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Social responsible investment, decent work and pension funds
A good example of integration is the index Goldman Sachs GS Sustain. Cramer and Karabell provide the following description of this index: “Goldman Sachs developed a
proprietary index called GS Sustain. Its goal is to identify the companies ’best positioned to sustain competitive advantage and superior returns through analysis of 1 return on
capital, 2 industry positioning, and 3 management quality with respect to environmental, social governance issues. By combining traditional financial analysis with sustainability
factors, Goldman aims to identify companies that not only score well on sustainability issues, but also those that outperform the comparable universe of competitors. In essence,
they hope that GS Sustain will be an index of gold-standard companies rather than companies that are icons of only sustainability” Cramer and Karabell, 2010, p. 6.
Main challenge The main challenge is to decide how to weight the financial and the extra-financial aspects,
therefore requiring analysts with a strong expertise. Once again, the key issue is to determine where to draw the line.
3.5. Collaborative initiatives
Collaborative engagement is defined as “the engagement activities conducted collaboratively by multiple parties for example pension funds andor fund managers in
order to gain leverage and minimise costs and risks” Mercer, 2007, p. 2. According to the same report, collaborative engagement forms a subset of collaborative initiatives. The
UNPRI,
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the Carbon Disclosure Project CDP as well as national and regional social investment organizations can be considered as examples of collaborative initiatives.
It is striking to note that almost every pension fund studied in the UNEP FI report, How leading public pension funds are meeting the challenge, contributes to at least one
collaborative initiative UNEP FI, 2007. Even though pension funds are deemed major investors, it is obvious that they gain more power and influence as members of such
initiatives: “By joining forces with fellow investors and other stakeholders such as companies, NGOs and governments, investors can leverage the larger scale to more
effectively bring about desired change” Eurosif, 2011, p. 13. Being part of a collaborative initiative is therefore a great opportunity for investors to strengthen their impact on the
market and instigate change.
For example, Ethos, the Swiss Foundation for Sustainable Development, was created in February 1997 by two Geneva-based pension funds and is currently composed of 130
institutional investors. Its purpose is to promote the consideration of sustainable development principles and corporate governance best practice in investment activities;
and to promote a socio-economic environment that serves the society as a whole and preserves the interests of future generations. Being an association of institutional investors
makes Ethos an important investor, which can effectively engage and influence the companies in which it invests. Ethos undertakes its ownership responsibilities by asking
questions, identifying potential improvement and, where appropriate, formulating proposals at annual general meetings. Consequently, it can strongly influence the
companies’ policies, in particular those related to executive compensation or conflicts of interest.
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See Appendix IV for a description of the Principles.
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Ethos website, http:www.ethosfund.cheethos-foundationethos-foundation.asp, 18.05.2012.
Social responsible investment, decent work and pension funds
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Lastly, mention should be made of the UNPRI’s “Engagement Clearinghouse”. This is a forum designed to help signatories to draw the attention of other shareholders to specific
issues and promote collaborative actions. It enables them to share information about collaborative engagement activities they are conducting, or would like to conduct.
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Main challenge The parties have to reach an agreement before engaging with the companies. It can
therefore be a time-consuming approach, especially if the initiative is conducted by a large number of participants.
3.6. Combining strategies
