Summary of responses to the PRI reporting and assessment tool 2009

Co-operative Financial Services

Organisational Overview
Organisational Overview

This section captures information that helps determine if some of the subsequent questions are required and also plays a role in benchmarking. Please make sure you provide accurate answers.
This is also one of the more challenging sections as it may require gathering information from multiple sources. We suggest you collect all this information before progressing to other parts of the questionnaire.

1. What were your organisation's total assets under management as of the most recent count (in millions)?

(Estimating to the nearest hundred million as of December 31 2008 would be preferable - although the most recent available count would be sufficient. If your currency is not listed, please select 'other' and indicate your currency or convert to United States dollars.)

19000
Please select currencyBritish pound (GBP)
1a. If 'other' was selected, please specify the other currency hereNo Answer

2. Please pick the one category and level of complexity that best describes your organisation (if your organisation is a pension fund, please also select your pension type). This information may be used to provide you with the best possible benchmarking.

Complexity

  • Highly complex:- (>20 investment strategies, multiple offices in different countries)
  • Moderately complex:- (5-20 investment strategies, a few offices)
  • Simple:- (<5 investment strategies, one office)
Category
Complexity
Pension type
Other (please specify below)Simple
2a. If 'other' was selected, please specify the other category hereThe Co-operative Asset Management is an asset management company which is part of The Co-operative Financial Services. We manage the Insurance and Unit Trusts income for CFS's Insurance and Investment businesses. From July 2009, we will be offering fund management services to 3rd parties. We apply a responsible investment approach across all funds under management. This is explained in more detail later.
3. Please provide an approximation of your average asset mix for 2008 or your asset mix as of the most recent count (in percent):

(+/- 5% is sufficient. The sum of all the fields must be 100%)

 
Internal
Active
Internal
Passive
External
Active
External
Passive
Listed equity (developed markets)22.72.85.43.5
Listed equity (emerging markets)0.4000
Fixed income (not including corporate issuers)10.90.700
Fixed income (corporate issuers)352.800
Private equity1.7000
Listed real estate or property0000
Non-listed real estate or property009.20
Hedge funds4.1000
Commodities0000
Infrastructure0000
Cash0.7000
Other (Please specify): Structured Products
0.1000
Governance, Policy and Strategy
Governance, Policy and Strategy

Questions 5 through 15 are about the governance and oversight of your organisation's responsible investment activities and the associated policies and strategy. This section will be scored separately from the six Principles.

"Policy" in this section may refer to one overall RI policy or multiple policies that address various elements of RI.

5. Do you have a policy that makes specific reference to responsible investment (RI) or environmental, social, and governance (ESG) issues?Yes
6. If you have a policy that makes specific reference to RI/ESG issues, which of the following Principles does it address?

(Please check all that apply.)

Principle 1: We will incorporate ESG issues into investment analysis and decision-making processes.,Principle 2: We will be active owners and incorporate ESG issues into our ownership policies and practices.,Principle 3: We will seek appropriate disclosure on ESG issues by the entities in which we invest.,Principle 5: We will work together to enhance our effectiveness in implementing the Principles.
7. If you have a policy that makes specific reference to RI/ESG issues, which of the following asset classes does it apply to?

(Please check all that apply.)

Listed equity (developed markets),Fixed income (not including corporate issuers),Fixed income (corporate issuers),Private equity,Non-listed real estate or property,Hedge funds
8. If you have a policy that makes specific reference to RI/ESG issues, when was your policy last reviewed?Within the last 3 years
9. If you have a policy that makes specific reference to RI/ESG issues, has it been disclosed publicly?

(If answering yes, please indicate how this statement can be obtained - a URL would be sufficient. If answering no, please explain why not.)

Yes: 'http://www.goodwithmoney.co.uk/servlet/Satellite/1205481515098,CFSweb/Page/GoodWithMoney#start'
10. To what extent has your approach to responsible investment been translated into a plan of action as reflected in business planning, strategic planning, or similar internal management processes?

  • Large extent: you have both long and short term RI objectives relating to various aspects of your RI program across asset classes and regions that are regularly updated or reviewed. Larger organisational objectives have been reduced to individual objectives for which staff members are held accountable on a regular basis. There are key performance indicators related to responsible investment and resources have been allocated. You feel you have invested considerably in RI implementation and processes.
  • Moderate extent: you have a plan for some aspects of your RI program but not others. Some staff members have specific RI objectives. High level goals may be understood but not documented. You feel you are progressing in RI implementation but have some way to go.
  • Small extent: you have developed a list of actions when you first adopted responsible investment or your approach to RI is ad hoc with new initiatives being implemented as time allows. You are at an early stage in your RI implementation.
To a large extent
11. Who within your organisation has responsibilities related to RI implementation?

(Please check all that apply.)

Board of trustees or board of directors,Committee of the board of trustees or board of directors,Chief Executive Officer or Chief Investment Officer or equivalent,Other senior management,Middle management,RI or ESG specialist,Non RI or ESG investment professional
12. Do you have a policy or approach/process that requires screening out or excluding stocks or sectors from your investment universe?Both stocks and sectors
13. What are your reasons for screening out or excluding stocks or sectors from your investment universe?

(Please check all that apply.)

We believe that it is possible to exclude companies/sectors which will prove to be long term chronic underperformers in terms of their ability to maintain and grow earnings i.e. our exclusion is based on a high level integration,We believe that exclusion is a way in which we can influence the behaviour of companies (i.e. an element of our approach to engagement),We believe that certain companies/sectors are vulnerable to negative publicity surrounding the nature of their business and that this may have an adverse effect on share price performance (i.e. our screening is based on controlling investment risk),We screen for clients when requested
14. Please describe how your organisation assesses if there is a link between your RI activities and the performance (risk and return) of your investments:ESG is so integrated into the investment process that it is not possible to separate out the RI component to provide a numerical analysis of single impacts. ESG analysis provides fund managers with enhanced information to incorporate into investment decision making, which is used alongside a variety of other sources. The way ESG issues affect a company is sometimes financially immaterial, while sometimes it becomes a dominant factor in investment return. Frequently the risks are long term, although when they crystallise, the effects can be drastic, e.g. catastrophe in UK banking system due to irresponsible lending while incentivising short term performance. An annual ESG performance review of FTSE 350 is undertaken and published as the TCAM/The Observer 'Good Companies Guide'. This indicates any changes in companies' ESG performance. We have an exclusions process. If a stock is unsuitable on grounds of poor ESG performance, and we feel new or additional engagement won't prove successful, we divest.
15. Please add any overall comments and clarifications related to Governance, Policy, and Strategy here.No Answer
Principle 1
Principle 1: We will incorporate ESG issues into investment analysis and decision-making processes.

For the purposes of this questionnaire, integration is the consideration of ESG issues alongside traditional financial measures, based on the belief that ESG issues can affect the performance (risk and/or return) of investment portfolios (to varying degrees across companies, sectors, regions, asset classes and through time). Please note that the view that ESG issues can influence investment returns may be based either on

  1. the premise that performance on these issues will eventually be reflected in financial and operational outcomes (revenue growth, margins, etc.) or
  2. the premise that the way in which the market rates or prices the stock will be affected even in the absence of an impact on financial or operational performance. However, exclusion of stocks from portfolios or downweighting them based on the possibility that an association with the stocks may adversely affect the owners profile or brand amongst stakeholders is not regarded as integration.
16. Please provide a one to two paragraph description of your approach to this Principle.

This question and similar questions relating to each of the other Principles are being asked for three reasons. The first reason is to gather details regarding signatory implementation for inclusion in the PRI annual report on progress. The second reason is to capture activities not captured directly by questions in the Reporting and Assessment Tool. The third reason is to provide context and details to support verification calls.

We have a focussed investment approach. Our UK universe is the FTSE350. The investment decision making process is as follows: Stage 1: We look for inefficient pricing through analysis at a company, industry & thematic level. Ideas can result from any single factor or a combination of the three. ESG factors form part of this analysis. We reduce the number of potentially interesting opportunities down to around 120 stocks. Stage 2: At this point a more detailed analysis is carried out including cash-based modelling, a full ESG assessment and a meeting with management. Our assets under management afford us excellent access (we're top 10 shareholder in a number of FTSE100 co's). Stage 3: A summary report (stocksheet/our "house view") is produced by financial and ESG analysts with scenarios capturing the main assumptions from our analysis on a best, worst & central scenarios. This is backed up by a full ESG 1 page report outlining key risks & opportunities: they key ones being incorporated into the full stocksheet
Integration of ESG issues into investment analysis and decision-making processes of internally managed assets
17. For what percentage of your internal assets under active management do you integrate RI/ESG issues into your internal investment decision-making processes (in percent)?

(+/- 5% is sufficient.)

Listed equity (developed markets)100
Listed equity (emerging markets)0
Fixed income (not including corporate issuers)100
Fixed income (corporate issuers)100
Private equity50
Hedge funds0
18. To what extent have you integrated RI/ESG issues into your internal active investment decision-making processes?

(Applies only to investments that include integration of RI/ESG issues as indicated in Q17.)

  • Large extent: you employ a systematic process to integrate RI/ESG issue consideration. RI/ESG issues may be considered in security valuation, security selection, and/or portfolio construction.
  • Moderate extent: for some RI/ESG issues you may have a systematic integration approach while for other issues you approach them in an ad hoc manner or not at all.
  • Small extent: for a few RI/ESG issues you may integrate consideration some of the time.
Listed equity (developed markets)To a large extent
Listed equity (emerging markets)Not applicable
Fixed income (not including corporate issuers)To a large extent
Fixed income (corporate issuers)To a large extent
Private equityTo a moderate extent
Hedge fundsNot applicable
19. When forming investment views, to what extent does your organisation gather and analyse ESG information, including, where applicable, information obtained from engagement activities?

(Applies only to investments that include integration of RI/ESG issues as indicated in Q17.)

  • Large extent: you gather and analyse information across a comprehensive range of ESG issues and across a large proportion of the markets and assets in your investment universe. Furthermore, the information is updated regularly. This research and analysis may be undertaken internally or may be purchased from an external party. In the latter case, internal resources are nevertheless applied to interpreting the information. Alternatively, one or more ESG issues may be the key driver for your overall investment strategy and process.
  • Moderate extent: you gather and analyse information across a moderate range of ESG issues and across a significant part of your investment universe. There remain some gaps in coverage, either in terms of the issues and asset markets covered, or the frequency with which analysis is refreshed, as well as some gaps in internal capacity to analyse the information.
  • Small extent: you gather and analyse some information on ESG issues. This research is ad hoc in nature, however, and considerable gaps exist in coverage and timeliness. You feel that you are in the early stages of developing capacity to gather and analyse information on ESG issues.
  • Not applicable: only a possible answer if you don't manage assets internally.
To a large extent
20. To what extent do portfolio managers or others making investment decisions in your organisation apply the ESG information and analysis available to them when constructing and managing portfolios?

(Applies only to investments that include integration of RI/ESG issues as indicated in Q17.)

  • Large extent: you have a systematic approach towards assessing the implications of all ESG research and analysis which is gathered by your organisation and incorporating it into your assessment of the investment outlook for all investments which are potentially affected and, hence, into portfolio holdings.
  • Moderate extent: you regularly consider the implications of ESG research for investments where the case for doing so is clear-cut. In other cases, however, ESG research is not thoroughly assessed and applied in formulating views on all investments where it may be relevant.
  • Small extent: ESG research is used on an  as-needed basis. Generally, ESG research may be used as part of a qualitative overlay and to decide between investments where the investment case, judged on traditional analysis, is marginal. Alternatively, ESG research may be applied in portfolios only in respect of a relatively small number of sectors where one or more ESG issues are of most obvious relevance e.g. major corporate governance failings, high exposure to heavy polluters.
  • Not applicable: only a possible answer if you don't manage assets internally.
To a large extent
21. To what extent do you have a process for improving the effectiveness of research and portfolio management processes with regards to ESG factors?

(Applies only to investments that include integration of RI/ESG issues as indicated in Q17.)

  • Large extent: on a continuous basis, you review both the quality and relevance of ESG research and the effectiveness with which it is applied in your day-to-day portfolio management, with a view to optimising your overall investment process through identifying opportunities or risks.
  • Moderate extent: you review ESG research regularly (at least annually) with a view to enhancing its coverage and relevance and/or the way it is used in portfolio management. The focus is both on identifying investment opportunities and avoiding risks.
  • Small extent: you occasionally review the integration of ESG research.
To a large extent
22. To what extent do you have a process for assessing and improving internal investment staff competency to incorporate RI/ESG issues into investment analysis and decision-making processes?

(Applies only to investments that include integration of RI/ESG issues as indicated in Q17.)

  • Large extent: all relevant staff members undergo a regular assessment of their RI competency, resulting in an individual plan for ongoing professional development. In addition, the overall skill mix within the team is regularly reviewed to identify any gaps. RI-competency may be integral to recruitment decisions.
  • Moderate extent: relevant staff members are encouraged to undertake relevant external RI-related training and some in-house sessions are provided. RI-competency may be an element in recruitment decisions.
  • Small extent: relevant staff members are permitted, at the organisation's cost, to attend external RI-related training courses, conferences etc.
To a large extent
Integration of ESG issues into investment analysis and decision-making processes of externally managed assets
23. For what percentage of your external assets under management are RI/ESG issues integrated into the investment decision-making processes of your external investment managers (in percent, +/- 5% is sufficient)?
Listed equity (developed markets)60
Non-listed real estate or property100
24. To what extent have RI/ESG issues been integrated into the investment decision-making processes of your external investment managers?

(Applies only to investments that include integration of RI/ESG issues as indicated in Q23.)

  • Large extent: your investment manager employs a systematic process to integrate RI/ESG issue consideration. RI/ESG issues may be considered in security valuation, security selection, and/or portfolio construction.
  • Moderate extent: for some RI/ESG issues your investment manager may have a systematic integration approach while for other issues they approach them in an ad hoc manner or not at all.
  • Small extent: for a few RI/ESG issues your investment manager may integrate consideration some of the time.
Listed equity (developed markets)To a moderate extent
Non-listed real estate or propertyTo a large extent
25. To what extent do you consider the capabilities of external investment managers to incorporate RI/ESG issues when searching for, selecting and retaining your external investment managers?

(Applies only to investments that include integration of RI/ESG issues as indicated in Q23.)

  • Large extent: ESG integration is integral to your views on all of your investment managers and, hence, on your hire, fire and retain decisions. You look at the ESG information available to your managers, the way that they integrate it into their investment decisions and the competence of their staff in ESG areas. Where you believe that managers are not developing their capabilities to your satisfaction, you raise your concerns with them and ensure that they recognise the importance of RI capability in determining the awarding of future mandates.
  • Moderate extent: ESG integration is part of your assessment of all managers and there have been cases where your degree of comfort with a manager has been affected by their performance in the area. You may have made hire/fire decisions on this basis on rare occasions. You monitor the resources which the managers devote to the area and encourage them to develop their capability. You do not, however, tend to investigate the way that ESG research is reflected in portfolios.
  • Small extent: you observe that your existing and potential managers have differing degrees of commitment to RI/ESG integration and, at the margin, favour those with higher commitment. This issue could be a factor in hire and fire decisions in the future. You have not, however, made a detailed assessment of the RI-related resources applied by all of your managers, nor of the way that such resources are integrated into the investment process.
To a moderate extent
Integration - final comments
26. Please add any overall comments and clarifications related to Principle 1 here. Please also describe any significant activities relating to Principle 1 that have not been captured by the questions above.Q12 & 13. Screening only applies to our ethical fund, The Sustainable Leaders Trust. For our other funds, as identified in Q7, we apply an Ethical Engagement Policy (see link in Q9). ESG analysts have formal and regular 1-to-1 meetings with financial analysts and fund managers to discuss company, industry and theme issues relevant to investment performance. During the year, we formed a working group comprising Heads of ESG, Financial Research and Equities (intermittent attendance from Heads of Fixed Income & Alternatives) to embed the integration process further and to critically assess the materiality of topics for further research. In stage 1 of the process described in Q16, material ESG risks were often significant factors in our decisions not to continue to research companies further. Key ESG-related themes in 08 were climate change, demographics, corp gov, emerging market consumer, urban regeneration & infrastructure and technology. We also aim to identify winners and losers in sustainable innovation.
Principle 2
Principle 2:

We will be active owners and incorporate ESG issues into our ownership policies and practices.

27. Please provide a one to two paragraph description of your approach to this Principle.Our approach is based on three aims: a) to CHAMPION customers' values and expectations of corporate behaviour. Our customer mandated Ethical Engagement Policy underpins our engagement with companies on ESG issues to affect change in underperforming companies and urge them to explore opportunities across sustainability themes; b) to PROTECT our customers' savings. We have a duty to ensure companies are run in their interests. Engagement provides decision useful information which enhances our fundamental analysis and hence valuations and c) to CHALLENGE companies that lag behind in financial performance or are not sustainable as we believe better corporate performance enhances shareholder value. Voting and our explanations to management when withholding support are backed by in-house expertise.

(Proxy) voting - applies only to listed equity (developed markets), listed equity (emerging markets) and listed real estate or property.

28. Do you have a (proxy) voting policy?

(If 'Yes - disclosed publicly', please indicate how your (proxy) voting policy can be obtained- a URL would be sufficient. If answering no, please explain why not.)

Yes - disclosed publicly: 'http://www.goodwithmoney.co.uk/servlet/Satellite/1205481515098,CFSweb/Page/GoodWithMoney#start'
29. Does your (proxy) voting policy address environmental, social, and governance issues?
EnvironmentalYes
SocialYes
GovernanceYes
30. Who decided how to vote on ballot items on behalf of your organisation in 2008?

(Please check all that apply.)

Internal investment manager,Internal voting or governance group
31. To what extent is information related to ballot items gathered and analysed before voting decisions are made?

  • Large extent: you might buy external voting research and recommendations and supplement it with your own research. Alternatively, you may undertake the research largely in-house. You review each ballot item before casting your votes and undertake whatever analysis is necessary to make an informed judgement.
  • Moderate extent: you might either buy external voting research and recommendations or perform your own research. You review most ballot items before casting your votes and undertake whatever analysis is necessary in most cases to make an informed judgement.
  • Small extent: You generally rely on your research provider to gather and analyse ballot items. You might perform some very limited research on a small number of issues. You might only review some ballot items before your votes are cast and don't usually undertake additional analysis to make an informed judgement.
To a large extent
32. Do you ensure that voting is done in accordance with your voting instructions?Yes for all
33. Do you inform companies of your rationale when you abstain or vote against management recommendations?Yes for all
34. Please indicate how many resolutions you could have voted on and how many resolutions you did vote on in 2008:

(include abstentions as votes where votes against are not possible, use the last available one year period if information for 2008 is not available or too difficult to gather, approximate numbers are acceptable. If you are unable to provide the exact number please provide an approximation of the percentage by entering 10 in the 'Resolutions could have voted on' column and your estimate in the 'Resolutions voted on' column. So if you voted on about 70% of the possible resolutions you would enter 7 in the 'Resolutions voted on' column. If you are not sure, please enter a 1 in all four fields.)

 
Resolutions could have voted on
Resolutions voted on
Domestic57535753
Foreign39413941
35. You are classified as an Asset Owner and should not answer this question. For the listed equities that you manage, do you provide (proxy) voting services for your clients if they request them?No Answer
36. How does your securities lending program address voting?We recall some securities for voting on some ballot items on a systematic basis
37. How many shareholder resolutions related to ESG issues did you file or co-file during 2008?
As lead filer0
As co-filer0
Planning to be lead filer in 20090
Planning to be co-filer in 20090
38. Please explain why you did or did not file or co-file any shareholder resolutions related to RI/ESG issues during 2008:No Answer
Engagement - general
39. Who engaged with companies to seek ESG improvements in 2008?

Please rank who engaged with companies according to their importance within your overall active ownership activities. You can only select Most, Second, Third and Fourth most important once each. Only the method you rank as 'Most important' will be scored for benchmarking purposes. If you wish to request that your other methods of engagement also be scored, please complete all the relevant sections and email the PRI at assessment@unpri.org when you submit your response.

Internal staffMost important
External investment manager(s)Did not engage with companies in 2008
External engagement service provider(s)Did not engage with companies in 2008
Other (Please specify): na
Did not engage with companies in 2008
40. Do you have a written engagement policy or other documents that direct engagement?

(If 'Yes - disclosed publicly', please indicate how your policy can be obtained- a URL would be sufficient.)

Yes - disclosed publicly: 'http://www.goodwithmoney.co.uk/servlet/Satellite/1205481515098,CFSweb/Page/GoodWithMoney#start'
41. If you have an engagement policy or other documents that direct engagement, what do they include?

(Please check all that apply.)

Indication of what markets it applies to,Expectations of companies with regards to environmental issues,Expectations of companies with regards to social issues,Expectations of companies with regards to governance issues,Approach to monitoring companies,Approach to selecting companies for engagement
42. How many companies are you invested in?550
Engagement - internal staff
43. To what extent do you have a process for identifying and prioritising ESG related engagement opportunities?

  • Large extent: you gather and analyse information across a comprehensive range of ESG issues and across a large proportion of the markets in your investment universe. Furthermore, the information is updated regularly. This research and analysis may be entirely undertaken internally or may be purchased from an external party. In the latter case, however, it is understood that some internal resource would be required to interpret the information. Your research may include an analysis of the impacts of various issues on specific companies and prioritisation of engagement opportunities.
  • Moderate extent: you gather and analyse information across a moderate range of ESG issues and across a significant part of your investment universe. There are some gaps in your coverage however, either in terms of the issues and markets covered, or the frequency with which analysis is refreshed.
  • Small extent: you gather and analyse some information on ESG issues. This research is ad hoc in nature, however, and considerable gaps exist in coverage and timeliness. The process may be largely reactive rather than proactive.
To a large extent
44. How many portfolio companies did you engage with on ESG issues in 2008?
  • Extensive engagement: you may have had multiple instances of focused interaction with a company on issues identified by you and with a view to changing the company's behaviour. You were predominantly engaging with people at the company with the authority to change corporate behaviour. The engagements were systematic and you began them with a clear goal in mind. Extensive engagement includes more than writing letters and includes bilateral meetings in person or on the phone. You may have identified other investors to work with to address the issues you have identified.
  • Moderate engagement: you had more than one interaction with a company on issues identified by you or others. The engagement was somewhat systematic but the specific desired outcome may not have been clear at the outset. You may have responded to requests to engage with other investors on issues identified by them.
  • Basic engagement: you directly contacted companies but your engagements tended to be ad hoc and reactive. At the commencement of the engagement, you may not have had clear goals in mind regarding the desired changes to the company's behaviour and you may not have pursued the issue beyond your initial contact with the company. You may have signed on to letters authored by others. Your engagements might be more about gathering information than seeking ESG related improvements.
Extensive engagement31
Moderate engagement271
Basic engagement14
45. What proportion of your engagements addressed environmental, social or governance issues (in percent)?

(One engagement may address more than one issue, so the three percentages need not add to 100%. For example, if you only had one engagement and it addressed environmental and governance issues then the answer would be 100% for environmental and 100% for governance.)

Environmental17
Social18
Governance89
46. To what extent do you set ESG engagement objectives and attempt to evaluate your engagement success?

  • Large extent: you may have developed a clear and systematic process (either through internal efforts or in partnership with an academic or other group) to regularly measure the impact of your engagement efforts. You set engagement objectives before engaging with companies and track outcomes against those objectives.
  • Moderate extent: you may have developed a process to measure the impact of your engagement efforts but may not always apply it. You might set engagement objectives sometimes before engaging with companies.
  • Small extent: you tend not to set engagement objectives before engaging with companies and may only keep track of your successful engagements.
To a large extent
47. What percentage of engagements that ended in 2008 were deemed successful (in percent)?

(Engagement success: a considerable part of objectives or milestones that were set when the engagement commenced were achieved.)

17
48. To what extent do you have a process for assessing and improving staff competency to act as active owners and incorporate ESG issues into ownership practices?

  • Large extent: all relevant staff members undergo a regular assessment of their competency in the area of active ownership, resulting in an individual plan for ongoing professional development. In addition, the overall skill mix within the team is regularly reviewed to identify gaps. Competency in the skills required to implement active ownership practices is integral to recruitment decisions.
  • Moderate extent: relevant staff members are encouraged to undertake relevant external training and some in-house sessions are provided. Competency in active ownership activities is an element in recruitment decisions.
  • Small extent: relevant staff members are permitted to attend external training courses, conferences etc, paid for by the organisation, where the events will enhance active ownership competencies.
To a large extent
Engagement - external engagement service provider(s)
49. This question is not applicable to you due to your response to Q39 regarding who engages with companies. How many portfolio companies did your external engagement service provider(s) engage with on ESG issues on your behalf in 2008?
  • Extensive engagement: your external engagement service provider(s) may have had multiple instances of focused interaction with a company on issues identified by you or them and with a view to changing the company's behaviour. Your external engagement service provider(s) was predominantly engaging with people at the company with the authority to change corporate behaviour. The engagements were systematic and they began them with a clear goal in mind. Extensive engagement includes more than writing letters and includes bilateral meetings in person or on the phone. They may have identified other investors to work with to address the issues you or they have identified.
  • Moderate engagement: your external engagement service provider(s) had more than one interaction with a company on issues identified by you, them or others. The engagement was somewhat systematic but the specific desired outcome may not have been clear at the outset. Your external engagement service provider(s) may have responded to requests to engage with other investors on issues identified by them.
  • Basic engagement: your external engagement service provider(s) directly contacted companies but their engagements tended to be ad hoc and reactive. At the commencement of the engagement, they may not have had clear goals in mind regarding the desired changes to the company's behaviour and they may not have pursued the issue beyond their initial contact with the company. Your external engagement service provider(s) may have signed on to letters authored by others. Their engagements might be more about gathering information than seeking ESG related improvements.
Extensive engagement
Moderate engagement
Basic engagement
50. This question is not applicable to you due to your response to Q39 regarding who engages with companies. What proportion of your external engagement service provider(s)'s engagements on your behalf addressed environmental, social or governance issues (in percent)?

(One engagement may address more than one issue, so the three percentages need not add to 100%. For example, if you only had one engagement and it addressed environmental and governance issues then the answer would be 100% for environmental and 100% for governance.)

Environmental
Social
Governance
51. This question is not applicable to you due to your response to Q39 regarding who engages with companies. To what extent do you contribute to and assess the ESG engagement activities of your external engagement service provider(s)?

  • Large extent: you probably have a regular dialogue with your service provider to identify and prioritise engagement issues. You may also collaborate with them to set engagement objectives. You require and review regular reporting on engagement activities performed on your behalf. You question why companies have or have not been engaged, the success of the engagements, and the background and experience of staff performing engagement for you, with a view to assessing the value of the service on an ongoing basis.
  • Moderate extent: you keep up-to-date with issues being pursued by your provider but do not generally participate in determining the issues or the objectives. You require and review regular reporting on engagement activities performed on your behalf. You evaluate the merit of the service regularly (say, annually) but do not undertake in-depth analysis in doing so.
  • Small extent: you receive reporting on engagement activities performed on your behalf but have minimal dialogue with your service provider. You do not evaluate the merit of the service regularly.
No Answer
Engagement - external investment manager(s)
52. This question is not applicable to you due to your response to Q39 regarding who engages with companies. How many portfolio companies did your external investment manager(s)'s engage with on ESG issues on your behalf in 2008?
  • Extensive engagement: your external investment manager(s) may have had multiple instances of focused interaction with a company on issues identified by you or them and with a view to changing the company's behaviour. Your external investment manager(s) was predominantly engaging with people at the company with the authority to change corporate behaviour. The engagements were systematic and they began them with a clear goal in mind. Extensive engagement includes more than writing letters and includes bilateral meetings in person or on the phone. They may have identified other investors to work with to address the issues you or they have identified.
  • Moderate engagement: your external investment manager(s) had more than one interaction with a company on issues identified by you, them or others. The engagement was somewhat systematic but the specific desired outcome may not have been clear at the outset. Your external investment manager(s) may have responded to requests to engage with other investors on issues identified by them.
  • Basic engagement: your external investment manager(s) directly contacted companies but their engagements tended to be ad hoc and reactive. At the commencement of the engagement, they may not have had clear goals in mind regarding the desired changes to the company's behaviour and they may not have pursued the issue beyond their initial contact with the company. Your external investment manager(s) may have signed on to letters authored by others. Their engagements might be more about gathering information than seeking ESG related improvements.
Extensive engagement
Moderate engagement
Basic engagement
53. This question is not applicable to you due to your response to Q39 regarding who engages with companies. What proportion of your external investment manager(s)'s engagements on your behalf addressed environmental, social or governance issues (in percent)?

(One engagement may address more than one issue, so the three percentages need not add to 100%. For example, if you only had one engagement and it addressed environmental and governance issues then the answer would be 100% for environmental and 100% for governance.)

Environmental
Social
Governance
54. This question is not applicable to you due to your response to Q39 regarding who engages with companies. To what extent do you contribute to and assess the ESG engagement activities of your external investment manager(s)?

  • Large extent: you require and review regular reporting on engagement activities performed on your behalf. You have regular discussions with your external managers on the issues to be pursued through engagement and the engagement objectives. You also have a dialogue on why companies have or have not been engaged, the success of engagements, and the background and experience of staff performing engagement for you. You regularly evaluate the managers' engagement activity based on these dialogues and other analysis.
  • Moderate extent: you take an active interest in the managers' engagement activities but do not have regular dialogue with the manager. You require and review regular reporting on engagement activities performed on your behalf. You evaluate the managers' engagement activity regularly (say annually) but do not undertake additional analysis in doing so.
  • Small extent: you receive reporting on engagement activities performed on your behalf where provided but do not actively seek to discuss engagement activities with your managers. You do not evaluate the managers' engagement activities regularly.
No Answer
55. This question is not applicable to you due to your response to Q39 regarding who engages with companies. Did you consider the capabilities of external investment managers to engage with companies on ESG issues on your behalf when searching for, selecting and retaining your investment managers?No Answer
Engagement - final comments
56. What ESG issues were addressed in your or your service providers'engagement initiatives?

(Please check all that apply.)

Activities in conflict zones,Benefits and compensation,Bribery/corruption,Climate change,Environment,Governance,Health,Health and safety,Human rights,Labour issues
57. What measures do you or your external service provider(s) use to assess the impact and success of engagement?At the start of each engagement initiative, we identify a "point of difference" with a company, our objectives and timeframe (if appropriate). These differ case-by-case. We judge whether our objectives were achieved or our recommendations adopted in whole or in part. Where the target company has acted or provided us with explicit feedback of change consistent with our substantive recommendations, we count this as success - provided we can be reasonably confident that the change would not have otherwise occurred without our input, either as an investor acting alone or as part of a group of investors acting collaboratively.
58. Please add any overall comments and clarifications related to Principle 2 here. Please also describe any significant activities relating to Principle 2 that have not been captured by the questions above.In the interests of investor transparency, we were the first UK institutional investor to publish our voting record and policies on the internet, a practice now followed by others. We vote in favour of the majority of US (and non-US) shareholder resolutions relating to improving ESG performance and reporting. We regularly attend AGMs, more so than any other UK institutional investor, and raise our concerns directly with management. We are distinctive in believing in the AGM as an important forum for questioning management and holding it accountable to shareholders. We are unique in having a "customer-mandated" engagement policy.
Principle 3
Principle 3: We will seek appropriate disclosure on ESG issues by the entities in which we invest.
59. Please provide a one to two paragraph description of your approach to this Principle.We believe that adequate and consistent reporting on ESG is essential in order that investors can make meaningful comparisons on ESG performance. Good communication with shareholders is also a strong indicator of quality of management. Specifically, we look for how ESG considerations are influencing corporate strategy and look for indicators which illustrate how well they are on-track with their own objectives and other stakeholder expectations.
60. Who asked investee companies (or other investment entities) to provide information about their ESG policies, practices or performance in 2008?

(Please check all that apply.)

Internal staff,Internal staff collaboratively with other investors
61. To what extent did you or your external engagement service provider(s) or your external investment manager(s) have a dialogue with investee companies (or other investment entities) regarding the production of standardized reporting about their ESG policies, practices or performance in 2008?

('Standardized' could also include systematic reporting in areas where standardized reporting has not yet emerged.)

  • Large extent: you or your agents have direct contact with companies and regularly encourage systematic ESG reporting by them. You or your agents have a systematic approach to assessing the quality of reporting across a range of issues which are judged to be important and ask for standardised reporting where appropriate. You or your agents have taken a leading role in investor collaborations seeking systematic reporting by companies. You or your agents may also regularly provide feedback to companies on their reporting.
  • Moderate extent: you or your agents have direct contact with companies. You or your agents ask them to provide standardised reporting on key ESG issues from time to time, but you do not have a systematic approach to identifying cases where scope exists for improved reporting. You or your agents may also occasionally provide feedback to companies on their reporting.
  • Small extent: you or your agents have signed on to one or more collaborative initiatives regarding standardised reporting. You or your agents may also have occasionally asked companies for standardised reporting and /or provided feedback on their reporting.
Listed equity (developed market)To a large extent
Listed equity (emerging markets)Not at all
Fixed income (not including corporate issuers)Not at all
Fixed income (corporate issuers)To a small extent
Private equityNot at all
Non-listed real estate or propertyNot at all
Hedge fundsNot at all
62. What formats of reporting on ESG issue policies, practices or performance have been requested? Please check all that apply.Integrated with regular financial reports,Standalone corporate social responsibility or sustainability reporting,Global Reporting Initiative (GRI),Other (please specify): 'ABI SRI Guidelines'
63. To what extent did you or your external engagement service provider(s) or your external investment manager(s) seek information from companies regarding their practices related to norms, standards, codes of conduct or international initiatives related to ESG issues in 2008?
  • Large extent: you or your agents have made a substantial and systematic effort to seek information from companies regarding their participation in and compliance with a number of relevant norms, standards and codes.
  • Moderate extent: you or your agents have made a significant effort to seek information from companies regarding their participation in and compliance with at least some relevant norms, standards and codes.
  • Small extent: you or your agents have requested information from some companies but this has been undertaken in an ad hoc manner.
To a moderate extent
64. Please add any overall comments and clarifications related to Principle 3 here. Please also describe any significant activities relating to Principle 3 that have not been captured by the questions above.Undertaking the TCAM / The Observer "Good Companies Guide" over the last two years, and having voted against or abstained on the report & accounts at AGMs for 6 years, we have been impressed by the continued increase in the number of companies now reporting ESG. However, there still needs to be far greater emphasis on where and how ESG disclosures relate to investment value and the long-term sustainable performance of businesses. Companies should do more to provide different forms of information on an audience basis.
Principle 4
Principle 4: We will promote acceptance and implementation of the Principles within the investment industry.
65. Please provide a one to two paragraph description of your approach to this Principle.In all of the external presentations we do in the investment community and corporate circles, we promote the UNPRI. The UNPRI is also promoted internally wherever possible. At a broader level, we are strong advocates of responsible investment and participate in government and regulatory consultations on the matter wherever possible.
66. Did you consider RI/ESG requirements when searching for and selecting service providers in 2008 when applicable?
Investment consultantYes, all of the time
Proxy voting service providerYes, some of the time
External overlay service providerYes, all of the time
Investment research providerYes, some of the time
67. Have you included RI/ESG elements in the following?
Investment monitoringYes, some of the time
Incentive structure (internally managed)Yes, all of the time
Incentive structure (externally managed)No
Contractual relationships with external investment managersNo
Contractual relationships with other investment related service providersYes, some of the time
68. To what extent did you encourage your eligible service providers to become PRI signatories or consider RI/ESG factors in 2008?

(Service providers include but are not limited to: external investment managers, investment consultants, proxy voting service providers, external engagement service providers, and investment research providers.)

  • Large extent: in 2008 you asked all of your service providers that are not yet PRI signatories if they would sign the PRI or develop RI/ESG capability.
  • Moderate extent: in 2008 you asked some (greater than 40%) of your service providers that are not yet PRI signatories if they would sign the PRI or develop RI/ESG capability.
  • Small extent: in 2008 you asked a few (less than 40%) of your service providers that are not yet PRI signatories if they would sign the PRI or develop RI/ESG capability.
  • Not applicable: only an available option if you have no service providers or if all of your service providers are already PRI signatories or already consider RI/ESG factors.
To a small extent
69. You are classified as an Asset Owner and should not answer this question. To what extent did you encourage your institutional clients to become PRI signatories or consider RI/ESG factors in 2008?
  • Large extent: in 2008 you asked all of your institutional clients that are not yet PRI signatories or don't yet consider RI if they would become PRI signatories or consider RI.
  • Moderate extent: in 2008 you asked some (greater than 40%) of your institutional clients that are not yet PRI signatories or don't yet consider RI if they would become PRI signatories or consider RI factors.
  • Small extent: in 2008 you asked a few (less than 40%) of your institutional clients that are not yet PRI signatories or don't yet consider RI if they would become PRI signatories or consider RI.
  • Not applicable: only an available option if you have no institutional clients or if all of your institutional clients are already PRI signatories or already consider RI/ESG factors.
No Answer
70. To what extent did you encourage peer organisations to become PRI signatories or consider RI/ESG factors in 2008?
  • Large extent: in 2008 you were an active advocate for RI and the PRI. You may have actively sought to promote RI or the PRI in industry forums or when speaking with the media.
  • Moderate extent: in 2008 when approached, you were an advocate for RI and the PRI. When asked, you may have sought to promote RI or the PRI in industry forums or when asked about RI when speaking with the media.
  • Small extent: in 2008 when approached, you were sometimes an advocate for RI and the PRI. When asked, you might have sought to promote RI or the PRI in industry forums or when asked about RI when speaking with the media, but you many not have encouraged your peers to become PRI signatories or consider RI/ESG factors very often.
To a moderate extent
71. Have you revisited any relationships with service providers in light of RI/ESG issue-related capabilities?Yes
72. Does your broker evaluation process (which determines how you allocate commissions to brokers) include an ESG component and/or do you have a budget to pay for ESG broker research?No
73A. What is your total investment research budget (including brokerage commissions intended to recognize research, in the same currency used in Q1)1120531
73B. what proportion of your total investment research budget is allocated to ESG research (in percent)?15
74. To what extent do you identify ESG issues and suggest them to brokers or other investment research providers for research?
  • Large extent: you have identified specific environmental, social, or governance issues that you would like more research on from your brokers or other research providers. You may have identified specific companies, sectors or themes for research. You may have contacted multiple research sources to indicate your desire to receive this sort of research. You may have asked for mainstream research that incorporates ESG issues.
  • Moderate extent: you may have identified some research providers that can provide you with ESG research and suggested future research ideas. You may not have contacted all of your research providers to request this research.
  • Small extent: you have indicated to your brokers or other investment research providers that you are interested in receiving ESG research.
To a small extent
75. To what extent did you engage in dialogue, lobbying or initiatives pertaining to government policy and/or industry regulations (for example, stock exchanges or accounting standards) related to RI/ESG issues in 2008?
  • Large extent: you may have initiated dialogue on policy initiatives relating to RI/ESG issues or participated extensively in dialogues initiated by others. You may have commented on issues relevant to your domestic market as well as issues relevant to foreign markets.
  • Moderate extent: you participated in some policy initiatives relating to RI/ESG issues. Your engagement may be focused on domestic markets.
  • Small extent: you participated in a few policy initiatives relating to RI/ESG issues when asked to.
To a large extent
76. Please add any overall comments and clarifications related to Principle 4 here. Please also describe any significant activities relating to Principle 4 that have not been captured by the questions above.We have found this principle the most difficult to perform strongly against. This is because many of our peers and contacts are already signatories.
Principle 5
Principle 5: We will work together to enhance our effectiveness in implementing the Principles.
77. Please provide a one to two paragraph description of your approach to this Principle.Our Co-operative heritage naturally lends itself to collaboration and we practice this through frequently engaging with other investors on ESG issues. We collaborate with other investors where: a) we share similar views with other investors; b) it fits with our other engagement priorities in terms of materiality; b) our weight, influence and support can bring a material issue, otherwise ignored, to the fore; c) it reduces costs and resources for our investee companies; d) the structure of the collaboration allows it to be productive and an efficient use of resources; e) when the time is right e.g. when individual engagements have failed.
78. To what extent did you collaborate with other investors to improve your effectiveness in implementing each of the following Principles?

  • Large extent: you may have initiated one or more collaborative initiatives or industry associations relevant to the principle and adopted a leadership position within established initiatives or associations. You may also have worked actively with a number of other investors on specific issues of relevance to the principle.
  • Moderate extent: you have been an active participant in a number of relevant collaborative initiatives. You may also have undertaken some work with other investors on specific issues of relevance to the principle.
  • Small extent: you may have joined a small number of relevant collaborative initiatives but have not been an active participant in their activities.
Principle 1To a large extent
Principle 2To a large extent
Principle 3To a moderate extent
Principle 4Not at all
79. How did you use the PRI Engagement Clearinghouse in 2008?

(Please check all that apply.)

Logged in during 2008 to use the Clearinghouse as a learning tool or to keep up to date on ongoing engagements,Joined a collaborative engagement led by another signatory that was posted to the Clearinghouse,Planning to log in in 2009
80. Did you participate in any of the following RI/ESG issue-related collaborations and/or associations? For those not listed, please use the "other" field:

(Please check all that apply.)

Carbon Disclosure Project,Council of Institutional Investors (CII),Extractive Industries Transparency Initiative (EITI),Institutional Investors Group on Climate Change (IIGCC),Regional social investment organisation (for example SIF or UKSIF),United Nations Environmental Program Finance Initiative (UNEP FI),Other (please specify): 'Unconventional Fossil Fuels',Other (please specify): 'PSF - Pharmaceutical Shareowners Forum',Other (please specify): 'RSPO - Roundtable for Sustainable Palm Oil',Other (please specify): 'GIGN - Global Investors Governance Network',Other (please specify): 'Ethos - A foundation created by Swiss pension funds'
81. Please indicate the three RI/ESG issue-related collaborative engagement initiatives and/or industry associations that you participated in most extensively and indicate how you did so:
  • Large extent: you may have participated actively in the leadership of the initiative and in the preparation of position papers, joint statements or meetings. You also acted as a spokesperson for the initiative and actively promoted the initiative. You may participate in working groups on specific issues and contribute to the organisation or content of events organised by the group. You may have provided financial support for the initiative.
  • Moderate extent: you may have participated to some degree in leadership of the initiative and/or in preparation of position papers and joint statements. You also provided general support for the initiative in various non-public forums.
  • Small extent: You joined the initiative or association, attended some meetings and paid a membership fee but were not actively involved in the leadership or work program of the initiative.
1st Other specify from Q80To a large extentIn July, CFS and WWF jointly published a report discussing the global economic background to unconventional oil, the environmental & social impacts of extraction and refining, and what failure to properly cost, regulate and mitigate these impacts could mean for stakeholders - especially investors. TCAM has subsequently actively initiated dialogue and collaborated with investor groups in Europe and North America alike to press caution on unconventionals, and also organised an event to further promote the recommendations included in the report. See also Question 95 (Principle 5).
3rd Other specify from Q80To a large extentIn 2008, we held a position on the Executive Board of RSPO. In addition to speaking to various stakeholders (incl. investee companies) about RSPO, our activities included contributing to a Palm Oil Finance handbook (produced by WWF) providing guidance to the investment and banking communities regarding palm oil sustainability. Along with UKSIF and CCLA, we also helped to organise and spoke at an investors'event on sustainable palm oil.
4th Other specify from Q80To a large extentOur participation in this forum for international governance collaboration included engagement in Broadridge over service deficiencies; letter to regulatory authorities of Singapore on appointment of proxies; and discussion of proxy votes and current developments in over 35 countries. We were very active in various working groups and also provided financial support for the forum.
82. Please add any overall comments and clarifications related to Principle 5 here. Please also describe any significant activities relating to Principle 5 that have not been captured by the questions above.Having been involved in several collaborative efforts in the UK, it is often difficult from the onset to establish an end-point. There is also (always) the free-rider problem, whereby some institutions benefit disproportionately from collaborations while contributing little. The UNPRI Clearinghouse collaborations have been very useful and well structured in the main though.
Principle 6
Principle 6: We will each report on our activities and progress towards implementing the Principles.
83. Please provide a one to two paragraph description of your approach to this Principle.As part of The Co-operative Group, we are committed to complete, full and independently audited reporting. As the investment function of an insurance and investment company, we regularly report to stakeholders (internal and external alike) and to customers in the form of our Sustainability Report. This has been a consistent winner, year-on-year, of most leading reporting awards. We publish quarterly reports to our independent external Advisory Committee on our ESG activities. We also publish a quarterly update on the Sustainable Leaders Trust (SLT) for SLT unitholders; and to the Trustee Committee of PACE, the Co-op Group pension fund. We have no external institutional or charity clients, therefore we have not felt the need to dedicate more resource to reporting more extensively.
84. To what extent did you disclose (privately and/or publicly) your approach to incorporating ESG issues into investment analysis and decision-making processes in 2008?

(If you disclose publicly, please indicate how this disclosure can be obtained - a URL would be sufficient. If answering not at all, please explain why not.)

  • Large extent: you provided a review of your investment process, highlighting the way in which analysis of ESG issues is integrated into investment decisions. This review was comprehensive (e.g. covered multiple asset classes where relevant) and detailed, subject to the necessity to protect information on proprietary techniques. This review was disclosed publicly and is readily accessible via your website.
  • Moderate extent: you may have prepared a comprehensive and detailed review of your investment process highlighting ESG integration. However, it was not necessarily distributed publicly. Alternatively, your review may have contained gaps either in coverage or in detail.
  • Small extent: you provided only a relatively brief overview of your investment approach and the integration of ESG analysis into decisions.
To a small extent: ''
85. How did you disclose your (proxy) voting record in 2008?

(Please select all that apply. If you disclose publicly, please indicate how this disclosure can be obtained - a URL would be sufficient. If answering not at all, please explain why not.)

Disclosed to clients or beneficiaries,Disclosed publicly: 'http://www.goodwithmoney.co.uk/servlet/Satellite/1200903577492,CFSweb/Page/GoodWithMoney',All votes,Guidance explaining some votes,Disclosed continuously (soon after votes are cast)
86. To what extent did you disclose (privately and/or publicly) your RI/ESG issue-related engagement activities, results and progress in 2008?

(If you disclose publicly, please indicate how this disclosure can be obtained - a URL would be sufficient. If answering not at all, please explain why not.)

  • Large extent: your reporting provided background on the issues at hand, the nature of the engagement and the outcomes. You may have reported the companies that you engaged with and the issues covered with the companies. You may have also covered emerging issues on which you intend to pursue engagement in future. You may have reported publicly on all of your key RI/ESG engagement activities.
  • Moderate extent: you reported on some of your key RI/ESG engagement activities. Your reporting may not have been disclosed publicly.
  • Small extent: you provided an overview of your RI/ESG engagement activities, possibly including some examples.
To a large extent: 'http://www.goodwithmoney.co.uk/servlet/Satellite/1200988622688,CFSweb/Page/GoodWithMoney; http://www.goodwithmoney.co.uk/servlet/Satellite/1205481515098,CFSweb/Page/GoodWithMoney (engagement examples under each issue); http://www.goodwithmoney.co.uk/images/pdf/FINALFULLWEB.pdf (includes various examples pp.22-23; 42-46)'
87. Did you disclose (privately and/or publicly) RI/ESG activities, results and progress related to Principle 3, Principle 4 or Principle 5 in 2008?

(If you disclose publicly, please indicate how this disclosure can be obtained - a URL would be sufficient. If answering not at all, please explain why not.)

Principle 3Yes - to the publicThe Sustainability Report (www.goodwithmoney.co.uk/images/pdf/FINALFULLWEB.pdf; pp. 43-45) includes examples of how we have requested improvements in SEE risk disclosure and frequently voted against accepting the report and accounts of companies that fail in this respect, while also supporting resolutions calling for SEE reporting on company-specific issues
Principle 4Not at allSee Q76
Principle 5Yes - to the publicOur latest Sustainability Report (www.goodwithmoney.co.uk/images/pdf/FINALFULLWEB.pdf) provides details of when we have supported shareholder resolutions tabled by other responsible investors with regards to ESG issues (pp.44-45) and how we have otherwise collaborated with other investors, for instance by convening the Pharmaceutical shareholders' Forum (p. 25).
88. How would you like to publish your responses to this PRI Reporting and Assessment tool?

(Please check all that apply.)

Please automatically publish our responses to the reporting and assessment tool in full on the PRI website
89. Please add any overall comments and clarifications related to Principle 6 here. Please also describe any significant activities relating to Principle 6 that have not been captured by the questions above.We are in the process of publishing an annual review of our responsible investment activities in 2008. This will be published in April 09. As previously mentioned, from July 09, we will be able to manage 3rd party funds alongside our own. We will therefore be reporting as an independent entity, as well as as part of the Co-operative Group, on our ESG practice and performance. The Co-operative Sustainability Report has been a consistent winner, year-on-year, of most leading reporting awards.
Closing Comments
90. Please describe the benefits you have enjoyed as a result of signing the PRI:Webinars have provided decision-useful information and informed our engagement efforts; Clearinghouse alerts have highlighted risk areas we'd not previously been aware of ; We have been able to demonstrate our ability to co-operate through collaborations with other PRI signatories.
91. What has your organisation changed as a direct result of becoming a PRI signatory?Improved documentation and ESG governance mechanisms (integration working group).
92. Did the financial market turmoil of 2008 cause you to change your approach to the consideration of ESG factors or active ownership? If it did, please explain how.The economic downturn has caused us to place even greater emphasis on our commitment to active ownership. Our ESG analysis (sub-prime exposure; remuneration not aligned to sustainable growth) contributed to our fund managers making judicious decisions about our exposure to banking & real estate (underweight), so that we were better placed to absorb the shocks. We actually believe the turmoil has had some beneficial effects to the Co-op. We strongly believe that our Co-operative business model, and the social values attached, will prove successful in the long run and that an investment approach conducive to these values will be increasingly attractive to consumers disillusioned with big business & excess. The strength of this belief led to our decision to launch a bold media campaign focused on these factors: alternative business models and business ethics. At a time when our PLC competitors are focusing on value, our model enables us to place greater emphasis on 'values' and use this as a point of difference.
93. What are the top three activities the PRI Secretariat could undertake to enhance and encourage further implementation of the PRI by current and prospective signatories?
1.Publication of all PRI collaborative initiatives on the website in real time, including progress to date.
2.-
3.-
94. What are your top three PRI-related goals/priorities for 2009?
1.Better address Principle 4 in our activities.
2.Bring ESG integration in all asset classes to the level applied to listed equity and fixed income.
3.Improve disclosure of our PRI-relevant activities and progress; more clearly address each Principle in public reporting and communications.
95. What were your most significant achievements in 2008 in relation to your implementation of Principles?
Principle 1: We will incorporate ESG issues into investment analysis and decision-making processes.The increased support and buy-in from our equity analysts and fund managers in terms of the important contribution ESG analysis was making to investment decision-making. Improved communication due to formalisation of meetings and refocusing of the UK funds on fewer stocks. The introduction of a focussed investment approach (we're top ten shareholder in a number of FTSE100 co's) has allowed us to dedicate more resource and time to fewer stocks resulting in deeper understanding and greater access to management.
Principle 2: We will be active owners and incorporate ESG issues into our ownership policies and practices.Many engagements producing unambiguously positive results, or our analysis proving prescient given subsequent events. E.g. Our pressure on HSBC re sustainability of its wholesale financing to high impact sectors helped produce a revision of its clients&policies; WPP met our substantive recommendations to embed ethical&reputational risk mgmt following our concerns about past practices; Tesco met many of our recommendations on supply chain mgmt; We were the only co to attend the Bellway AGM to vote against & challenge a remuneration rpt which went on to be defeated because of payments for failure; Northern Rock (started in 07,proved right in 08): Voted against the remuneration rpt due to inappropriate incentives. Other investors had been supportive. NR is now an example of incentivising unsustainable lending practices; RBS (started in 07, proved right in 08): Unlike most investors, we refused to approve the takeover of ABN-Amro due to its complexity&risk. The takeover is now acknowledged to have been a disaster
Principle 3: We will seek appropriate disclosure on ESG issues by the entities in which we invest.Our "Good Companies Guide" stimulated significant interest from companies who were keen to engage with us on matters of general ESG disclosure. >20 companies contacted us to ask how they could improve their scores through better transparency. In addition, the disclosure recommendations to oil companies outlined in our report "Unconventional Oil": Carbon intensity targets and viability of mitigation options " Local environmental management including tailing ponds and water use " Respect for First Nations legal rights and other stakeholder engagement " Conservation areas and land-use planning " Greater disclosure for shareholders on how all of the above are to managed to protect their licence to operate.
Principle 4: We will promote acceptance and implementation of the Principles within the investment industry.-
Principle 5: We will work together to enhance our effectiveness in implementing the Principles.Our co-ordination of an investor event on Tar Sands. And since then, as investor letter to large oil and gas companies involved. The letter has the provisional support of the Institutional Investor Group on Climate Change and most major UK SRI investors and is being drafted in conjunction with Ethical Funds and other U.S. investors active in this arena. The joint recommendations are predicated on the Investor Statement on Climate Change: http://www.iigcc.org/docs/PDF/Public/11NovemberInvestorPolicyStatement.pdf
Principle 6: We will each report on our activities and progress towards implementing the Principles.During the year we improved our ESG reporting in the following areas: 2 client websites including ESG content & updates (updated at least quarterly ); 12 IFA brochures including 2 specifically covering ESG (updated quarterly); material on our new "Good With Money" website (updated as appropriate); The Co-op Group Sustainability Report; New look Sustainable Leaders Trust quarterly newsletter
96. What were your biggest barriers in 2008 with relation to your implementation of the Principles?
Principle 1: We will incorporate ESG issues into investment analysis and decision-making processes.Since ESG issues are largely intangible, it is still difficult to reflect them in valuations. There is still no agreed definition of 'materiality' particularly in relation to ES as opposed to G, especially as many ES issues play out in the mid-to-long term. This makes it more difficult to reflect. Market conditions made 2008 an exceptionally difficult year for ESG as many practitioners had failed to predict the absence of business ethics and governance systems which led to global financial turmoil. This may have served to discredit or undermine the efforts of ESG investors.
Principle 2: We will be active owners and incorporate ESG issues into our ownership policies and practices.Resources and the long-term nature of engagement. It is often difficult to internally justify protracted engagement when outcomes, by their very nature, are not immediate. Attribution is also a problem when you have several investors asking for similar things: who really had the most influence? The requirement to cover so many issues for so many companies means we cannot pursue every case we'd like to and have to make hard choices about which ones are most serious and likely to yield results.
Principle 3: We will seek appropriate disclosure on ESG issues by the entities in which we invest.-
Principle 4: We will promote acceptance and implementation of the Principles within the investment industry.The fact that, in our sphere of influence, most financial institutions are already signatories of UNPRI. Also, we do not currently have third party clients who we could promote the UNPRI to.
Principle 5: We will work together to enhance our effectiveness in implementing the Principles.Free-rider problem. Resource intensive. Differing motives of investors  some ethically-driven, some financially driven. Not all ESG engagement delivers financially useful information.
Principle 6: We will each report on our activities and progress towards implementing the Principles.Our contributions to The Co-operative Group Sustainability Report is extremely comprehensive and highly resource intensive. E.g. it involves the provision of all records on ESG analysis and engagement to independent auditors for inspection, followed by visits from them. However, not all of this information is used in the final Sustainability Report. Since the launch of the TCAM brand in July 2008, by necessity we have dedicated all additional reporting resources on ESG to the material relating to the promotion of the brand.
97. Please indicate which principle you find the most difficult to implement and the principle you find the least difficult to implement:
Most difficultPrinciple 4
Least difficultPrinciple 1