Sidney Sussex College and Sustainable Investment
A Report to the Environmental Committee June 2013
Elias Wynshaw and Daniel Macmillen
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Table of Contents
Introduction ……………………………………………………………... ………...3
Seven Arguments…………………………………………………………………... 4
The Financial Implications of an SRI Policy…………………………………………5
The Legality of an SRI Policy………………………………………………………..7
Student Concerns ……………………………………………………………… …. 8
Sidney’s Social Fingerprint…………………………………………………………..8
Tobacco……………………………………………………………………………..9
Mining……………………………………………………………………………...10
Fossil Fuels………………………………………………………………………....19
Defense…………………………………………………………………………….24
Support Services…………………………………………………………………....25
Banking……….…………………………………………………………………....28
Conclusion and Alternative Paths…………………………………………………..29
Appendix 1 ………………………………………………………………………...31
Appendix 2 ………………………………………………………………………...33
“You can make a difference with your investments. Sustainable-managed companies perform better.
This is not ideological cant – it is fact. Businesses have to be run correctly for the long term, and
investors and asset owners have to be involved; you have to hold the executives accountable for the
downstream consequences of the decisions they are making on your behalf.” – Al Gore
“The evidence is compelling. Sustainable investing can be a clear win for investors and for
companies”- Mark Fulton, global head of climate change investment research at Deutsche Bank
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Introduction - Why Sustainable and Socially Responsible Investment at Sidney?
Thinking seriously about how our prestigious educational institution is investing its endowment is
crucial for its reputation and future.
This document has three key goals:
First, to underline why it is crucial that Sidney discusses its investing practice as a charity and
educational institution.
Second, to examine Sidney’s portfolio, and its respective social and environmental fingerprint.
We must note that we do not intend to propose what investments or which fund managers are
ethical or responsible. We merely intend to elucidate why stakeholders find certain companies
antithetical to both their own principles, and the broader values of the Sidney community.
Thirdly, to suggest a framework through which discussions about Sidney’s investing practice can
emerge.
Ultimately, we firmly believe that thinking seriously about responsible investment is crucial for
Sidney’s well-being as a leading, principled institution.
What is responsible investment?
Values
Value
Diagram Source:
Profit
Earnings
Cash flow
Share price
Environment
Responsible
investment
Dividends
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Human Rights
Ethics
Fairness
United Nations,
Principles of
Responsible
Investment
The Reasons – Seven Arguments for Thinking about Sustainable Investment
1. Mission and Value Alignment
There is a dangerous disconnect between the values expressed by the college’s tracker investments,
and the values of the college’s stakeholders, and the nature of its mission. With regard to college
stakeholders, it is clear (as will be indicated in the discussion surrounding the Social Footprint of the
Charitrak Investment Fund), that the college’s money is indirectly invested in certain companies with
flagrant violations of basic standards of environmental sustainability, governance, and respect of
human rights. Furthermore, the college’s mission states that “it is a central aim of the College to
promote academic excellence, just as it is to guard freedom of thought and belief, for all its members
and for the public good.” Moreover, “in pursuing its objective as a place of religion, the College
carries forward the tradition, continuous since its foundation, of reflection upon the benefits, and
moral and ethical commitments, entailed by religious belief, and upon the implications of that belief
for the individual and society.”
2. Reputational Risk
Investments that do not consider environmental, social, and ethical considerations pose a
reputational risk for the institution. Previous college-based campaigns regarding arms investments
negatively affected the reputation of Cambridge colleges such as St. Johns, Corpus Christi and
Trinity Hall.
3. Sidney is Lagging Behind
Other peer institutions, such as Oxbridge colleges, and universities such as St. Andrews and
University College London have explicit Responsible Investment policies. Among the Ivy League
universities in the United States., Harvard, Brown and Columbia University have some form of
explicit commitment to sustainable and responsible investing.
4. Financial Sense
Due to the endowment's long‐term nature, it has special opportunities not available to investors who
are tied to a shorter time period. For instance, the endowment need not allow short‐ and
medium‐term returns to outweigh long‐term performance. These special opportunities allow the
endowment to be engaged in investing practices that take into account the negative impacts of
climate change on long‐term investments in fossil fuels, for example.
5. Sustainable or Responsible investing is a rapidly growing trend and asset class
In the United States, the overall total of SRI assets in 2012 is $3.74 trillion, a 22‐percent increase
since year end 2009. Although no similar data is available for the United Kingdom, the UK is the
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country with the second highest number of signatories to the UN Principles for Responsible
Investment, an initiative that gained signatory asset managers, asset owners, and service providers in
2012 alone, bringing the total number of signatories to 1070 (see graph above).
6. Alumni Donations
Students are a major source of funding for the college, both through their tuition fees and as
potential alumni donors, and will be more likely to give money to the University if they are satisfied
with how the University manages its investments. The same reasoning applies to existing alumni,
who are being increasingly targeted for donations as the Cambridge seeks to increase its endowment
fund. In a study conducted by CUSU in 2008, over 90.7% of Cambridge’s students said they would
be more likely to donate money to the University if they knew there was a strong ethical investment
policy in place. A strong alumni campaign was a significant factor in UCL’s recent decision to
implement an SRI policy.
7. Leadership Potential
The college is uniquely poised to invest and manage its endowment according to sustainable and
responsible investment practices. With a network of distinguished researchers, an active body of
students, staff and faculty members, and a mission to contribute to society, the college can lead and
shape the way its institutional investors are obtaining competitive returns while building a more
sustainable future.
Furthermore, the college prides itself on having produced remarkable trail-blazing individuals,
capable of transforming society, of conducting luminary and world-renowned research. An
analogous innovative intent should also be applied to the ethical codes of the institution, and a
college‐wide policy at Sidney would set an example for the endowments of other Colleges,
empowering staff, academics and students in other Colleges to press their respective institutions
along the same issues.
The financial implications of an SRI policy1
‘High Sustainability companies significantly outperform their counterparts over the long term, both in terms of stock
market and accounting performance’
The Impact of a Corporate Culture of Sustainability on Corporate Behavior and Performance – (Eccles and
Serafeim, Harvard Business School)
This section has been excerpted from the proposal compiled by the CUSU Ethical Investment Campaign in February
2009.
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‘We document positive market reactions to engagements with US public firms on ESG issues over 1999-2009. The
average one-year abnormal return after initial engagement is 1.8%, with 4.4% for successful engagements. The positive
abnormal returns are most pronounced for engagements on the themes of corporate governance and climate change.’
(Active Ownership – Dimson, Karakas, Li, 2012)
“Charity Commission guidance states that an “ethical investment policy may be entirely consistent
with this principle of seeking the best returns”2. The financial implications of a well-managed SRI
policy should be minimal especially given that divestment should only be used as a last resort in a
small minority of extreme cases of problematic corporate behaviour. Engagement is frequently a
more productive strategy that has little or no impact on investment return. There are also a large
number of mainstream well-performing funds that use positive screening, which are good
investment options in their own right.
Research by the Ethical Investment Research Service EIRIS found that significant portions of the
market (up to 20%) can be excluded from an investment universe as part of an ethical investment
policy without affecting financial performance. The Joseph Rowntree Charitable Trust’s SRI policy
excludes around one third of the FTSE All-Share (much more than most) and performance has still
been consistently in line with the All-Share from 1978-20023.
Furthermore in a 2004 report, the Association of British Insurers concluded that ‘incorporating
social responsibility can reduce portfolio volatility and increase returns.’4 ‘Ethical’ funds and indexes
often outperform their counterparts which do not employ ethical exclusions. For instance Jupiter
Ecology Fund, which uses a range of positive and negative screening techniques, was placed in the
1st quartile of the Global Growth Sector Ranking for its returns over a one, three, and five year
period5 in January 2008.
The Co-operative bank, which has a very stringent customer-led ethical investment policy, taking
into account issues including Environmental sustainability, Human Rights, Labour Rights, Animal
Rights and Consumer Protection and using engagement and positive and negative screening.6 It is
competitive with equivalent banks which do not have a policy and September 2008 the Co-operative
Bank bucked trends in the financial sector by increasing profits despite the credit crisis.7
Charity Commission guidance: CC14, detailed guidance, Section F. Ethical and socially responsible investment
Joseph Rowntree Charitable Trust’s Financial report. Available at: http://www.jrf.org.uk/about-us/finance.asp
4 Association of British Insurer’s 2004 report:
http://www.abi.org.uk/Display/File/364/Risk_rewards_and_responsibility_1204__RISKS.pdf
5 http://www.jupiteronline.co.uk/PI/Our_Products/Green_Funds/SRI_Funds/J3.htm
6 View page 45 of the Co-operative Bank’s “Sustainability Report 2007”, found at:
<http://www.goodwithmoney.co.uk/images/pdf/FINALFULLWEB.pdf>.
7 Jonathan Sibun, “Cooperative Bank upbeat but warns on debts”, 12 September 2008.
http://www.telegraph.co.uk/finance/newsbysector/banksandfinance/2953123/Co-operative-Bank-upbeat-but-warnson-debts.html
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The legality of an SRI policy8
“A college’s environmental or sustainable investment policy can be fully compliant with the college’s
fiduciary responsibilities as is outlined in Charity Commission guidance9. There is an excellent
precedent for SRI policies in UK higher education institutions: a large number of UK Universities
and Cambridge Colleges already have strong SRI policies in place.
The view that financial return is the only permissible consideration in investment decisions has been
widely discredited. This argument was largely based on an interpretation of a particular legal
precedent (Cowan v Scargill 1984). A 2005 legal report commissioned from the firm Freshfields
Bruckhaus-Derringer by the United Nations Environment Programme concluded that ‘no court
today would treat Cowan v Scargill as good authority for a binding rule that trustees must seek the
maximum rate or return possible for every investment and ignore other considerations.’10
Based on the outcome of the landmark case Harries (Bishop of Oxford vs. Church Commissioners [1992]),
the Commission has identified three circumstances under which making ethical exclusions is
acceptable:
a) A practical conflict with the charity’s aims. Thus, many colleges choose not to invest in
tobacco since it conflicts with the medical research they do.
b) Investments which may make potential beneficiaries unwilling to be helped, or alienate
members/supporters. In this case, significant unease on the part of students, fellows or
alumni could legitimately be claimed as justification for placing restrictions on
investments.
c) While a. and b. allow exclusions even with a risk of significant financial detriment, if a
charity reasonably believes it will not entail such detriment, they ‘may accommodate the
views of those who consider it inappropriate on moral grounds’, regardless of whether it
falls into either of the previous two categories.
Case law can be interpreted as obliging institutions to consider their position on a particular ethical
issue, even where they may not be obliged to alter their investment practices. The outcome of the
Bishop of Oxford v Church Commissioners case stated that where a conflict arises, trustees ‘will
need to balance the difficulties they would encounter, or likely financial loss they would sustain if
they were to hold the investments, against the risk of financial detriment if those investments were
excluded from their portfolio’ - which ‘will usually require expert advice’.11 As such, the
establishment of a committee to consider and evaluate members’ ethical concerns regarding
university investments is not only permitted by Charities Law but fully in the spirit of the Charity
Commission’s guidelines.
This section has been excerpted from the proposal compiled by the CUSU Ethical Investment Campaign in February
2009.
9 Charity Commission guidance: CC14, detailed guidance, Section F. Ethical and socially responsible investment
10 Summary of Freshfields’ Report by University of St Andrews’ Investments and Collections Committee
11 CC14 : Investment of Charitable Funds, February 2003
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Furthermore, the Trustee Act 2000 encourages charity trustees to act as ‘SRI champions’, requiring
them to ensure investments are “suitable”. In 2000 the Cabinet Office Strategy Unit in a review of
charity law (Private Action, Public Benefit: A Review of Charities and the Wider Not-For-Profit Sector)
proposed that charities with an income of over £1m should report annually on the extent to which
social, environmental and ethical issues are taken into account in their investment policies.12
Student Concerns
Broadly speaking, the companies earmarked by students as contentious, and unpalatable include:
African Barrick Gold, Anglo American, Anglo Pacific Group, AstraZeneca, BAE Systems,
BG Group, BHP Billiton, BP, British American Tobacco, Burberry Group, Cobham,
Diageo, G4S, Glencore International, Imperial Tobacco Group, Meggitt, Petroceltic
International, Petropavlovsk, Rio Tinto, Royal Dutch Shell, QinetiQ Group, Serco Group,
Talvivaara Mining Company, Vedanta Resources.
Sidney’s Social Fingerprint
What makes these companies unsynchronized with the principles and values upheld by
members of the Sidney community?
Before we review some of the key investments, we must acknowledge that any discussion of a
company’s behaviour is convoluted, for there are always discrepant perspectives, and all reports on
corporate practice run the risks of being overly sympathetic or excessively vituperant. We have made
a patent attempt to use what we think are some of the most authoritative investigative sources, and
have borrowed the work of widely-acclaimed researchers in the field of corporate scrutiny.
The appraisals of the featured companies have been, for the most part, taken whole-cloth from the
reports conducted by RepRisk, the world’s leading provider of dynamic business intelligence on
Environmental, Social and Governance risks (ESG). We unfortunately do not have the time or
resources to go into depth onto the numerous companies flagged up by students; rather, we will
focus on a few key areas, and on seventeen companies, arguably the most flagrant examples of
unsustainable investments.
12
Investing Responsibly: Technical Advice for Financial Managers, UK Social Investment Forum
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Tobacco
British American Tobacco
British-American Tobacco is the world’s second-largest tobacco company. With factory machines
that roll 715 billion cigarettes each year, BAT sells over 200 cigarette brands in 180 countries,
making it responsible for 15% of the world’s tobacco market. Despite its immense profitability and
international profile, British-American Tobacco has a severely tarnished record of social
responsibility. Various reports have traced the company’s raw tobacco to African farms known for
their extensive practices of child-labour, with child workers as young as 5 picking tobacco leaves,
and consequently, suffering severe exposure to toxic pesticides and absorbing high levels of
dissolved nicotine through their skin.13 In 2007, British American Tobacco and other tobacco
companies were sued by four Nigerian states over allegations that they had targeted young and
underage smokers in an attempt to increase smoking rates. According to lawyers representing the
state of Kano, these companies sponsored numerous concerts and sporting events, in some cases
even distributing free cigarettes to inveigle minors to take up smoking.14
Furthermore, aside from its numerous violations of the Tobacco Advertising Act established in
2002, its constant use of marketing methods which glamorize and romanticize smoking, its
vociferous lobbying of EU institutions to oppose smoking bans, its serious undermining of the
negotiation power of tobacco leaf picker unions in developing nations, BAT has also actively
campaigned to try to discredit research from the World Health Organisation (WHO), using tobaccofunded investigation to undermine WHO nicotine addiction and the health impacts of second hand
smoke. They have actively worked towards eroding the Framework Convention on Tobacco
Control (FCTC) and, as if that was not enough, recently disclosed court documents in Hong Kong
had revealed that between 1987 and 1993 BAT sold at least US $1.2 billion worth of cigarettes
(approximately 50 billion cigarettes) to a Hong Kong-based network which smuggling into China
and Taiwan. The respective network was found to have colluded with the Triad, Asia's most
notorious criminal organization. 15
See Action on Smoking and Health’s Report on “BAT’s African Footprint” at
< http://www.ash.org.uk/information/tobacco-industry/bats-african-footprint>. Also see Kristin Palitza, “Child
labour: the tobacco industry’s smoking gun”, The Guardian, 14 September 2011.
14 Chris McGreal, “Nigeria takes on big tobacco over campaigns that target the young”, The Guardian, 15 January 2008.
Also see KnowMore’s article on “British American Tobacco”, accessible at
<http://knowmore.org/wiki/index.php?title=British_American_Tobacco>.
15 The International Consortium of Investigative Journalists, “BAT finds a partner in Asia’s most notorious criminal
organization”, 3 March 2001. Accessible at < http://www.icij.org/node/460/bat-finds-partner-asias-most-notoriouscriminal-organization>.
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Mining
The extraction industry is traditionally one of the most criticized by various stakeholders for its
injurious impacts on communities and the environment. However, the mining industry is not a
monolithic bloc; there is a panoply of companies, and a continuum of ethical practice.
The college’s investment managers at BlackRock obviously value the mining industry highly, for the
sector represents over 10% of the entire portfolio’s investments. However, unfortunately, the
selected companies are some of the most notorious and historically abusive companies within the
field; within the college’s twenty-five mining investments are six companies that have been ranked
according to a RepRisk classification, as among the “Ten Most Controversial Mining Companies in
the World”.
Rio-Tinto
“NGOs have targeted Rio Tinto over its alleged human rights and environmental abuses around the
world, keeping the company in the media spotlight throughout 2011. Protests organized by
representatives from regions where Rio Tinto has operations, such as Indonesia, Mongolia and the
US, were held at the company’s AGM in April.
Key issues that have been highly publicized include uranium mining; alleged genocide and war
crimes in Papua New Guinea; and the risk of social and environmental damage at many mining
projects proposed by Rio Tinto and its subsidiaries.
In Australia, health and safety conditions and a lack of transparency at the Mount Thorley, Hunter
Valley and Bengalla coal mines, which are managed by Rio Tinto Coal Australia, have drawn
criticism and media attention throughout the course of the year. At Rio Tinto’s Bell Bay smelter,
union members allege they were harassed by managers of the project. Meanwhile Rio Tinto Alcan
pleaded guilty in court to spilling over 62,000 liters of unleaded petrol, resulting in the contamination
of soil and groundwater in Arnhem Land.
An NGO report stated that radioactive water is also in danger of spilling from the Ranger Uranium
Mine into an Aboriginal community area and Kakadu’s World Heritage-listed wetlands. The mine is
operated by Energy Resource of Australia, which is controlled by Rio Tinto. Reportedly, over the
past 30 years, roughly 100,000liters of contaminated water have leaked out of the mine’s tailings dam
per day.
Environmentalists have called on Rio Tinto to stop uranium mining in Western Australia, claiming
the company produces radioactive waste which has been known to cause intergenerational sickness.
The company was also criticized for supplying to Tokyo Electric Power (the operator of the two
Fukushima plants that experienced melt down and cooling problems in Japan), despite Tokyo
Electric Power’s reported issues of ongoing falsification of information and cover-ups.
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In Africa, uranium mining has also been blamed for pollution and for alleged detrimental health
impacts on local populations. In addition, the company’s operations are often located in areas where
regulations and tax laws are lax. In 2011, Rio Tinto was accused of not allowing for proper public
consultation, a lack of transparency, failing to deal with waste properly, and health and safety issues
regarding its workers in African countries.
New projects proposed by Rio Tinto have also gained attention due to the alleged ecological and
social risks they pose. In Canada, Rio Tinto Alcan has been sued by two First Nation tribes in
British Columbia’s Supreme Court given Kenney Dam’s alleged adverse impacts on their culture,
sustenance and fisheries.”16
Additionally, through the college’s investments in Rio Tinto, we are regrettably also linked to one of
the most brutal, grisly and forgotten conflict zones on the planet, West Papua, whose vicious
military occupation by Indonesia has led to the deaths of over 100,000 people since 1969. The
college’s tenth largest investment is in Rio Tinto, the third largest mining company in the world, a
company which jointly oversees the Grasberg Mine, one of the most profitable and heavily criticised
mines in the world. Acclaimed British investigative journalist Mark Curtis has done extensive work
documenting Rio Tinto’s complicity in grave violations of human rights. Through its lucrative
reliance on the Indonesian military and police force to suppress regular indigenous protests against
the mine’s activities, Rio Tinto has been indirectly connected to indiscriminate killings, torture and
disappearances of local people, in addition to the forced displacement of over 4,000 members of the
Amungme tribe since the mine's creation. There have been countless cases of murder, rape and
persecution, all occurring within the context of the military’s systematically violent repression of
indigenous communities that dissent against the mine’s activities. As Aloysius Renwarin, chair of the
Institute for Human Rights Study and Advocacy in Jayapura, West Papua notes: “These human
rights violations in the mining area show no signs of abating, dating from the arrival of the company
up to the present-day.” In addition, 230,000 tonnes of toxic waste from the mine pour into the
Ajkwa rivers each day, contaminating drinking water supplies, and devastating plant life along the
riverbanks.17 It is ecocide at its worst, and as a result, the largest investment fund in the world, the
Norwegian government’s pension fund, sold its entire $850 million stake in Rio Tinto in 2007,
expressing severe concerns about the way the Grasberg mine was being operated.18
RepRisk, “Most Controversial Mining Companies of 2011”, March 2012, published at the RepRisk AG, February
2012.
17 For a comprehensive report on Rio Tinto’s role in West Papua, see Mark Curtis’ Fanning the Flames: The Role of British
Mining Companies in Conflict and the Violation of Human Rights, published by the War on Want, 2007. Access at:
<http://www.waronwant.org/attachments/Fanning%20the%20Flames.pdf.>
18 John Acher, “Norway fund drops Rio Tinto on ethical grounds”, Reuters, 9 Sep 2008.
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Glencore
“Despite apparent attempts to remain in the shadows, Glencore and its subsidiaries have faced
accusations from non-governmental organizations (NGOs) concerning their operations around the
globe. Perhaps one of the most significant episodes arose in 2008, when Glencore was nominated
the winner of the ‘Public Eye’ award. The award is given to the company whose activities are viewed
by voters as the most detrimental for society or the environment. Organized by Swiss NGO Berne
Declaration together with Greenpeace, the award specifically highlighted pollution through
Glencore’s mining activities as well as its anti-union stance.
One of the company’s ongoing scandals relates to its Zambian subsidiary Mopani Copper Mines
(MCM), which has been accused of a scam aimed at evading taxes in one of the world’s most
impoverished countries. MCM is said to have engaged in ‘financial and accounting manipulations',
whereby it failed to justify why it recorded a GBP 234 million increase in operating costs in 2007,
and falsely downplayed the volume of cobalt it extracted. As part of the scheme, MCM also
apparently sold copper to Glencore at artificially low prices. Five NGOs reportedly filed a related
complaint against MCM and its partner, First Quantum Minerals, with the Organisation for
Economic Cooperation and Development, based on a leaked audit report. Furthermore, the
Environmental Council of Zambia claims that the Mopani mine has caused acid rain and water
pollution, leading to health problems in an area with around 5 million inhabitants. NGO Counter
Balance released a report stating that MCM does not provide safe working conditions, contravenes
OECD human rights guidelines by expelling farmers, discharges large quantities of toxic waste and
drains Zambia’s water and energy resources. There have also been concerns expressed about health
and safety, especially after an accident at the mine in October 2010, which led to two fatalities.
In Colombia, the company Prodeco, owned by a Glencore subsidiary, was fined almost USD
700,000 for several environmental violations. Glencore was also tied to criticism of Colombian
Carbones del Cerrejon, as it holds a major share in Xstrata, which is one of the part-owners of this
company. The National Indigenous Organization of Colombia charged Carbones del Cerrejon with
human rights violations, excessive use of force, water pollution, use of chemical explosives and
carbon dust contamination at the Permanent Peoples' Tribunal in Madrid in 2010. Glencore was
further implicated in a story reported in early 2010 about Colombian air force attacks in which they
burnt homes in indigenous communities, including those belonging to the Alto Guayabal people,
wounding several inhabitants and killing an infant. The Alto Guayabal's lands reportedly contain
large mineral deposits, and Glencore is one of the companies granted permission by the government
to conduct explorations at the Mande Norte Mining Project site. In 2009, Glencore’s part-owned
subsidiary, Fenoco, was accused of attempting to use the courts in Colombia to criminalize workers’
demonstrations, which were staged in protest at the deaths of employees allegedly due to poor
working conditions. Fenoco is further accused of conspiring with a government agency to set up
spurious unions in order to disrupt the functioning of existing organizations.
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Glencore has faced NGO scrutiny for importing raw materials from conflict zones. Its subsidiary,
Katanga Mining, came under fire for allegedly obtaining cheap mining concessions within the poorly
regulated Democratic Republic of Congo, a country where mining is often linked to international
human rights and labor standards violations as well as massive environmental destruction. Swiss
charities called on their government to introduce a law requiring multinationals to declare their
revenue on a per country basis, and to consider restricting imports from such countries. In 2009,
Glencore was linked to investment in the company operating Kipushi Zinc Mine, where miners
allegedly faced precarious conditions in dilapidated shafts.
There have also been critical reports of the social and environmental impacts of Glencore’s activities
as well as allegations related to governance issues in several other countries. In 2008, Glencore’s
Bolivian subsidiary, Sinchi Wayra, came under fire for allegedly dumping 30,000 liters of waste into a
local stream and for using intimidation tactics against local opposition as a means of stifling dialogue
and limiting participation. Also in Bolivia, workers were killed in clashes with government forces
related to the Huanuni Mine in 2006 and 2008. The mine supplied the Vinto Tin Smelter, which the
government had acquired from Glencore after the company was accused of having initially
purchased it through corrupt means. In 2009, Glencore attracted media attention in relation to
concerns expressed by the UN Food and Agriculture Organization about the large-scale cultivation
of agricultural lands by foreign entities.
This allegedly destroys the livelihoods of local farming communities, marginalizes local food
production, exacerbates malnutrition, reduces biodiversity and leads to the overuse of resources.
Along with another company, Glencore was said to have secured rights to use farmland in Paraguay,
Ukraine, Kazakhstan and Sierra Leone. In 2008 in Australia, aboriginal tribes reportedly considered
legal action against an Xstrata subsidiary that had locked them out of their sacred sites. Several years
ago, the US Department of Justice announced a probe of Glencore after allegations surfaced about
kickbacks given to employees of Aluminum Bahrain (Alba) in order to secure below-market prices
on aluminum products.19
In addition, since the announcement of its Initial Public Offering in April 2011, media focus has
been further focused on Glencore and its complex web of subsidiaries and affiliated companies.
Glencore’s notorious secrecy has become increasingly controversial as cases of environmental and
human rights abuses linked to its global operations have been brought to light.
The company’s activities continue to be targeted for safety, environmental impact, human rights and
tax issues. Glencore’s mining activities in Katanga, a poorly regulated conflict zone of the
Democratic Republic of Congo, have made it a target for human rights organizations. There are
suspicions that the company supplies copper and cobalt from freelance miners, many of whom are
children, who work under life-threatening conditions in the Tilwezembe Open Pit Mine. The mine is
owned by Katanga Mining, a Glencore subsidiary.
19
Karen Reiner, “Spotlight on: GLENCORE INTERNATIONAL”, RepRisk, Zurich, April 15, 2011.
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Sulfur dioxide emissions from the Nkana cobalt plant and Mufulira copper smelter, owned by
Mopani Copper Mines (MCM), reportedly exceed locally prescribed limits in Zambia. MCM is
majority-owned by Glencore. Around 300,000 locals are reportedly being affected, suffering health
problems and a loss of crops. Large amounts of sulfuric acid are allegedly injected into the ground to
extract the ore, with devastating effects on the environment and residents.
In Peru, Glencore’s Empresa Minera Los Quenuales has allegedly harassed union members, and two
people were reportedly killed during a blockade. At its La Jagua coal mine in northern Colombia, the
company was also accused of trying to prevent unions from being formed.
Glencore’s Colombian subsidiary, Prodeco, has also been criticized for allegedly operating in areas
where paramilitary forces have forced local residents off their lands and killed at least 18 people.
Furthermore, the company came under fire for reportedly disposing of waste illegally. Xstrata (in
which Glencore holds a largeshare) has a one-third stake in El Cerrejon, which operates a
controversial coal mine in Colombia. The mine has reportedly contaminated groundwater and
created air pollution, which has led to health problems for the local people. The two companies have
also been accused of anti-competitive behaviour as Xstrata has allegedly received several contracts
from Glencore that were not subject to competitive tenders.
Century Aluminum, which is 44 percent owned by Glencore and also acts as a major supplier, has
allegedly breached a string of environmental laws in the US, including air pollution and groundwater
contamination. In China, Glencore has a stake in the proposed PolyMet copper mine, which has
also drawn criticism due to its potential impacts on the environment and locals’ livelihoods.
Furthermore, food security analysts have accused Glencore of causing a rise in the price of raw
commodities, making it increasingly difficult for poor consumers to feed their families. The
company is said to have used its dominant position within the global market to drive up prices
through speculative activity and also to have sought illicit information from authorities in Russia and
Belgium to gain a competitive advantage in local markets.”20
Lonmin
“British mining company Lonmin came under fire in August when strikes over wages at its Marikana
platinum mine in South Africa escalated, leading to deadly clashes between miners and police forces.
On August 10, an estimated 3,000 workers, who allegedly live on USD 2 a day, participated in a
strike over their salaries at the mine. Prior to the strike and the resulting massacre, at least 10 people
including union representatives, security guards and 2 police officers were killed in clashes. A few
days later, on August 16, 34 protesters were shot dead, 78 were injured, and 259 were arrested
following violent clashes with police. Lonmin and the South African government were criticized for
RepRisk, “Most Controversial Mining Companies of 2011”, March 2012, published at the RepRisk AG, February
2012.
20
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allowing the protest to escalate. Allegedly, several hundred police officers fired at the demonstrators
after unsuccessful attempts to silence them with water cannons and rubber bullets.
On August 20, nearly a quarter of the workers returned to the Marikana mine in response to alleged
threats by Lonmin to dismiss the 3,000 striking miners if they failed to return. In September, South
African President Jacob Zuma announced a Judicial Commission of Inquiry into the Marikana
tragedy. Following the incident, the mine was provisionally shut down and Lonmin reportedly
considered a USD 1 billion rights issue in order to make up for the losses due to the temporary
closure. Xstrata, one of the company’s main shareholders, announced that it was willing to
contribute to Lonmin’s fundraising.
In the wake of Marikana, South Africa has seen continuing labor unrest at several mines. Companies
such as AngloGold Ashanti, Gold One, Anglo American Platinum (Amplats), and Gold Fields have
been affected by strikes and protests by some 75,000 miners. Unrest continued throughout
November and December at various mines in the country, including Harmony Gold Mining’s
Kusasalethu mine in Carletonville and Amplats’ sprawling facilities in Rustenburg.”21
BHP Billiton
“In 2011, BHP Billiton continued to be one of the most controversial companies in its sector with a
consistently high RepRisk Index. It attracted a great deal of NGO criticism for its alleged
widespread environmental destruction and human rights abuses. BHP’s operations have constantly
been associated with resettlement or the forced relocation of communities, the destruction of
traditional livelihoods, human rights abuses and the violation of indigenous peoples’ rights.
Occupational health and safety was one of the issues consistently highlighted in 2011. Fatalities at
the Cerrejon Coal Mine in Colombia in late 2010 had already called attention to alleged poor
working conditions. Despite a commitment to improving health and safety, BHP has reported 26
deaths from 2009 to 2011. According to a survey conducted by the Financial Times, BHP has failed
to decrease the number of fatalities at their operations over the past five years.
In Pakistan, it was reported that 90 percent of the villagers living near the Zamzama gas plant
operated by BHP Billiton are allegedly suffering from various diseases resulting from toxic fumes
emitted by ponds at the plant. In Australia, workers were also reported to have been exposed to
asbestos on a BHP Teekay shipping vessel. Other issues were highlighted at the BHP Billiton
Mitsubishi Alliance’s (BMA) Peak Downs and Saraji mines in Australia.
The company’s drilling techniques have also been controversial. An NGO report called “Dirty
Energy” targeted BHP’s deep sea oil production, which involves a more carbon intensive process
than conventional oil production. Furthermore, BHP reportedly has a huge stake in US shale gas,
21
RepRisk, “Most Controversial Companies of 2012”, March 2012, published at the RepRisk AG, March 2013.
15
with plans to use the controversial hydraulic fracturing (fracking) technique to develop it. In
Arkansas, BHP Billiton faced a class action lawsuit over the negative impact of fracking operations.
Critics also accused BHP’s CEO of misleading the public regarding its corporate social responsibility
agenda when 139 BHP Billiton companies in its group were highlighted as operating from
international tax havens. This was further highlighted by the report “Publish what you pay” which
criticized BHP for alleged tax evasion. The company was ranked as the 13th least transparent
company for country level disclosure on its international operations in Transparency International’s
“Promoting Revenue Transparency” 2011 Report on Oil and Gas Companies.”22
Barrick Gold
“In 2011, Barrick Gold has been the focus of several reports and news headlines due to the human
rights abuses allegedly occurring at its mines. Multiple claims of sexual abuse, beatings and murders
have been linked to its security staff. Those affected by environmental destruction, health problems,
and loss of land and livelihoods have also achieved a media presence, publicizing their complaints
against the company.
In Papua New Guinea, gang rapes were allegedly carried out at Barrick Gold’s Porgera mine, for
which the company was encouraged to fire several employees after pressure from human rights
groups. Its security forces have also been accused of extrajudicial killings and beatings, usually of
illegal miners trying to make a living on the mine’s periphery. There have also been allegations that
the mine is causing extensive environmental damage to forests and farmland, and has taken land
required by locals for their livelihoods. In addition, six million tons of tailings from the mine have
allegedly been discharged into the Porgera River.
African Barrick Gold, which is largely owned by Barrick Gold, has also been embroiled in allegations
of sexual assault levelled against the company’s security guards at its North Mara gold mine in
Tanzania. This scandal followed another incident where seven intruders were allegedly shot dead at
the mine after 800 people stormed the project. The action was sparked due to the forced relocation
of 10,000 families, the loss of farmlands and livelihoods, and the ongoing poisoning of local
residents.
The Chilean and Argentinian governments have been accused of drawing up a favorable tax treaty
for Barrick Gold’s Pascua Lama mine, which straddles the border of the two countries. The project
allegedly violates OECD and Equator Principles due to impacts on indigenous peoples and their
livelihoods, breaches national and international laws, and has reportedly damaged and depleted
glaciers. It has also been accused of a lack of transparency, falsely obtained land titles, corruption in
RepRisk, “Most Controversial Mining Companies of 2011”, March 2012, published at the RepRisk AG, February
2012.
22
16
supplier contracts, and non-compliance with environmental legislation. In addition, there have been
16 worker deaths at the mine, and the operations have been accused of failing to benefit the local
community.
The Bajo Segura Santa Lucia waste treatment facility, used by Barrick’s Veladero gold mine in
Argentina, has allegedly been releasing an illegal discharge into streams.
The construction of an electric transmission line, to power Barrick Gold’s Pueblo Viejo mine in the
Dominican Republic, has drawn criticism concerning its impact on the Nizao and Banilejo river
basins. Over 5,000 people were allegedly displaced in order to make room for the mine’s tailings
dam. In addition, experts have voiced concerns that the dam could collapse or overflow, potentially
contaminating a branch of the Yuli River.
In the US, Native American activists have legally challenged the expansion of Barrick Gold’s Cortez
Hills mine in Nevada, claiming it will damage the mountains by pumping out 4,100 gallons of water
a minute to keep the open pit dry for the mining operations. There are also fears it will pollute the
air and dry up groundwater.” 23
Anglo-American
“Anglo American faced criticism across the globe in 2011 for both its current and proposed mining
projects. The year saw protests at many of the company’s sites due to concerns about worker safety
as well as a great deal of opposition to its plans for new projects that would allegedly affect local and
indigenous communities as well as result in detrimental impacts on the environment.
Anglo American’s joint venture with Xstrata and Mitsui & Co at the Collahuasi mine in Chile proved
very controversial throughout the year. Over twenty labor unions accused the companies of serious
acts of retaliation against union leaders following a series of strikes. Additionally, the company was
one of the key investors in the HidroAysen Dam, a project that sparked violent protest across the
country when it was granted approval.
The project would allegedly flood 6,000 hectares of rare forest, river valleys, national parks and
farmland. The company’s Peruvian operations also saw strong opposition this year. The Quellaveco
Copper Mine was criticised due to concerns about heavy usage of scarce water supplies. Likewise, its
proposed Michiquillay Mine faced protests from residents who sought better compensation and
feared it would damage the local environment. In Colombia, the company is part-owner of the
highly controversial Cerrejon Mine and continued to attract strong criticism. In the mine’s 32 years
of operation, communities of Afro-Colombians, indigenous groups and campesinos claim to have
RepRisk, “Most Controversial Mining Companies of 2011”, March 2012, published at the RepRisk AG, February
2012.
23
17
been constantly struggling against displacement, human rights violations by paramilitary forces, and
for the protection of their natural resources.
In North America, the Pebble Mine (proposed by a consortium that includes Anglo American,
Northern Dynasty Minerals, and Rio Tinto) faced strong opposition in the Bristol Bay region of
Alaska in 2011. Opponents have claimed it will produce approximately 10 billion tons of toxic waste
and have expressed serious concerns about the impacts on ecosystems and landscapes. These
concerns are due to the proposed underground mining operations that would be located between
Lake Clark National Park and Lake Illiamana, the largest fresh water body in Alaska and source of
the salmon-rich Kvichak River. Furthermore, local indigenous groups have voiced concerns over the
impact the project would have on their traditional way of life.
In South Africa, Anglo American was one of several mining companies whose workers, led by the
National Union of Mine Workers, demonstrated against alleged poor safety standards in an effort to
secure a reduction in mining fatalities. Reportedly, 3,500 miners submitted a memorandum of
concerns to officials in Johannesburg. Anglo American also faced a lawsuit by 18 ex-employees of
the President Steyn Gold Mine, owned by one of its former subsidiaries. The plaintiffs claim that the
company knowingly exposed them to silica dust, which led to respiratory illnesses, including silicosis
and tuberculosis. The 18 cases were chosen to represent the circumstances of tens of thousands of
former mineworkers who have allegedly suffered as a result of working for Anglo American.”24
Vedanta Resources
“Concerns about indigenous rights abuses and environmental damage in Orissa, India, have kept
Vedanta in the spotlight for the past few years and have led to several high-profile divestments.
Earlier in 2010, a series of protests with up to 8,000 tribal members and anti-Vedanta activists were
staged. The controversy surrounding Vedanta’s proposed projects in the region came to a head in
August this year, when the Indian government withdrew its permission to mine at the Niyamgiri
Bauxite Mine in Orissa and issued a notice for violation of forestry laws. The committee reviewing
the proposed project concluded that it would severely impact the hunting and farming lifestyle of
the Dongria Kondh and Kutia Kondh tribes through pollution and diversion of rivers, and
destruction of flora, including fruit-providing and medicinal plants they depend on. Additionally, it
would have destroyed an area they consider sacred. Vedanta was also accused of illegally occupying
forest land and collaborating with local officials to falsify documents.
There have also been calls for the closure of a Vedanta subsidiary’s Orissa Alumina Refinery amidst
claims that work on its expansion project, in an ecologically sensitive area, began without the
necessary permits. Another subsidiary, Sterlite Industries’ Tuticorin Copper Smelter, was ordered to
shut due to repeated violations of air, water and hazardous waste pollution.
RepRisk, “Most Controversial Mining Companies of 2011”, March 2012, published at the RepRisk AG, February
2012.
24
18
Vedanta also experienced further ramifications of the chimney collapse at its BALCO subsidiary’s
Korba Thermal Power Plant in 2009, which resulted in the deaths of 41 construction workers. Three
BALCO executives were charged with manslaughter this year.
Outside of India, Vedanta’s Konkola Copper Mine allegedly polluted the Kafue Gorge River in
Zambia with mine effluent, depriving thousands of households of safe access to water.”25
Fossil Fuels
“The logic of divestment couldn't be simpler: if it's wrong to wreck the climate, it's wrong to profit
from that wreckage.” – Bill McKibben
One of the most oft-cited truisms within the debates surrounding ethical investment is that whilst
the world of ethics may be murky and mangled, there are clear-cut areas of “fundamental moral
importance” which cannot be ignored when making decisions and compromises regarding
investment. The campaigns for divestment from companies operating within apartheid South Africa
is perhaps the most famous example of this principle’s application. With the blossoming fossil fuel
divestment movement spreading across American campuses, climate change, which is compromising
not only wholesale environmental destitution but the very survival of human species, has already
become the new “South Africa”, the most pressing and essential issue of current generations.
We have no idea what the world will look like in a few years time, let alone a few decades. But it is
almost certain that we will ask ourselves, both personally and institutionally, what did we do to
forestall and prevent the damage? What did we do to attempt to secure the safety and sustainability
of our planet, and secure it for our future generations? A more environmentally-compatible
investment policy would indubitably impose clear restrictions on fossil fuel returns, and seek to feed
funds into the plethora of environmentally sustainable projects that are on emerging across global
markets.
With regard to Sidney’s portfolio, over 16.70% of the BlackRock Charitrak fund is invested in Oil &
Gas Producers; once again, there is a continuum of ethical practice, but once again, many of the
included companies are some of the most well-known violators of environmentally safe practice.
RepRisk, “Most Controversial Mining Companies of 2011”, March 2012, published at the RepRisk AG, February
2012.
25
19
BP26
BP is no newcomer to controversy, especially in the wake of the “Deepwater Horizon project, which
resulted in the release of an estimated 41 million barrels of crude into the Gulf of Mexico. BP faced
fines of up to USD 4,300 per barrel due to gross negligence, in addition to civil lawsuits brought by
oil-rig workers and fishermen among others. It was also condemned for not being adequately
prepared for such an event and for the widely banned toxic dispersants it used in the cleanup
process, which have allegedly resulted in incidents of chemical-exposure related illnesses in the
surrounding population. It has also been accused of harboring a culture in which whistleblowers fear
reprisal and intimidation.
This occurred while the company was still battling to restore its image after receiving a record USD
50.6 million fine this year following the 2005 refinery explosion in Texas, which killed 15 workers
and injured a further 180. In continued health and safety breaches at its Texas City Refinery, tens of
thousands of pounds of hazardous chemicals were released following equipment failure in April and
May of this year. It has been facing a protracted class-action lawsuit.
Additionally, BP has come under fire for numerous issues outside of the US, including its tar sand
operations in Canada, considered up to 5 times more carbon-intensive to exploit than normal crude.
The company was implicated in human rights abuses in Angola, a country named as one of its six
new profit centers. It has been criticized for ongoing violent persecution of unionized workers at its
operations in Colombia and linked to two alleged assassinations. Also in Colombia, it has been
accused of illegally forcing local communities off their land. BP’s use of the controversial process of
hydraulic fracturing of shale, where underground rock is blasted with high-pressure sand and
chemicals potentially polluting groundwater supplies, also attracted unwanted attention for the
company (…).
BP has been also criticized for doing business in Zimbabwe and for planning mountain-top removal
coal mines and methane extraction in an ecologically diverse region in Canada. Its joint venture,
TNK-BP, has been accused of discrimination against local employees in Russia.
The US Environmental Protection Agency has also cited BP for significantly increasing air pollution
linked to asthma, heart disease and early deaths as a result of its activities at the Whiting Refinery in
north-west Indiana. The oil company was also cited for allegedly installing equipment to process oil
at the refinery without receiving proper permits to process crude. BP was also criticized in the UK's
26Most
of the aforesaid information has been taken from Karen Reiner’s RepRisk report, “Most Environmentally and
Socially Controversial Companies – Oil Industry Special Report”, Zurich, June 11, 2010.
20
Renewable Fuels Agency's biofuels report for not reporting on whether or not its products met
environmental standards.”27
Royal Dutch Shell
Another one of the world’s most controversial corporations is Royal Dutch Shell Intentional.
Here are only some of the numerous scandals that have besmirched the multinational, known as
being the second largest company in the world in terms of revenue:
“Shell has been criticized for erecting facilities within a conservation area and for not having the
correct excavation permits at a site in Ireland, as well as for having previously conducted illegal
drilling work. It was also accused of toxic waste dumping in Nigeria, which threatened the local
ecosystem and the community.A Nigerian court ruled that Shell must hand over the land
surrounding its Bonny oil terminal in Rivers State to the indigenous population in the Niger Delta.
Legal action was brought against the Shell Petroleum Development Co. of Nigeria Ltd on the
grounds that the company did not have the right to use the land at Bonny for the export terminal
and did not have the consent of land owners. Shell was also accused by NGOs of collaborating with
the Nigerian government to suppress peaceful protests against environmental damage caused by the
company's pipeline in the Ogoni region. In the US, Shell was fined USD 500,000 for sulfur dioxide
emissions at a natural gas processing plant in Michigan.”28
In 2009, “shareholders and environmentalists from the ShellGuilty campaign voiced their anger
about Royal Dutch Shell's track record of alleged polluting, human rights violations and, recently,
excessive executive pay despite the company's failure to meet pre-set targets. Campaigners claim the
company's activities in Nigeria have caused severe oil spills in the Niger Delta region, the poisoning
of communities through gas flaring, the emission of huge amounts of greenhouse gases, and the
wasting of approximately USD 2.5 billion of natural gas annually. Along with facing a trial in the
Netherlands over pollution allegations in Nigeria, Shell also stood stand trial in New York for
alleged collusion in human rights abuses dating back to the 1995 hanging of a writer and eight other
activists. Sixty percent of Shell's shareholders rejected the plan to pay executives millions of pounds
after not meeting performance metrics, and Shell’s CEO will step down in June amidst accusations
that the company is the most polluting in the oil sector and shareholder criticism over executive
greed.”29
27Charlotte
Mansson, “Most Environmentally and Socially Controversial Companies”, RepRisk, Zurich, November 4,
2008.
28
Charlotte Mansson, “Most Environmentally and Socially Controversial Companies”, RepRisk, Zurich, November 4,
2008.
29
Charlotte Mansson, “Most Environmentally and Socially Controversial Companies in May 2009”, RepRisk, Zurich,
June 11, 2009.
21
Environmental activists in the UK have announced that they will target the headquarters of twelve
companies, including Shell, in a week-long action against alleged 'climate criminals'. The companies
are accused of contributing to global warming. Shell Oil Company is involved in a lawsuit in the US
after it was accused of releasing excessive emissions at its Deer Park refinery and petrochemical
complex. The company agreed to pay nearly USD 6 million for past violations of the Clean Air Act.
Shell also came under fire for its involvement in the Canadian tar sands industry, which has been
blamed for endangering forest area and wildlife, contaminating food supplies, and for the increased
rate of cancer among the local population. In Australia, the company faced criticism over the
Gorgon LPG Project, developed in partnership with Chevron and Shell, which will allegedly destroy
Barrow Island's nature reserve. In Nigeria, the Shell Petroleum Development Company has been
blamed for oil spills that have allegedly polluted the community's rivers, creeks, and farmland, and
thereby affected locals' livelihoods.
In 2010, Royal Dutch Shell's reputation was marred by bribery and tax evasion allegations. In the
US, Shell and five oil-services companies recently agreed to pay USD 236.5 million to resolve a US
probe of overseas bribery. Furthermore, Shell committed to pay a USD 48.2 million fine to avoid
legal proceedings in the US over accusations that the company bribed Nigerian civil servants to be
given access to the Bonga Oil Field. In the Philippines, its subsidiary Pilipinas Shell Petroleum
Corporation stands accused of tax evasion and oil product smuggling worth USD 567 million. Royal
Dutch Shell has also come under fire for mistreating communities in countries like Brazil, Nicaragua,
Nigeria and Ireland. In Brazil, the company has been criticized for its plans to plant sugarcane for
ethanol production on land that legally belongs to the Guarani indigenous tribe, which has
reportedly been the victim of repeated violent, sometimes deadly, attacks. In Nicaragua, a recent
session of the Central American Court of Climate Justice has found Shell guilty of gravely affecting
the environment, making the region more vulnerable to climate change. Furthermore, Shell came
under fire in Nigeria, where it paid for a report written by the United Nations Environment
Programme (UNEP), which exonerated the company for 40 years of massive oil pollution and what
some call a “human rights tragedy” in the Niger Delta. In Ireland, the Corrib Gas Project has been
facing opposition from the Pobal Chill Chomain community, citing human rights and environmental
concerns.
Royal Dutch Shell’s environmental record has also been widely criticized in 2010. In the US, Shell
paid USD 6 million to settle a 2008 lawsuit for releasing millions of pounds of toxic chemicals into
the air from its Deer Park refinery in Texas. In Brazil, Royal Dutch Shell has been ordered to
compensate workers who were harmed by air and groundwater contamination around an agricultural
chemicals plant in Paulinia, Sao Paulo. In Chile, Shell settled a 2005 lawsuit brought by fishermen in
Antofagasta, where the company had been accused of polluting beaches and ponds located on
company-owned coastal lands. In Australia, Shell's joint venture Gorgon Project has come under fire
for potential impacts on indigenous island species, and Shell's Prelude LNG project has raised
eyebrows among conservationists for reportedly emitting an expected 55 million tons of greenhouse
gases over the next 24 years. The company has also been criticized for its commitment to tar sands
development, and the high amount of controversial palm and soybean oil contained in its biodiesel
22
products. These controversial ingredients have been blamed for the destruction of virgin forests and
ecosystems in Indonesia and Argentina.
The company also came under fire for purchasing USD 1.5 billion worth of crude oil from the
National Iranian Oil Company in summer 2010, after the US had sanctioned Iran due to its ongoing
nuclear program.”30
BG Group
“Environmental and governance issues [surrounding the BG Group] dating back several years first
came to light in 2010, meaning that BG Group received a great deal of negative media attention
throughout the year. In February, the onshore Karachaganak Oil and Gas Fields project, operated
by the KPO consortium that includes BG, was reportedly fined USD 21 million for environmental
violations. These included excessive waste dumping and emissions in 2008. The consortium further
faced several investigations by Kazakhstan’s authorities into tax evasion and fraud. The cases relate
to a USD 1.3 billion cost overstatement and allegations of hundreds of millions in illegal earnings.
BG was also recently accused of violating the country’s immigration and labor laws. Following the
Gulf of Mexico disaster and renewed interest in moratoriums on underwater drilling, BG Group was
among companies targeted by activists and politicians mobilizing against deep-sea drilling plans in
the Sicilian Strait.
This has been identified as a priority conservation area. BG subsidiary Queensland Gas Company
has been at the center of a controversy in Australia surrounding its multibillion dollar Queensland
Curtis LNG Project. Landowners and environmentalists reportedly blocked the company from
continuing seismic testing in the gas-rich Surat Basin amid fears about current relations with local
communities and pollution issues. Concerns were also expressed about the effect that the coal seam
gas extraction process and its use of large amounts of underground water will have. The project will
allegedly generate about 5.75 million tons of greenhouse gases per year and large amounts of salty
water as a by-product, and there is a push for the company to develop and implement greenhouse
gas reduction and coal seam gas water treatment strategies. In Bolivia, indigenous leaders attempted
to block exploitation of the Tarija natural gas reserves where another BG subsidiary operates. They
claim that companies severely impact on communities by diverting the flow of groundwater,
affecting wildlife, and creating large-scale deforestation and pollution.
Additionally, the company came under fire in the UK for its excessive remuneration policies
following revelations that its chief executive had received GBP 28 million in cash, shares and
pension contributions the previous year.”31
Karen Reiner, “Most Environmentally and Socially Controversial Companies – Oil Industry Special Report”, Zurich,
June 11, 2010.
30
23
Defense
BAE Systems
“BAE Systems is one of the world's largest arms producers. It makes fighter aircraft, warships,
tanks, armoured vehicles, artillery systems, missiles, munitions and much more. In 2012, company
sales reached £17.8 billion, a 7 per cent fall from 2011 (sales reached a high of £22.3 billion in 2010).
BAE has military customers in over 100 countries, with about 95 per cent of sales being military. Its
focus is on increasing sales to the Middle East, notably to Oman and United Arab Emirates, and
continuing to supply Eurofighters and other arms to the Saudi Arabia regime.
Furthermore, it has periodically been found to have been illegally supplying weaponry to war zones
and dictatorships. For example, in 2009, Amnesty International called for a freeze on transfer s to
Guinea of weapons used for human rights violations, as weapons produced by BAE had been seen
to be in use by the Guinean security forces and their egregious repression of social protests.
BAE Systems has also been accused of corruption and paying bribes in a deal in 2001 to supply
GBP 1.1 billion worth of fighter planes to the Czech military. In a separate incident, the
Organization for Economic Co-operation and Development (OECD) published a report detailing
bribery allegations concerning BAE Systems' involvement in weapons deals with Saudi Arabia.”32
Furthermore, BAE have been at the fore-front of research into autonomous, non-human military
agents. Recently, Human Rights Watch (HRW) produced a 50 page report entitled “Losing
Humanity: The Case Against Killer Robots” calling on a complete ban on “killer robots,” or, more
precisely, “fully autonomous weapons”, directly pointing the finger at BAE’s Taranis combat aircraft
programme.
QinetiQ
A technological research company, Qineti Q, is the world's 52nd-largest defence
contractor measured by 2011 defence revenues, and the sixth-largest based in the UK. “QinetiQ was
created in 2001 as a Public-Private Partnership (PPP) takeover of part of the MoD's Defence
Evaluation and Research Agency (DERA). It describes itself as a 'defence and security technology
company'. It develops and tests new weapons and 'future concepts' in defence technology including
Karen Reiner, “Most Environmentally and Socially Controversial Companies – Oil Industry Special Report”, Zurich,
June 11, 2010.
32 Campaign Against the Arms Trade, “BAE AGM can’t hide from difficult questions and disruptions”, 8 May 2013.
31
24
ballistic missile defence. 80% of Qinetiq sales are military and the MoD is its largest customer3. It is
also involved in developing a whole new class of weapons using nanotechnology.
In December 2002 one third of the company was sold to the Carlyle Group, one of the largest
venture capital companies in the world and among America's largest military contractors. The group
is chaired by Frank Carlucci, Ronald Reagan's Secretary of Defence. George Bush Sr. was a senior
advisor until 2003. Also on the board are James Baker III, a lawyer who has been advising and
campaigning for Republican leaders since 1975 and fellow Republican adviser Richard G Darman.
Former Conservative Prime Minister John Major is on the board in Europe The Carlyle Group is
one of several American companies who have provided mercenary soldiers and military and police
training to other countries around the world, including some with questionable human rights
records.” 33
QinetiQ is also currently establishing and constructing a drone development centre in conjunction
with the Ministry of Defence. 34
Cobham
In 2004, Sidney Sussex had approximately 5100 shares in Cobham, a company which produces
missile components, weapons carriage and release systems, communication systems, radar and
electronic warfare products for a variety of suppliers, including the U.S Navy and the defense forces
of the United Arab Emirates.35 Despite student uproar, both in the Sidney community and in the
student press, Sidney’s involvement with Cobham has remained, although in the more tacit form of
indirect investment.
Support Services
G4S
British security service company G4S is one of the most polemical companies in the world. It has, in
most recent years, been the target of numerous reports by the pressure group Ethical Consumer,
namely its “Is this that what you call good service?” investigation in 2011, which evinced patterns of
of deeply irresponsible corporate behaviour, and was most recently 'Worst Company of the Year'
Public Eye People's Award.
Independent researchers and human rights advocates, John Grayson and Adri Nieuwhof, have
compiled an astonishing list of indignities, committed by the company and its subsidiaries over the
last five years.
“Scotland PLC: The military and the arms trade in Scotland”, Corporate Watch, June 2005.
http://www.huffingtonpost.co.uk/2012/07/12/unmanned-drone-development-centre_n_1667366.html
35 James Dacre, “Colleges invest “unethically” in arms industry”, Varsity, Number 607, 5 November 2004.
33
34
25
In their own words:
“G4S owns the ArmorGroup and has ordinance management operations in 26 countries. Its Gurkha
Services arm trains the British army for combat duties. In 2010 and 2012 respectively, the US Senate
Armed Services Committee and the UN watchdog Global Policy Forum published criticism of G4S
as a military contractor. According to War on Want, the criticism did not stop the British
government from extending armed security contracts with G4S in Afghanistan, understood to be
worth £72 million.
G4S has also been immensely controversial in the fact that is has profited from the Israeli
occupation of the Palestinian Territories. “G4S owns 90 per cent of its subsidiary G4S Israel
(Hashmira) which supplies services to the Israeli police, the Ministry of Defense, the Israeli Prison
Service, the Israeli army, and the settlement businesses. Over 4,500 Palestinian political prisoners,
including 177 children, are held in Israeli jails. The Israeli state’s transfer of Palestinian political
prisoners from the occupied territory to prisons in Israel has been long held to be a breach of the
Fourth Geneva Convention.
G4S also provides security services to the detention and interrogation facilities to the “Russian
Compound” in Jerusalem and to “al-Jalameh” detention centre in Haifa where Palestinian teens are
interrogated. In January 2012, the Guardian reported that Cell 36 of al-Jalameh prison is one of the
cells where Palestinian children are locked in solitary confinement for days or even weeks.
According to Defence for Children International Palestine section, in the past 11 years around 7,500
children, some as young as 12 years, are estimated to have been detained, interrogated, and
imprisoned in Israeli military and ‘security’ prisons. This averages out at between 500 and 700
children per year.
To investigate the treatment of Palestinian children under Israeli military law, the UK Foreign and
Commonwealth Office commissioned a group of lawyers. In their report ‘Children in Military
Custody’ published in June 2012, the lawyers argue that Israel breaches international human rights
standards including the UN Convention on the Rights of the Child and the Geneva Convention by
its treatment of Palestinian child prisoners.
G4S has also had an appalling record running immigration detention, deportation centres and escort
services in the UK. In October 2010, Angolan asylum seeker Jimmy Mubenga died under ‘restraint’
by G4S guards contracted to the UK Border Agency. A chilling dossier of evidence
entitled Outsourcing Abuse was published by Medical Justice in 2008. In 2011 an international
universities research project found that:
“The story of the UK’s immigration detention centres is one of indignity, danger, and misery as
catalogued by many authorities. In the UK’s detention centres there have been 16 suicides, alarming
rates of self harm, hunger strikes and appalling levels of mental and physical illness. Thousands of
innocent men, women and children have been put through the detention wringer.” (1)
26
Despite damning criticism, G4S continues to run three privatised detention centres in the UK. The
company is not scared to profit from controversial public contracts. In October 2012, the Australian
Government announced that G4S would manage its off shore asylum processing centre on Manus
Island in Papua New Guinea. G4S is also poised, with Serco, to profit from Canada’s ‘crackdown on
asylum’ and development of privatised detention centres. G4S already provides security for one of
Canada’s Immigration Holding Centres.
G4S also has made immense profit from the UK’s asylum support regime, a “system of
institutionalised inhumanity” designed not to support those seeking asylum in the UK, but to deter
others from coming to the UK, according to the distinguished immigration barrister Frances
Webber in her book Borderline Justice. Webber describes “a monstrous regime of bare subsistence
and a deterrent system of coercion, control and stigmatisation”. G4S has extended its interests in
these asylum markets with part of a five year UK Border Agency £600 million contracts to control
transport, dispersal centres and housing for those waiting for decisions on asylum claims.
Furthermore, G4S has pioneered police and prison privatisation in the UK and is poised to profit
from the freshly privatised probation market too. At present, the UK has more private prisons than
anywhere in Europe, even more than in the US. G4S has run privatised UK children’s prisons or
secure training centres since 1998. Fifteen-year-old Gareth Myatt died in April 2004 under ‘restraint’
by G4S staff at Rainsbrook Secure Training Centre near Rugby. There had, for years, been concerns
about staff bullies and restraint techniques that caused 'positional asphyxia'. In a High Court
judgment on 11 January 2012, Mr Justice Foskett found it highly likely that large numbers of
children were unlawfully restrained in secure training centres run by G4S (and Serco) between 1998
and 2008.
Foskett stated: “The children and young persons sent to [secure training centres] were sent there because they had
acted unlawfully and to learn to obey the law, yet many of them were subject to unlawful actions during their detention.
I need, I think, say no more.”
Finally, G4S has also been long-known for co-opting and distorting charities, using charities “both
as a Trojan Horse to penetrate and control freshly marketised areas of the public sphere, and as a fig
leaf covering up human rights abuses against children. G4S is linked up with the UK’s leading
children’s charity Barnardo’s in the exploitation of prison and asylum markets. Through this
partnership G4S accessed £3m of Big Lottery funding for projects with Barnardo’s at its two private
prisons in South Wales. Now G4S and Barnardo’s jointly run the Cedars immigration removal
detention centre which continues to lock up children and has been the scene of abuses against
migrant families who were deported from the centre.
Charities are now becoming aware of G4S and its abuse of human rights. In Denmark, in September
protests resulted in ending their links with G4S. Late in December 2012 two Dutch charities Food
27
Bank Utrecht and Jantje Beton cut their ties with G4S, after they were informed about the abuse of
children in Israeli prisons equipped by G4S.” 36
Serco Group
Another one of the most controversial companies in the support services industry is Serco. “A
FTSE 1000 international service company, Serco has grown largely through the outsourcing of
public services, particularly from successive UK governments. Now worth an estimated $4 billion,
Serco is involved in hospitals, traffic management, prisons, immigration detention, military logistics,
military health support, prisoner transport and custodial security, education, health and justice,
amongst other activities. The Serco Group has operations throughout Europe, Asia, North America
and Africa. More than 90 percent its revenue is derived from government contracts or franchises
awarded by governments.”37
For its part, Serco has been criticised many times for the conditions at Yarl's Wood detention centre
which led to repeated hunger strikes by detainees, as well as recent condemnation of conditions at
Colnbrook centre near Heathrow Airport. They have periodically been accused of egregious human
rights violations in prisons and juvenile detention centres all over the world. Serco are classified by
the Norwegian government own investment fund schemes as “unethical”, and are thus barred from
applying for investment.
Banking
HSBC
Over 6% of the college’s holdings are in HSBC Holdings, making it a crucial component of the
Blackrock’s Charitrak Investment Fund. However, over the recent years, HSBC Holdings has been
embroiled in colossal scandals regarding money-laundering and currency manipulation.
As RepRisk’s report on the “The Most Controversial Companies of 2012” notes:
John Grayson and Adri Nieuwhof, “Ten Reasons to vote for G4S as the World’s Worst Company”, OpenDemocracy,
10 January 2013.
37 Patrick O’Keeffe, “Nightmare on Christmas Island: Serco’s Australian Detention Centre”, Corp Watch, October 25,
2011.
36
28
“Two major scandals undermined HSBC’s reputation in 2012: a series of international money
laundering charges, and the alleged involvement of the bank in the manipulation of the London
interbank offered rate (Libor).
In early 2012, HSBC was the subject of several investigations related to alleged money laundering
issues. In May, its subsidiary HSBC Bank USA was investigated by several US departments. The
company was also criticized for failing to install effective due diligence processes despite being
ordered to do so in 2003; failing to adequately review hundreds of billions of dollars in transactions
that could be linked to drug trafficking, terrorism and organized crime; intentionally failing to review
suspicious transactions while creating a false impression of due diligence; and for dismissing an
employee after he raised concerns.
In December, HSBC agreed to pay a record sum of USD 1.9 billion in fines to settle a series of
money laundering charges brought by various US government agencies. According to documents
filed in a district court, the bank had bypassed regulations related to sanctioned nations, such as Iran,
Libya, Sudan, Myanmar, Cuba and Syria. Meanwhile in the UK, the bank had to reach a settlement
on similar charges with the country’s Financial Services Authority. Furthermore, the US Senate
accused the company of having deficient money laundering controls and thus exposing its HSBC
Mexico unit to illicit transactions linked to drug cartels. HSBC has also been involved in the
notorious Libor scandal. In early 2012, a class action lawsuit was filed in New York on behalf of the
City of Baltimore and New Britain against 16 banks including HSBC for alleged manipulation of the
Libor rate. Additionally, European authorities began investing more than a dozen banks, including
HSBC, for allegedly manipulating the Euro interbank offered rate (Euribor). Moreover, in the course
of 2012, the bank was also accused of being complicit in tax evasion schemes in UK and the USA.”
38
Conclusion and Future Paths
It is far too easy to uncritically bash mega-corporations or posture sympathy towards the infinite
grievances of the world. After all, every single business or enterprise has ethical complications and to
merely engage in finger-wagging over-simplifies in the intricacy of these affairs. Nonetheless, the fact
of the matter is that some of the companies included in the college’s portfolio of investments are
not just ethically questionable. They are enterprises embroiled in grossly unethical conduct,
following strategies of maximising profitability by any means possible, whether that involves
flagrantly violating local and international law; colluding and funding armed repression, corruption,
lobbying and political manipulation, aggressive union busting, wholesale environmental destruction,
or the instigation of negligent health and safety policies.
Old habits die hard, and for years, financial managers abdicated any major responsibility towards
ensuring that the ways in which public, charitable institutions sought to maximize income mattered.
RepRisk, “The Most Controversial Companies of 2012”, compiled in 2013, available at
http://www.reprisk.com/downloads/specialreports/28/MCC%202012.pdf.
38
29
But they do. We can no longer turn a blind eye to the worldwide implications of those from whom
we profit. The permanence of injurious investment practices is only possible through our ignorance
and ambivalence, and altering our current relationship will require much principled, reasoned action.
Through divesting from problematic companies or exerting shareholder pressure, and moving our
investment practice towards a more active style of management, where the college’s resources can be
placed within profitable, long-term areas that have positive effects on society and the environment,
we can ensure that our investment policy lives up to our own values and moral expectations.
We must begin with questions: Can the college invest in industries that negate its commitment to
climate change mitigation research? Can it legitimately indirectly place its money in organisation
guilty of numerous and consistent human rights violations? Can it invest in funds that are registered
in tax havens when it receives funding from the UK government? Can it invest in companies and
funds that discriminate against women, minorities, or LGBT people in its business practice?
Once we can acknowledge that there is a tension, and the status quo is not acceptable in any way,
then we can move to more substantive, tactical questions. Can our ethical considerations be matched
through the current procedures of passive investment, or do we need more active investment? How
do we make sure to maintain low volatility whilst trying to transform our practices? Who do we
consult with, and how should we go about deciding what sectors we might want to engage with, and
what sectors we want to distance ourselves from?
There are many places to start, both internally, within the decision-making organs of the college, and
externally, engaging with experts in the field, such as The Ethical Investment Co-operative Limited39,
Britain’s leading ethical financial managers, or Cheviot Asset Management’s own sustainable
investing programme. In the words of Blackrock, the company which manages our investments: “we
are not investors as principals, but as agents for our clients, and it is their values or concerns that
must be used to frame the criteria against which we evaluate companies”40. If this is the case, we
must impel Sidney to synchronise the principles of its stakeholders, its students, staff, fellows,
alumni and faculty, with its actual policies. We can either accept the reality of investment as it is, or,
alternatively, we accept our inherent responsibility for changing it.
“At every level the greatest obstacle to transforming the world is that we lack the clarity and
imagination to conceive that it could be different.” - Roberto Unger
39
40
http://www.ethicalmoney.co.uk/
Erik Hagen, “BlackRock does not wish to explain”, Framtiden, 27 August 2009.
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Appendix 1: Motion passed by SSCSU, Lent 2013
a) Socially Responsible Investment
SSCSU Notes:
That “it is a central aim of the College to promote academic excellence, just as it is to guard freedom
of thought and belief, for all its members and for the public good.”
That additionally, “in pursuing its objective as a place of religion, the College carries forward the
tradition, continuous since its foundation, of reflection upon the benefits, and moral and ethical
commitments, entailed by religious belief, and upon the implications of that belief for the individual
and society.”
That Sidney Sussex College predominantly has no direct investments, but rather, its money is
invested through a Tracker Fund, and it is the responsibility of fund managers to decide where
investments should lie.
That the global number of assets engaged in sustainable and responsible investment practice is
growing. In the United States, the overall total of SRI assets in 2012 is $3.74 trillion, a 22-percent
increase since year-end 2009. Although no similar data is available for the United Kingdom, the UK
is the country with the second highest number of signatories to the UN Principles of Responsible
Investment, an initiative that gained 178 signatory asset managers, asset owners, and service
providers in 2012 alone, bringing the total number of signatories to 1071.
That numerous other educational institutions, including several Cambridge Colleges, and the
Universities of Oxford, St. Andrews, Manchester, Edinburgh, and recently UCL, have instituted an
explicit commitment towards socially responsible investment.
That the Charity Commission guidance states that an “ethical investment policy may be entirely
consistent with this principle of seeking the best returns”41.
SSCSU Believes:
That as a prestigious and influential institution, Sidney Sussex College has a particular obligation to
set an example of socially responsible behaviour.
That there is a danger that college funds, entrusted to third party fund managers, are being invested
in ethically dubious enterprises, such as arms, environmentally damaging fossil fuels, and conflict
zones.
41
Charity Commission guidance: CC14, detailed guidance, Section F. Ethical and socially responsible investment
31
That the college is urged to take into account considerations regarding the ethical nature of its
investments.
That there is substantial evidence that Sidney Sussex College can reform its investment practice
without jeopardising competitive returns.
That the college is uniquely poised to invest and manage its endowment according to sustainable and
responsible investment practices, and should implement an investment policy which better
synchronises its principles, and the values of its stakeholders with its practical mandate.
SSCSU Resolves:
To encourage the college’s investment team to pursue a greater and more explicit commitment to
SRI practice, which can be achieved through a variety of practices, such as outlining specific,
strategic investment principles that incorporate environmental and social considerations.
To impel the college’s investment team to play an active role in influencing its investment managers,
encouraging good behaviour and discouraging poor behaviour through screening of investments,
either positively or negatively or through direct engagement with firms.
To push the college’s investment team to foster greater transparency over its investments, and to
pursue a more reflexive relationship with its stakeholders: students, faculty and staff.
To create a reasonable procedure which would allow members of the Sidney community to review
and oversee investment decisions, to ensure they are in line with the college’s adopted principles.
To align itself with CUSRIC (Cambridge University Sustainable and Responsible Investment
Campaign), joining a broad coalition of students, faculty members and staff across the entire
university committed to changing the way the University and Colleges invest their money.
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Appendix 2: Ethical Investment Policies Across Cambridge and the UK
Magdalene College, Cambridge - Ethical Investment Policy
“The College's investment managers are expected to avoid involvement in organisations that clearly
ignore responsible standards in dealing with, inter alia, employees, the environment, and the
communities in which they operate.
The Investments Committee reviews all individual investment transactions at its regular meetings
with the opportunity, and authority, to make any changes it feels appropriate.”
St. Johns College, Cambridge - Ethical Investment policy
“The College operates an ethical investments policy. Under the terms of that policy and having
regard to the requirements of charity law to maximise returns, the College seeks to ensure that
investments are not made in companies whose practices are in conflict with the charitable purposes
of the College or are likely to alienate the members or benefactors of the College.”
Peterhouse College, Cambridge - Ethical Investment Policy
“The College operates an ethical investment policy. Under the terms of that policy and having
regard to the requirements of charity law to maximise returns, the College seeks to ensure that
investments are not made in companies whose practices it believes to be in conflict with the
charitable purposes of the College or likely to alienate a sizeable proportion of the members or
benefactors of the College. In consequence the College currently excludes the shares of tobacco
companies from its discretionary portfolios.”
Clare College, Cambridge - Ethical Considerations Policy
“The College’s holdings are in index-tracker funds, and as a result the College has a wide range of
indirect holdings in companies listed on the world’s stock markets. In view of this, we believe that
the best approach to ethical investment considerations is to engage with those companies which may
be falling short of their social responsibilities.
College members (particularly students, but including Fellows and staff) are encouraged to monitor
the ethical standards of listed companies and to draw to the Bursar’s attention the evidence of
instances where companies may be falling short. The Master will then write to the chairman of the
relevant company expressing the College’s view.”
Downing College, Cambridge – Ethical Investment Policy
“The College keeps its duty in regard to the ethical investment of its funds under review. In line with
the findings of the Harries case (Bishop of Oxford v. Church Commissioners, 1992), the overriding
principle guiding the College’s investments is the financial return of the portfolio, unless such
investments are contrary to the charity’s aims. Categories of exclusion that may fall within this
33
definition are companies whose activities violate human rights, the environment, and best practice in
social and stakeholder matters. After a period of assessment of methods of managing investments,
the College decided to change its system of investing, and with effect from the financial year
beginning on 1 August 2009, the College withdrew its portfolio from its discretionary manager and
appointed a firm of advisors which provide a range of pooled funds in which to invest. The
Investment Committee is responsible for decisions on asset allocation but does not select individual
stocks.”
Newnham College, Cambridge – Ethical Investment Policy
Clare Hall, Cambridge - Statement of Investment Principles, including Ethical Investment
Policy
“Clare Hall’s Statement of Investment Principles sets out the broad principles governing the
College’s investment policy. It has been approved by the Finance Committee which monitors
compliance annually and by the Governing Body. Clare Hall Investment Fund (CHIF) is an
amalgamated fund which comprises permanent endowment and unrestricted funds held for the
benefit of the College. Units in CHIF are held on behalf of the constituent funds as nearly as
possible in proportion to their respective capital values as at 01 July 2003, the effective date of
constitution of CHIF. Any new units are purchased at the 30 June year-end valuation
The objectives of CHIF are:
• Payment of an annual dividend which grows at a rate at least equal to the annual rate of rise in
College costs, measured, inter alia, by reference to the Higher Education Pay and Prices Index; and
• The maximum total return which is consistent with this objective and with an acceptable risk
exposure.
Property is invested in the Charities Property Fund. The day-to-day management of non-property
assets is delegated to the Cambridge University Endowment Fund (CUEF). Performance is
monitored against a customised benchmark made up of 50% FTSE All-Share Index, 25% MSCI AC
World Index and 25% FTA UK Government All Stocks Index. The WM unconstrained ex property
Charity Universe is used as an additional benchmark in order to compare the investment managers’
performance with that of their peers.
Clare Hall’s Investment Policy reflects the belief that the interests of the College are, in general, best
served by seeking to obtain the best financial return from investments, consistent with commercial
34
prudence. Clare Hall follows the Charity Commission’s guidance on ethical investments and will not
engage financially with any company whose practices are considered to be in conflict with the
purposes or aims of the College as a place of education, learning and research. The Finance
Committee will seek to ensure that investments are not made that are judged likely to alienate the
members or benefactors of the College. They may, from time to time, direct the College’s Fund
Manager or Managers not to invest in specific companies or classes of company for ethical reasons.
The College encourages its Fund Managers to adopt investment processes which take social, ethical
and environmental issues into account, where that can be done without jeopardising the long-term
financial interests of the College. During the year, the College transferred the remainder of its nonproperty endowment assets to the CUEF. The Finance Committee reviews the College’s holdings
on a regular basis to ensure that they are consistent with this Policy.”
University of York – Ethical Investment Policy
The University routinely invests funds with third party organisations through the regular investment
of surplus funds and endowments. Wherever possible, the University wishes to make such
investments in ways that are consistent with the mission and values of the University as expressed in
the Charter and the Corporate Plan.
The University’s ethical investment policy is based on the premise that the University’s choice of
where to invest should reflect the ethical values it espouses in public life.
The University will not knowingly invest in companies whose activities include practices which
directly pose a risk of serious harm to individuals or groups, or whose activities are inconsistent with
the mission and values of the University.
In order to give effect to its commitment to this policy the University will:




review on a regular basis whether any investment is contrary to the University’s value system
consider representation from members of the University community that the University
should not invest, or should disinvest, in specific companies
issue guidance for fund managers responsible for the University’s investments
monitor the operation and effectiveness of the policy on an annual basis
March 2009
University College London – Ethical Investment Policy
Ethical considerations:
1 While the guiding principle of UCL’s investment policy is to generate funds, whether through
income or capital growth, with which to further the work of UCL, there are three instances,
established in English case law, where criteria other than financial criteria are appropriate and in
accordance with which UCL will not invest in a particular business in the following circumstances:
35
i.
ii.
iii.
where such investment might conflict, or be inconsistent, with the aims, objects or activities
of UCL. Thus, for example, investment in the tobacco industry would be inconsistent with
and would conflict with UCL’s research into cancer
where such investment might hamper the work of UCL either by alienating financial
supporters or potential financial supporters; or by having a material impact on applications
from potential students
where such investment, while not excluded by virtue of (i) or (ii) above, is considered by
UCL to be unethical, subject to paragraph 4 below
2 .UCL’s Ethical Investment Review Committee provides a forum for discussion of ethical
investment matters. The Review Committee, which reports to Council, meets twice a year to
consider requests received from within the UCL community for review on ethical grounds of stocks
within UCL’s current investment portfolio. Any businesses whose activities are deemed unethical by
the Review Committee will be identified as such through a process of ‘negative screening’, ie the
exclusion of stocks from an existing portfolio on the grounds that such stocks do not meet the
ethical standards of UCL.
Policy approved by UCL Council (effective from 1 January 2009)
London School of Economics – Ethical Investment Policy
“ (…) The School appoints fund managers, to manage the School’s principle endowment funds
investment, who have a published policy of taking into account environmental, social and
governance (ESG) issues in their assessment of companies in whom the School has investments, of
engaging with those companies where ESG issues are a concern to financial sustainability, and on
reporting on their engagement with those companies to investors.
The School includes relevant environmental criteria in all procurement decisions, including
procurement of investments consultants and advisers. (…)”
The University of St. Andrews SRI Policy – an example of best practice 42
1. Introduction
The University has previously adopted a traditional arms length approach to investment managers
placing discretion and responsibility in all matters associated with individual stock selection to its
appointed investment managers while placing reliance on those managers Socially Responsible
Investment Policies. Following engagement with the Student body the University accepts that in
making investment decisions the University should have regard to the promotion of sustainable and
socially responsible behaviours. This policy has been developed in partnership with the active
student body with the intention of moving the investment policy to one in which sustainable and
The policy below is an abridged version of the full policy available at http://foi.standrews.ac.uk/PublicationScheme/servlet/core.generator.gblobserv?id=1516
42
36
ethical issues are taken into account alongside financial issues by investment managers in individual
stock selection issues.
2. Needs of the Funds
In general terms the University believes that to support the primary purpose of the funds that it
needs to achieve an above inflation (based on UK RPI) of 4% per annum. This general need is
measured against a periodic (every 3 to 5 years) cash flow modeling exercise which is used to
support a review of the Asset Allocation Strategy.
4. Authority to Invest
The University Court derives its authority to invest funds from Ordnance No. 119
‘Additional Regulations as to the administration and finances of the University’ which provides for
wide ranging powers to enter into financial transactions and arrangements. The University Court is
also content to place reliance on a report commissioned by the United Nations Environment
Programme’s Finance Initiative (UNEP FI). This report which considered investment decisions
reflecting environmental, social and governance issues from legal firm Freshfields Bruckhaus
Deringer. The University is satisfied that this report indicates that it is entitled to take into account
wider issues which are aligned with the interests of the funds stakeholders, as long as the approach
to investment continues to involve a high degree of professional expertise and there is diversification
in the asset base taking into account due regard for items of risk and return.
6. Investment Criteria
The University believes that in investing its funds, regard must be made to social, environmental and
governance issues. In line with its general strategic direction, the University believes that its
investments should mirror its own desire to be sustainable and promote sustainability. Appointed
asset managers are therefore expected to encourage good behaviour or discourage poor behaviour
through screening of investments, either positively or negatively or through direct engagement with
firms. In making investment decisions the University expects its appointed managers to consider,
the following areas (this list should not be considered as exhaustive):
- Promotion of human rights, including but not limited to the equality of gender, race and sexuality;
- Promotion of good business ethics and good employment practices;
- Protection of the global environment, its climate and its biodiversity;
- Promotion of community investment;
- Promotion of international co-operation and an end to international conflict including a
prohibition of companies which produce armaments;
37
- Sustainable provision and procurement of essential resources and services (utilities for example);
- Prohibition of companies which test on animals purely for cosmetic purposes;
While operating within these criteria, appointed investment managers are left at their discretion to
select individual stocks and to operate within their own Socially Responsible Investment Policy. The
appointed manager will be accountable to the University in terms of financial performance and
adherence to commitments made on issues of social responsibility and sustainability. The appointed
manager will also be expected to discuss issues around social responsibility and sustainability with
the investments advisory committee. The University shall seek enforcement of the ESG elements of
this policy through the investment practice of its appointed Investment Managers.
7. Investment Manager(s)
The University has three main groups of asset investment, as outlined in section 5 above.
Mainstream Investment – Around 80% of funds are invested in a segregated SRI
Global Growth Portfolio with Morleys. These funds are managed on an active basis with the aim of
achieving a return at least equivalent to MSCI plus 2.75% before fees on a 3 year rolling basis with
an expected tracking error on from MSCI of 6%.
The investment process for this fund involves an initial negative screening, followed by a review of
the sustainability of companies’ products & services and a review of the effectiveness of
management. Alongside this review, a fundamental financial appraisal of a company’s financial
position and prospects is carried out. Companies which are potentially attractive investments and
meet sustainability and management criteria then undergo a thematic company analysis to create a
longlist of potential firms to invest in. From this longlist, the best ideas are considered for inclusion
in the portfolio.
Thematic Funds – To provide some diversification within the portfolio the Endowment funds will
hold around 15% of funds in a number (between 1 and 4) thematic investment funds. These will
invest either around specific goals (clean energy funds) or across wider themes (climate change) and
they may change from time to time. It is likely that any funds held here will be expected to achieve at
least MSCR plus 2% after fees on a rolling 3 year basis.
38
8. Fund Performance
Investment manager(s) will be expected to report to the Investment & Collections Committee in
writing and in person periodically in line with the needs of the Committee.
Investment manager(s) shall meet with the Sustainable Investment Advisory Committee (being a sub
committee to the Investment and Collections Committee with remit outlined in Annex A) in relation
to the investment criteria and stock selections.
a. Investment Returns – Investment Manager(s) will provide a quarterly report outlining the
performance of their University portfolio compared against the agreed benchmark for that quarter,
the previous 12 months and the previous 3 and 5 years or since appointment (as appropriate).
b. Investment Criteria – Investment Manager(s) will provide quarterly reports outlining their stock
selection decisions in relation to the Investment Criteria agreed with them on appointment and as
summarised in this policy. The University would expect any appointed investment manager to
support the development of this policy in conjunction with the investments advisory committee,
particularly with regard to transparency and definition of sustainability issues.
University of St Andrews Investments Advisory Committee Membership and Remit
1. Purpose
The University has established an investment policy which has its heart consideration of issues
relating to positive behaviours in Environmental, Social and Governance (ESG) alongside
requirements to generate funding for primary purposes. In support of this the University recognises
that it will need to supplement its ongoing Committee structure to provide additional monitoring of
the ESG aspects of its investment policy.
For this reason it has created an Investments Advisory Committee as a sub group of the
Investments & Collections Committee. This Committee will be established initially on an informal
basis until the working arrangements and their effectiveness can be trialed and tested.
2. Membership
It is important that this Committee has the opportunity to mirror, as far as possible, the elements of
the University Community. It is therefore proposed that up to 3 members be permitted from each
of the following constituencies: Court, University Management, Students, Staff and Alumni. The
Committee would meet, either in public, or with public and private sessions on at least a twice yearly
basis, following receipt of investment managers’ reports with the investment managers invited to
attend on an annual or biannual basis.
39
The Committee will be chaired either by the Convener of the Investments and Collections
Committee or by a members of University Management.
3. Remit
The proposed remit for this Committee would be:
-
To engage with investment managers on ESG issues,
To provide advice to the Investment and Collections Committee on ESG issues,
To monitor the progress of implementation and effectiveness of the investment strategy raising
concerns with ICC along with recommended actions,
Regularly liaise with stakeholder groups on ESG issues and publicise theinvestment policy,
Ensure that all investments are conducted in a transparent manner including the annual
publication of full details of the investment accounts.
40