsourced services adheres to your beliefs and policies on ESG/RI.

For the Corporate Human Rights Benchmark we work with the other project partners to define the methodology following extensive consultation with stakeholders and we have created the research manual and other methodology and research practice documentation and the accompanying database. The philosophy of the project accords with our overall philosophy and operating principles as set out in earlier sections and research providers work sign up to all of this as part of being involved with the project.

For the Investment in Occupied Lands project, the methodology and philosophy of the project remains firmly with the EIRIS Foundation and we discuss individual cases and the presentation of the data in some detail to make sure everything remains aligned with those principles.

 

 


SG 06. Providing training/education

06.1. Indicate whether you provide training/educational services on ESG/RI. Tick all that apply.

          Charity and Foundation Staff
        
          Individuals
        

06.2. Describe the main components of your training/educational services on ESG/RI and any variations depending on the group you provide training/education to.

Our charitysri.org website provides free information and resources on Responsible Investment - what it is, reasons for doing it and how to go about it. Responsible Investment in this context is about aligning investments with mission and incorporating social, environmental and ethical issues into investments.

We can provide tailored support to charities applying these principles and approaches to their individual circumstances.

Our yourethicalmoney.org website provides objective, independent information on green and ethical finance to mainstream consumers. The website aims to:

  • Encourage people to think about the wider impacts, both positive and negative, that their money, and how they bank and invest it, can have on society and the environment
  • Empower consumers to help address key concerns such as climate change, poverty, human rights and sustainable development through their financial decision-making
  • Contribute to the building of a sustainable financial sector
  • Present information regarding alternative financial products, for example: ethical investment funds, green mortgages, child trust funds that invest responsibly
  • Highlight the key issue of financial exclusion in the UK, a massive country-wide problem which is inextricably linked to poverty and social exclusion
  • Offer resources such as take-away guides, letter templates, a database of independent financial advisors with ethical investment experience and contact details for relevant organisations, institutions and funds
  • Be impartial and independent

06.3. Describe whether these training/educational services include any commercial elements.

          We have in the past and may in the future provide paid-for bespoke training/guidance to charities to assist them in formulating a RI investment policy.
        

06.4. Additional information. [OPTIONAL]


SG 07. Applying, advancing and promoting the PRI principles

07.1. Describe how your organisation applies, advances and promotes the PRI Principles.

Principle 1: We can help charities integrate ESG issues into their investment process, and the Corporate Human Rights Benchmark (CHRB) is being used by investors to integrate business and human rights issues to their investment processes while the Investment in Occupied Lands database does the same for these specific conflict issues. Your Ethical Money helps the UK retail investor integrate ESG consideration into their investment decisions.

Principle 2: We are carrying out engagement on behalf of the sponsors of the CHRB and encouraging others to do the same. With regards to our Investment in Occupied Lands (IiOL) project we have worked with investors to help them take up active ownership opportunities with regards to the application of human rights due diligence.

Principle 3: Both the CHRB and IiOL project are very focussed on public disclosure. The former insisting on public disclosure before analysing information from companies (and providing them with a specific "portal" to make further disclosures), and the latter being a vehicle to disclose accurate information about operations in disputed territories concerned. We also work to encourage charities to seek appropriate disclosure of ESG issues with regards to their invesments. 

Principle 4: We will take every opportunity to encourage charities to consider becoming signatories of the PRI in working with them and to consider using data from PRI in choosing their own fund managers as appropriate. We are also in the process of looking at whether PRI data on manager implementation of the PRI principles can help to assess engagement and integration in our work for retail investors.

Principle 5: Our CEO Peter Webster sits of the PRI Board and our new strategy on transformational engagement will develop ways of maximising the impact of principle 2, while our planned work on spreading best practice corporate responsibility will include disclosure as per principle 3.  

Principle 6: This report is made in compliance with Principle 6, and we are making all relevant sections "public"

07.2. Highlight whether there are any ways that your organisation would like to engage further with the PRI. [OPTIONAL]

Specifically we still have plans to examine whether the PRI engagement platform might be an appropriate tool to encourage investors to encourage human rights due diligence in relation to occupied territories, and whether PRI data may help with the assessment to retail offerings in the UK. We also envisage potential co-operation around our strategies in the relation to spreading best practice corporate responsibility and assessing and encouraging transformation engagement where this aligns with investors' goals.


SG 08. Actions taken to promote responsible investment

8.1. Indicate which of the following actions your organisation has taken to promote responsible investments during the reporting year, independently of collaborative initiatives.

8.2. Additional information. [OPTIONAL]

In the reporting period in particular, we have in mind consultations (jointly with other project partners) on the latest update in the Corporate Human Rights Benchmark methodology. We organised a roundtable to present our report 'Questions to help companies respect human rights in occupied territories'  at the UN Forum on Business and Human Rights in Geneva.

Our yourethicalmoney.org website and some aspects of charitysri.org (for example analysis of the mutual funds available to charities) also provide continuous encouragement to providers to disclose clearly what they offer to other parties in the investment chain.


SG 09. Long term trends

09.1. Indicate which of the following long-term trends are addressed in your product outputs.

09.2. Explain how this long-term trend affects your product outputs.

This is a significant issue for charities as perhaps the biggest issue that their supporters and other stakeholders are likely to raise with them (even if it is not directly part of their mission) as well as being a topic on which charities for whom climate change is part of their mission may seek our help working out how best to work with other responsible investors going forward.

Climate change is also one of the issues driving the belief amongst an increasing number of investors that new models are needed if investment performance is to be sustainable in the long-term, which is one of the inputs to our strategy overall.

09.2. Explain how this long-term trend affects your product outputs.

There are a number of indicators in the Corporate Human Rights Benchmark which address issues around indigenous rights and the community impact of extractives operations which are all related to resource scarcity. Some of the due diligence issues that will arise in relation to companies identified by our Investment in Occupied Lands project are also related to the use of natural resources in disputed contexts.

More generally our whole strategy of seeking to move the business and investment world into models where successful long-term wealth generation can be sustainable and of benefit to all parties is given added urgency by many issues of resource scarcity.

          The development of new Business & Human Rights models
        

09.2. Explain how this long-term trend affects your product outputs.

The development of the UN Guiding Principles on Business and Human Rights is a long term trend in the understanding of the responsibilities of business and one of the necessary social aspects of long-term investment considerations, as evidenced by the number of investors supporting the Corporate Human Rights Benchmark and the UN Guiding Principles Reporting Framework. The UNGPs are central to the model of driving change adopted by CHRB, and we believe the due diligence framework advocated by the UNGPs for companies (and now by the OECD for investors) will also provide a model through which investors may be able to engage with companies operating disputed territories. Related to this we produced a report in 2018 entitled: Questions to help companies respect human rights in occupied territories


SG 10. Interaction with asset owners

10.1. Indicate whether you interact with asset owner clients.

10.2. Indicate the typical frequency and type of interactions with your asset owner clients.

Type of interaction

Frequency

Frequency

Frequency

Frequency

10.3. Additional information. [OPTIONAL]

During this reporting period we have further developed plans to hold an educative event specifically for charity asset owners exploring numerous aspects of reponsible investment. 


SG 11. Aligning approach with investor goals

11.1. Describe how you typically align your organisation’s philosophy and approach to ESG/RI with your investor clients’ goals.

Our vision speaks of creating a financial and corporate system that encourages sustainable and responsible wealth creation and management. This by definition mean that we strive to create a world where investors' goals and ESG are aligned, and in the meantime we work with those who already see value in using the various work we undertake.

11.2. Additional information. [OPTIONAL]


SG 12. ESG recommendations not aligned with investor goals

12.1. Describe what steps you take, if any, when your ESG recommendations are not in line with your investor clients’ goals.

We do not advice directly on what investors should do, we advise investors on how to deal with ESG issues generally taking into account their own best interest as nowadays understood by the developing concept of fiduciary duty where we particularly welcome the work PRI and others have done.

So we don't see it as our role to "campaign" for investors to do things that are bad for them, rather to help investors and the companies they invest in to identify ways in which ESG and their other goals can be aligned in pursuit of a more general transition to a sustainable economy.

12.2. Additional information. [OPTIONAL]


SG 13. Seeking feedback from clients

13.1. Indicate whether you seek feedback from clients on your RI/ESG services and product offerings

13.2. Describe how you use this feedback in your RI/ESG services and product offerings.

We are constantly tailoring our activities (such as online resources and events as two examples) based on feedback we receive from 'clients' and other stakeholders. Both the Corporate Human Rights Benchmark and the Investment in Occupied Lands project have also engaged in consultation on the best way to advance their research methods and other offerings in the reporting period and we see this as crucial to maintaining the usefulness of both projects.

To be very practical, in the case of CHRB it has affected the indicators that we are using to measure companies progress in 2018, and in the case of IiOL it has identified how the due diligence process might help investors address these issues, and the challenges that companies and investors will face in applying this approach which are informing our future guidance for them on these matters.


SG 14. Managing conflicts of interest

14.1. Indicate whether your organisation has a policy for managing potential conflicts of interest.

14.2. Describe how you manage potential conflicts of interest.

We have a process of identifying any conflicts on our trustee board with individual trustees standing aside from particular decisions as relevant (for example in the past this led us to exclude trustees who sat on advisory boards for retail ethical funds from being involved in signing off publications in relation to such funds) and we have considered the potential for conflicts of interest for specific projects as well (for example consideration of whether particular sources of funding might create unmanageable conflicts in relation to that project). Individuals facing any particular conflicts are expected to raise those with their line manager.

14.3. Describe how you ensure that company employees do not derive any personal gain from the use of information collected during your work process.

It is a condition of employment that all information and material used by employees in their work may be used solely for the purpose of fulfilling their responsibilities as an employee and not transmitted to anyone else or used for any other purpose. The importance of confidentiality around the launch of particular project updates or releases is emphasised case by case.

14.4. Additional information. [OPTIONAL]


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