MPA Ethical Investment Policy statement

Report: 7
Date: 16 March 2009
By: Treasurer

Summary

This report invites Sub-committee members to review the Authority’s Ethical Investment Policy Statement.

A. Recommendations

That Members

1. Consider whether they wish to make any amendments to the Policy Statement.

B. Supporting information

In 2007-08 the MPS commissioned Trucost, an environmental research organisation, to review the environmental and social performance of organisations receiving MPA investment funds. From this review the MPS developed an Ethical Investment Policy Statement which was agreed by the MPA in February 2008. This is set out below and the Committee is asked to review the statement. The statement aims to promote best practice sustainability standards in the Authority’s investment activity. The existing strategy has already been communicated to lendlist counterparties.

MPA Ethical Investment Policy Statement

Human Rights

1. The MPA seeks to support the principles of the Universal Declaration of Human Rights. MPA funds should not be invested in any organisation or business, which fails to uphold basic human rights within its sphere of influence or in any organisation whose links to an oppressive regime are a continuing cause for concern.

Arms trading

2. The MPA will not seek to invest in any organisation in the manufacture or transfer of armaments to oppressive regimes. In addition, the manufacture of torture equipment or other equipment that is used in the violation of human rights.

Social issues

3. The MPA seeks to invest funds in organisations, which have a responsible approach to social issues including employment and global trade.

Charitable Investment

4. Traditionally, financial institutions give money to charitable organisations and to activities within the local community. Financial institutions receiving funds from MPA investments should provide details of any charitable donations.

Environmental issues

5. The MPA seeks to avoid the investment of funds in organisations whose core activity contributes to significant negative environmental impacts.

6. In addition, the MPA will not invest funds in any organisation involved in animal testing, the fur trade and blood sports.

Guidelines & standards

7. The MPA wishes to promote and encourage commitment to the following ethical investment guidelines and standards:

• Equator Principles
•  UN Global Compact
•  UN Environmental Programme for Finance Initiative (UNEP – FI)

Appendix 1 explains the three guidelines and standards outlined above.

8. It should be noted that becoming a signatory of voluntary guidelines does not guarantee that a company’s policies and practices are of a better standard than those that are not signatories. The MPA would consider it advantageous for the financial institutions that it invests in to have signed up to one or more of these voluntary agreements.

9. At the time of the Trucost research, over a year ago, of the 8 UK financial institutions on the MPA lending list, 62.5% had signed up to at least one of the three voluntary guidelines analysed. 83.3% of foreign financial institutions signed up to at least one set of voluntary guidelines and of the 5 foreign banks analysed in depth, only one had not signed up to any.

10. Members should note that since the Trucost research the MPA lending list has changed considerably due to global events and if the revised lending list recommended to Finance and Resources Committee on 19 March 2009 is approved there will be 6 UK and 4 foreign financial institutions as counterparties. In addition, a number of large financial institutions are reviewing their approach to socially responsible investment (SRI) as a result of the changing financial situation.

C. Race and equality impact

Consideration has been given to the possible negative effects on all diversity strands through the MPA/MPS Environmental Strategy and the developing Ethical Investment Policy whereby best practice standards are promoted.

D. Financial implications

No financial implications

E. Background papers

None

F. Contact details

Report author: Paul Daly, Director of Exchequer Services, MPS

For more information contact:

MPA general: 020 7202 0202
Media enquiries: 020 7202 0217/18

Appendix 1

Ethical Investment Policy – supporting information

As financial institutions declare support for environmental and social issues to be taken in account when making financial decisions, a number of voluntary guidelines have been created. These include the following:

Equator Principles

The Equator Principles are a voluntary set of guidelines based on the environmental and social standards practiced by the International Finance Committee when evaluating financing projects. Financial institutions that adopt the Principles agree to use a screening process aiming to ensure that environmental and social assessments help inform decisions to finance development projects. This allows signatories to engage proactively with their stakeholders on environmental and social policy issues.

UN Global Compact

The UN Global Compact is a voluntary initiative, which aims to bring companies together with UN agencies and civil society to support environmental and social principles. The objectives are to mainstream the ten principles of the Global Compact (see selection below) in business activities around the world, which include areas of human rights, labour, the environment and anti-corruption including the following:

•  The Universal Declaration of Human Rights
•  The International Labour Organization's Declaration on Fundamental Principles and Rights at Work
•  The Rio Declaration on Environment and Development
•  The United Nations Convention Against Corruption

Benefits to participating in the Global Compact include:

•  Promoting responsible corporate citizenship.
•  Producing practical solutions to contemporary problems related to globalisation, sustainable development and corporate responsibility in a multi-stakeholder context.
•  Leveraging the UN's global reach and convening power with governments, business, civil society and other stakeholders.
•  Sharing best practices.
•  Accessing the UN's broad knowledge in development issues.

UN Environmental Programme for Finance Initiative (UNEP-FI)

The United Nations Environment Programme (UNEP) was established in 1972 at the UN Conference on the Human Environment in Stockholm. Since its inception, the UNEP’s mandate to promote economic growth that is consistent with the protection of the environment.

UNEP-FI is a global partnership between UNEP and the private financial sector. Almost 200 institutions including banks, insurers and fund managers have signed the UNEP-FI and they work with the UNEP to understand the impacts of environmental and social issues on financial performance.

Signatories of the UNEP-FI get the benefit of networking with other signatories, drawing on the extensive expertise from other institutions and learning about sustainability management, reporting and investment practices from around the world.

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