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Ethical risk

Ethical risk. The recent history of the ethics The risks The opportunities. The ethics. Concerns amongst the churches Ethical investment is offered to the public Principles turn out to be popular An industry is born The ideas spread far and wide Concerned individuals press for more

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Ethical risk

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  1. Ethical risk • The recent history of the ethics • The risks • The opportunities

  2. The ethics • Concerns amongst the churches • Ethical investment is offered to the public • Principles turn out to be popular • An industry is born • The ideas spread far and wide • Concerned individuals press for more • CEIG is formed

  3. The risks • Reputations can be worth money • Customers can act upon these things • People have choices about who to work for • Companies need approval • “Ethics” today and law tomorrow • Investors begin to explore the links • Demand for transparency grows • But perhaps principles don’t always pay • Risk in ignoring these issues

  4. The opportunities • For financial institutions • For individual investors • For pension scheme members • For companies • For churches and NGOs • A chance to see new linkages • Are we missing some opportunities?

  5. The birth of ethical investment • Traditional church concerns • Vietnam war • Apartheid in South Africa • Engagement and sanctions • EIRIS is launched

  6. Making ethical options available • Stewardship Unit Trust • More funds with further development • Environmental focus emerged • Wide range of approaches and products • The rise of ethical financial advice

  7. An industry develops • Expectations exceeded 1,000 times over • Guides for the public appear • UKSIF is formed (uksif.org) • “In house teams” appear

  8. The ideas spread far and wide • Engaging the mainstream • The World of Pensions • The Netherlands, Sweden, Japan . . . . • The Corporate World too • FTSE4Good

  9. Pressing for more • Churches and South Africa • Three wise men take on the Commissioners • Noisy defeat, but quiet victory • We have CEIG still • Charities now pressed to disclosure more

  10. The ideas spread far and wide • Engaging the mainstream • Pension schemes state their policies • The Netherlands, Sweden, Japan . . . . • The Corporate World too • FTSE4Good

  11. Relating to risk • Does it affect performance? • Should fund manager take an interest? • Even for “uncaring” investors? • Previous a question of potential investor costs • Now a question of pricing assets

  12. Can ethics mean business? • Increasing value of reputations • Brands and intangibles • Globalising world is “smaller” • If you want to be good, be careful

  13. A company needs it’s stake-holders • Customers can act upon these things • People have choices about who to work for • Companies need approval • “Ethics” today and law tomorrow

  14. Customers views: the BT study • Business strategy is to increase loyalty • Customer satisfaction correlated with loyalty • Detailed study of correlations • 25% of that comes from CSR issues • BT goes searching for ways to reinforce • “What’s it worth to be trusted?”

  15. Choosing where to work • Growth in transferable skills • Multiple careers seem more common • Shell identified new recruits as an issues • “What do you do at work, Mum?” • Nobody gets out of bed in increase EPS . . . • Need good enthusiastic people • Staff turnover costs thousands

  16. Gaining approval • Planning permission • Environmental permits • Licensing products • OF EVERYTHING • Professional judgement • Scope of legislation generally

  17. Investors begin to explore the links • ABI process • Disclosure the route • Are the SEE risks and opportunities being managed? • Role of the Board and information • Integrated risks systems • Accountability to shareholders

  18. Demand for disclosure grows • Company Law Review • Operating and Financial Review • Rather too much Board judgement • But “materiality” debate • EU process • Different views • Starting with voluntary approach • But “act as if you had to disclose” • Stakeholder forum • Global Reporting Initiative • “Insider” information

  19. So what sort of world is this? • Investors: pricing SEE factors • Companies: check and tell • So that’s sorted then? • But what if principles don’t pay? • Tobacco still sells • You could spend “too much” on environment • Market won’t always reward your efforts • Individual ethics still count • To ban, or not to ban . . .

  20. Ostrich Risk • Charities not thinking about their investments • Companies not thinking about their pensions • Financial institutions not seeing brand implications

  21. The opportunities • For financial institutions • For individual investors • For pension scheme members • For companies • For churches and NGOs • “Joined up economics” for pension schemes • What new opportunities do we need?

  22. Financial institutions • Ethical options and customer loyalty • Risk and returns issues for whole business • A general branding issue in murky world • Institutional Shareholder Committee process • Latest changes to UK retail market

  23. For the individual investors • Getting your own finances in order • Ethical funds or choice of shares • Opportunities to raise issues • With Fund Managers • With Financial Institutions

  24. For pension scheme members • What’s in the SIP? • Fit with employers position? • Is it being implemented? • Who are the fund managers? • What are they doing • Are there ethical options? • Just pensions reports, EIRIS web-site

  25. For companies • What is our own pension scheme doing? • What are we saying in our annual report? • Are their risks/opportunities we are missing? • Are we aware of the value of trust? • Do we want to be in Dow Jones/ FTSE4Good?

  26. For churches and NGOs • Is our own house in order? • Proper information, healthy debate, clear decisions • Could our members and supporters do more? • Are their links with our own work? • Do we know things the City doesn’t? • Are their opportunities to work with Companies?

  27. For Pension Schemes • Need to deal with members and employers views • Long term investors (USS, Hermes approaches) • Building value for the members • SEE factors probably are part of “World plc” • Opportunities to “explore the future” • “Benefit is a word with wide meaning”

  28. For the concerned citizen • Company Law Review process • European level debate • Pressing for ethical financial advice • Pushing forward Pensions rules

  29. Opportunities for all? • Not clear enough about links with poverty • What can multinational companies do about poverty? • What else can financial markets offer? • Links with trade policies • Brandt report type thinking • Conflict, environment, health, strong societies?

  30. Where are we heading? • Many established ethical paths • Growing awareness of risk and business links • Every growing range of opportunities • Real chance to change the way the world does business • A surprising amount depends on individual initiative

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