With pension funds' investments totalling around £1.2trillion, or the equivalent of the entire UK stock market, investors can influence corporate behaviour through exercising their shareholder rights and influence. We believe the best way for investors to improve the behaviour of big business (while maximising their own earnings) is through dialogue and persuasion, rather than picking and choosing investments ("screening”). That’s why at FairPensions our focus is on engaging with pension funds, asset managers and pension fund trustees on the issue of Responsible Investment.
FairPensions is eager to keep investors appraised of the rapidly changing landscape of Responsible Investment. We produce Investor Briefings outlining the potential financial risks arising from a range of environmental, social and governance issues. Recent Investor Briefings are available here.
Our industry benchmarking surveys have fast become an authoritative guide to the leaders and laggards in the pension industry, as well as a valuable resource on best practice. The very act of regularly measuring industry accountability has resulted in a quantifiable improvement in performance over just two years.
FairPensions regularly attends the Annual General Meetings of publicly listed companies to raise environmental, social and governance issues in conjunction with shareholders, civil society organisations and campaigners. A round-up of our AGM activites in 2011 is available here.
FairPensions offers a range of resources for investors designed to be a one-stop shop for the investment professional who wants to know more about Responsible Investment.
There are many examples where shareholders have used their shareholder power to improve corporations' social and environmental behaviour:
Early in 2010 FairPensions co-ordinated two shareholder resolutions, asking BP and Shell to publish details of the environmental, social and financial risks associated with their tar sands project. Supported by some of the largest pension funds in the world, these resolutions saw 1 in 10 shareholders refusing to side with management at the Shell AGM, while the BP AGM saw 1 in 7 reject the company's recommendation. Amidst massive media coverage, both Shell and BP rushed to meet with investors and made important disclosures as a result.
Royal Dutch Shell experienced the largest shareholder revolt in UK corporate history in May 2009, after nearly 60% of shareholders voted against a generous executive pay policy. Shell had decided to award its chief executive, Jeroen van der Veer, a pay package worth £9.1m, an increase of 58% on 2007. Investor anger was stoked after Shell missed its target of finishing third in a league table of big oil companies ranked by shareholder returns.
A group of European investors (including the pension fund manager F&C) created a shareholder resolution before the June AGM of Wal-Mart, expressing concern over the company's apparent inflexibility after bans by several US cities on Wal-Mart's out-of-town hypermarkets. They also challenged the company's failure to comply with international labour standards. Wal-Mart's poor business reputation, they said, was driving away customers and putting their investments at risk. After years of defending its anti-union stance in the US, Wal-Mart announced it would join a dialogue with investors on meeting ILO standards on employment. The company's 2008 AGM saw more shareholder resolutions than ever selected for the vote by the company
FairPensions' joint campaign with Oxfam to secure the continuing availability of affordable generic medicines in developing countries centred on a court case in India, through which pharmaceuticals giant Novartis sought local patent protection for its best-selling drugs. In a powerful example of responsible investment in action, we contacted pension funds worth £1.7trn, asking them to exert their influence as institutional investors to force Novartis to drop its claim. By capturing extensive media coverage, mobilising pension fund members and briefing investors we generated such pressure that in August 2007, Novartis dropped its appeal; a move hailed by Oxfam as “a vindication for India and a victory for campaigners.”
The New York City Pension Funds introduced a shareholder resolution at Robert Half International, a professional staffing and consultancy firm, requiring it to prohibit discrimination on the grounds of sexual orientation and gender identity. When the company notified the Pension Funds that it would amend its policies in light of the criticism, the shareholder resolution was withdrawn. The New York City Pension Funds have successfully urged around 30 of America's largest companies to adopt similar policies in recent years.
Following increasing concern about the lack of transparency in big-business donations to political causes and candidates, The New York City Pension Funds offered shareholder resolutions at 10 companies, requiring them to publicly disclose their political contributions to candidates, parties, committees and 527 organisations. Following talks with the Pension Funds, Lockheed Martin, Chevron, health insurance company Cigna, information company EMC and clothing company Limited Brands all began disclosing their political contributions. In total 31 companies have been persuaded to do so through shareholder resolutions since 2003.
The New York City Pension Funds (managing over $90 billion in assets) has made active use of its shareholdings in companies with operations in Northern Ireland to seek enforcement of the MacBride Principles, which seek non-discrimination of Catholics in the Northern Irish labour market. Since 2003, the New York City Pension Funds have negotiated MacBride implementation agreements with several major US companies with significant franchise operations in Northern Ireland, including the Marriot hotel chain, Coca-Cola and ExxonMobil. As one example, William C Thompson, Comptroller of the New York City Pension Funds, demanded that a loyalist mural in the Shankill area of Belfast be removed from the side of a KFC. He reminded the company that the New York City Pension Funds owned KFC shares worth more than $30m. The mural was painted over in less than 24 hours.
In 1998 Talisman purchased Arakis Energy, a large player in the Sudanese oil industry. At the time the government of Sudan was almost totally reliant on oil revenues in fighting a civil war. The war effort was repeatedly accused of war crimes and human rights abuses leading to pressure on Talisman to sell its interest in Arakis. Amongst others, the Ontario Teachers' Pension Plan, threatened to sell their shares if the company did not pull out of Sudan. In 2003 Talisman Energy divested the Sudan interest acquired through the Arakis acquisition selling its holdings to ONGC Videsh.