Summary of responses to the PRI reporting and assessment tool 2008

Co-operative Financial Services

Organisational Overview
1. What were your organisation's total assets under management as of 31 December 2007 (in millions)? 19582
Please select currency British pound (GBP)
1a. If 'Other' was selected, please specify the other currency here
2. What category would best describe your organisation? Insurance company
3. What proportion (in %) of your fund is defined benefit and what proportion (in %) is defined contribution? (please only answer this question if you answered  Pension or superannuation or retirement or provident fund or plan to Q2)
Defined benefit
Defined contribution
4. Please provide an overview of your asset mix as of 31 December 2007 (in %):
Listed equity (developed market, active) 29.3
Listed equity (developed market, passive) 11.3
Listed equity (emerging market, active) 0.1
Listed equity (emerging market, passive) 0
Fixed income - developed markets 41.8
Fixed income - emerging markets 0
Real estate or property 10.9
Private equity 1
Hedge fund 1
Infrastructure 0
Currency 0
Commodities 0
Cash 4.6
Other (Please specify): 0
5. Please indicate what percentage of your assets are managed internally and what percentage are managed externally (in %):
 
Internal
External
Listed equity (developed market, active) 66.7 33.3
Listed equity (developed market, passive) 100 0
Listed equity (emerging market, active) 0 100
Listed equity (emerging market, passive) 0 0
Fixed income - developed markets 100 0
Fixed income - emerging markets 0 0
Real estate or property 0 100
Private equity 100 0
Hedge fund 100 0
Infrastructure 0 0
Currency 0 0
Commodities 0 0
Cash 100 0
Other (Please specify): 0 0
Principle 1
7. Do you have a formal investment policy statement that makes specific reference to the integration of responsible investment (RI) or environmental, social and governance (ESG) issues within investment decision making and ownership practices? Yes, it is integrated into a broader investment policy and there is an independent RI/ESG policy
8. Do you have a statement that makes specific reference to the integration of responsible investment (RI) or environmental, social and governance (ESG) issues within investment decision making and ownership practices?
9. In what year were RI/ESG issues first formally addressed in a policy statement (integrated or independent)? 1990
10. Has your statement that makes specific reference to the integration of RI or ESG issues been disclosed publicly? Yes
11. Please indicate how this statement that makes specific reference to the integration of RI or ESG issues can be obtained (a URL would be sufficient): http://www.cis.co.uk/servlet/Satellite?c=Page&cid=1124260089851&pagename=CISv2%2FPage%2FtplCISv2PageStandard&loc=l http://www.co-operativeinvestments.co.uk/advisers/about_us.php
12. For what percentage of your internal assets under management do you integrate RI/ESG issues into your internal investment decision-making processes? (in %)
Listed equity (developed market, active) 100
Listed equity (developed market, passive) 100
Listed equity (emerging market, active)
Listed equity (emerging market, passive)
Fixed income - developed markets 100
Fixed income - emerging markets
Real estate or property
Private equity 50
Hedge fund 50
Infrastructure
Currency
Commodities
Cash 0
{inst1}
13. To what extent have you integrated RI/ESG issues into your internal investment decision-making processes?
Listed equity (developed market, active) To a large extent
Listed equity (developed market, passive) To a moderate extent
Listed equity (emerging market, active) To a large extent
Listed equity (emerging market, passive) To a moderate extent
Fixed income - developed markets Not at all
14. 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 %)
Listed equity (developed market, active) 50
Listed equity (developed market, passive)
Listed equity (emerging market, active) 50
Listed equity (emerging market, passive)
Fixed income - developed markets
Fixed income - emerging markets
Real estate or property 0
Private equity
Hedge fund
Infrastructure
Currency
Commodities
Cash
{inst}
15. To what extent have RI/ESG issues been integrated into the investment decision-making processes of your external investment managers?
Listed equity (developed market, active) To a small extent
Listed equity (developed market, passive) To a small extent
Listed equity (emerging market, active) Not at all
16. What proportion of your assets involve screening out or excluding stocks or sectors based on ethical (rather than long-term financial) criteria? (in %) 0.9
17. Do you have any staff dedicated to RI/ESG issue analysis and/or implementation?
 
Dedicated
Combined full-time equivalents
Investment analyst 1 1
Research analyst 3 3
RI/ESG issue policy advisor 1 0.1
(proxy) Voting specialist 2 1.5
Engagement specialist 1 1.5
Portfolio manager 1 1
Other (Please specify): 1 head of responsible investment plus 1 proxy voring implementation officer 2 2
1 head of responsible investment plus 1 proxy voring implementation officer
18. Which Board committee or other executive body has overall responsibility for RI/ESG issues? We have an independent external Advisory Committee of ESG experts which advises on ESG policy. We also have an Executive Ethics Committee (comprising the Director of Investments; Managing Director, Corporate & Markets; Head of Responsible Investment and Group Corporate Affairs Director) .This committee agrees on policy issues with reference to their consistency with the Social Responsibility strategy of our parent company, Co-op Group.
19. Do you assess the capabilities of internal investment staff to incorporate RI/ESG issues? Yes
20. Do you assess the capabilities of external investment managers to incorporate RI/ESG issues? Yes
21. Approximately what percentage of your internal non-ESG-specialist investment management staff received RI/ESG training in 2007? (in %) 80
22. What forms of RI/ESG training or awareness raising have been invested in, encouraged or provided for internal staff (investment and other)? Informal internal training,Conferences,Professional programs,Regular briefings on key issues,Other (please specify): 'Awareness-raising among internal staff: Stands at divisional and group-wide conferences communicating Responsible Investment. Presentations to the Co-op Group s regional members meetings; intranet communications and staff newsletters; reports produced by Responsible Investments team are distributed across other parts of the business. We report our ESG activities in the Group Annual Sustainability Report, which is distributed to all staff.'
23. Did you support the development of nonproprietary RI/ESG issue-related tools, metrics, analysis or academic research in 2007? To a large extent
24. Please indicate how the results of nonproprietary RI/ESG issue-related tools, metrics, analysis or academic research development you supported can be obtained if they have been disclosed publicly (a URL would be sufficient): THE CO-OP INVESTMENTS/ THE OBSERVER:  GOOD COMPANIES GUIDE . In Aug 07, we published rankings of UK FTSE 350 companies according to responsible investment criteria. This ranked companies on management of environmental impact,the communities in which they operate; social and environmental risks and corporate governance. The Good Companies Guide was published in the UK national press ( The Observer 28 Aug & 3 Sept 07). Cardiff University Business School  An Investigation into Environmental, Social and Governance Considerations in Institutional Investment . The project is funded by Nuffield and under the guidance of BRASS. Lead researcher is Dr. Jill Solomon (Cardiff University). Other researchers are Dr. Simon Norton (Cardiff University) and Dr. Nathan Joseph (Aston University). A number of papers have been published from this work, which are available on request. The latest paper, based on the study we participated in, will be published imminently.
25. Have you advocated/supported/ encouraged/participated in RI/ESG issue-related industry-wide training for investment professionals during 2007? Sponsored industry events,Advocated RI/ESG coverage in professional training programs (CFA, MBA, etc.),Spoke at or attended conferences,Had dialogue or exchanges with peers
26. What was your most significant achievement in 2007 in relation to your implementation of Principle 1? Development and embedding of internal processes (which are externally audited) which relate specifically to the integration of ESG into investment analysis and decision making processes. These have helped us systematically cover ESG risks in evaluating and monitoring companies. They enable us to better understand the key ESG issues that need to be assessed before making investment decisions and prioritise where we should focus our attention.
27. What was your biggest barrier in 2007 with relation to your implementation of Principle 1? The biggest challenge was how to decide on which ESG issues were most material to shareholder value. This is often easier for weak corporate governance and major environmental impacts. However, pricing social issues is often more difficult although they can often be more important.
28. Please add any overall comments and clarifications related to Principle 1 here. Enter text response here.
Principle 2
29. To what extent did you employ the following approaches in your 2007 active ownership strategy for listed equities?
(Proxy) voting To a large extent
Direct engagement conducted privately To a large extent
Direct engagement conducted publicly To a large extent
Collaborative engagement To a large extent
Filing shareholder resolutions Not at all
Co-filing shareholder resolutions Not at all
Other (Please specify):
No Answer
30. To what extent did you employ the following approaches in your 2007 active ownership strategy for all asset classes other than listed equity?
(Proxy) voting To a large extent
Direct engagement conducted privately To a small extent
Direct engagement conducted publicly To a small extent
Collaborative engagement Planning to in 2008
Other (Please specify): No Answer
31. Do you have a (proxy) voting policy? Yes - disclosed publicly
32. To what extent does your (proxy) voting policy direct action on ESG issues? For each issue, please indicate the extent of direction.
Environmental To a large extent
Social To a large extent
Governance To a large extent
33. Does your (proxy) voting policy apply to all voting regions (where possible)? Yes
34. Please indicate how your (proxy) voting policy can be obtained (a URL would be sufficient): http://www.co-operativeinvestments.co.uk/advisers/company_voting_records.php We vote in all regions. However, the policy document covers the UK. Overseas voting follows the spirit of the UK voting policy whilst taking advice from local proxy advisory services.
35. Do you ensure that voting is done in accordance with your (proxy) voting policy? Yes for all
36. What percentage of total votes cast were against management? (in %) 13
37. What percentage of shareholder resolutions relating to environmental, social or governance issues was supported? (in %)
Environmental 98
Social 98
Governance 80
38. Do you conduct (proxy) voting on behalf of your clients?
39. How many shareholder resolutions related to RI/ESG issues did you participate in during 2007?
As lead filer
As co-filer
Planning to be lead filer in 2008
Planning to be co-filer in 2008
40. How were portfolio companies engaged with in 2007? Please check all that apply. Internal staff engaged portfolio companies directly,Internal staff engaged portfolio companies collaboratively
41. Do you systematically bring RI/ESG issue-related engagement opportunities to your clients?
42. Do you systematically ask your external investment managers to bring RI/ESG issue-related engagement opportunities to you? Planning to in 2008
43. How many portfolio companies did you engage directly/were engaged on your behalf on ESG issues in 2007?
 
Extensive engagement
Moderate engagement
Basic engagement
Environmental 30 49 0
Social 6 6 0
Governance 30 36 300
44. What RI/ESG-related issues were addressed in your shareowner engagement initiatives? Please check all that apply. Activities in conflict zones,Benefits and compensation,Bribery/corruption,Climate change,Environment,Governance,HIV/AIDS,Health,Health and safety,Human rights,Labour issues,Nanotechnology / novel technology,Other (please specify): ': Customer satisfaction KPIs; responsibility in public relations; responsible lending; responsible gambling; utilities regulation.'
45. How were RI/ESG issue-related engagement targets and topics identified? Please check all that apply. Sector exposure,Risk profile,Focus issue,Ad hoc/reactive,NGO or union campaign,Other (please specify): 'Requests from our Advisory Committee. Connection to Co-op Group Policies'
46. Do you set RI/ESG issue-related engagement objectives and attempt to evaluate success? To a large extent
47. Have you sought evidence relating to the effectiveness of your active ownership strategy? Please check all that apply. Governance practices changed,(Written) commitment to improve a particular ESG issue,Improved disclosure,Collaborative work with a company on a specific ESG issue,Other evidence of improvement in investee company RI/ESG performance due to our activities,Impact on share price,Other (please specify): 'Numbers of companies engaged on Palm Oil have since joined the Roundtable on Sustainable Palm Oil, as we d advocated in our engagement with them. We report annually on our active ownership strategy and engagement activities in our Sustainability report. This is externally audited. The auditor assesses its effectiveness.'
48. What was your most significant achievement in 2007 in relation to your implementation of Principle 2? Exclusion Policy - if a stock is considered unsuitable for investment on the grounds of poor governance or SEE risk management, and it is not considered that new or additional engagement is likely to prove successful, an orderly divestment from the stock across all portfolios in ordered. Analysis undertaken in 2007 of six stocks divested on ESG grounds in 2006 showed the share prices of all but one of the companies divested have fallen.This gave us confidence in the quality of the ESG analysis underpinning the divestment recommendations, the robustness of the process and the decisions made.
49. What was your biggest barrier in 2007 with relation to your implementation of Principle 2? Enter text response here.
50. Please add any overall comments and clarifications related to Principle 2 here. Enter text response here.
Principle 3
51. Have you asked that investee companies (or other investment entities) produce standardized reporting on their RI/ESG issue policies, practices or performance (within annual financial reports or other formats)? To a large extent
52. What format of standardized reporting on RI/ESG issue policies, practices or performance have you requested? Standalone corporate social responsibility or sustainability reporting,Global Reporting Initiative (GRI),Other (please specify): 'ABI SRI Reporting Guidelines. 1. Since 2004, we have voted against the annual report and accounts at company AGMs where we have deemed SEE reporting to be inadequate. We wrote to all companies concerned expressing our desire to see improved SEE reporting in line with the Association of British Insurers (ABI) Guidelines on Social & Environmental Reporting. Year on year, we have witnessed an increase in the numbers and quality of baseline reporting across all sectors in this area. We have now been able to de-emphasise our efforts in this area due to the progress made. 2. Reporting on the risks and opportunities associated with biofuels production and use.'
53. Have you provided feedback to investee companies (or other investment entities) on their reporting on RI/ESG issues? To a moderate extent
54. Have you sought information from companies regarding their adoption of/adherence to norms, standards, codes of conduct or international initiatives related to RI/ESG issues?
Adoption To a moderate extent
Adherence To a moderate extent
55. Which norms, standards, codes of conduct or international initiatives related to RI/ESG issues have you sought information about from companies, with regard to their adoption of/adherence to? Equator Principles,International Labour Organization standards,World Economic Forum Principles for Countering Bribery,Universal Declaration of Human Rights,Other (please specify): 'RSPO'
56. What was your most significant achievement in 2007 in relation to your implementation of Principle 3? Since 2004, we have voted against the annual report and accounts at company AGMs where we have deemed ESG reporting to be inadequate. We wrote to all companies concerned expressing our desire to see improved ESG reporting. Year on year, we have witnessed an increase in the numbers and quality of baseline reporting across all sectors in this area. We have now been able to de-emphasise our efforts in this area due to the progress made.
57. What was your biggest barrier in 2007 with relation to your implementation of Principle 3? Comments from companies that they were being asked to comply with too many (sometimes conflicting) reporting requirements.
58. Please add any overall comments and clarifications related to Principle 3 here. Enter text response here.
Principle 4
59. Are you considering RI/ESG requirements when searching for and selecting the following?
External investment manager Yes
Investment consultant Not applicable
Proxy voting Yes
Engagement overlay Not applicable
Investment research Yes
Internal operations (for example, purchasing, travel, office space etc.) Yes
Other (Please specify): Not applicable
60. Have you linked the following to performance on RI/ESG issues?
Investment monitoring Yes
Incentive structure (internal investments) Yes
Incentive structure (external investments) No
Contractual relationships with external investment managers No
61. Are the default pension funds or retirement plans offered to your employees also signatories to the PRI? No
62. To what extent do you encourage your service providers to become PRI signatories? Not applicable
63. To what extent do you encourage your clients to become PRI signatories?
64. To what extent do you encourage peer organisations to become PRI signatories? Planning to in 2008
65. Do you have evidence that you have played a role in the improved integration of RI/ESG issues by external investment managers? To a small extent
66. Does your broker evaluation process include an ESG component or do you have a budget to pay cash for ESG broker research?
67. Have you revisited any relationships with service providers in light of RI/ESG issue-related capabilities? Yes
68. Have you engaged in dialogue, lobbying or initiatives pertaining to government policy and/or industry regulations (for example, stock exchanges, accounting standards) related to RI/ESG issues in 2007? To a small extent
69. What was your most significant achievement in 2007 in relation to your implementation of Principle 4? We are relatively new signatories to the UNPRI and hope to escalate our action on this Principle in 2008.
70. What was your biggest barrier in 2007 with relation to your implementation of Principle 4? Those who are of the opinion that the UNPRI is  yet another code when SRI is an issue already over-loaded with codes of best practice.
71. Please add any overall comments and clarifications related to Principle 4 here. No comment
Principle 5
72. Did you use the PRI Engagement Clearinghouse in 2007? Used clearinghouse
73. Did your use of the clearinghouse result in subsequent action or collaboration with other signatories? Yes
74. Please elaborate on how the PRI Engagement Clearinghouse could be made more useful: Quality of conference calls could be improved e.g. not announcing when people have left the conference call.
75. To what extent do you participate in the following RI/ESG issue-related collaborative engagement initiatives and/or industry associations? For those not listed, please use the "other" field: 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): 'pharma shareowners forum, RSPO (Roundtable on Sustainable Palm Oil)'
76. 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:
Institutional Investors Group on Climate Change (IIGCC) We have been a member of IIGCC since its inception. We have been actively involved in the promotion of public policy initiatives E.g. the inclusion of Aviation in the Emissions Trading Scheme; letter to the European Commission in respect to 2nd national allocation plan.
77. What was your most significant achievement in 2007 in relation to your implementation of Principle 5? Our contributions to the launch of a certification and supply chain system in November 2007 by the RSPO which has helped to make sustainable palm oil a reality.
78. What was your biggest barrier in 2007 with relation to your implementation of Principle 5? Of the numerous collaborative engagement which have emerged this year, choosing which to prioritise can be difficult. The need to direct resources towards delivering our own engagement strategy, directed by our customer-mandated Ethical Engagement Policy, can make extensive collaboration difficult to justify.
79. Please add any overall comments and clarifications related to Principle 5 here. Enter text response here.
Principle 6
80. Have you disclosed how RI/ESG issues are integrated into your investment processes? Yes - to clients or beneficiaries
81. Please indicated how this disclosure of how RI/ESG issues are integrated into your investment processes can be obtained (a URL would be sufficient): http://www.cis.co.uk/servlet/Satellite?c=Page&cid=1124260089851&pagename=CISv2%2FPage%2FtplCISv2PageStandard&loc=l http://www.co-operativeinvestments.co.uk/advisers/investment_process.php
82. To what extent do you disclose your annual (proxy) voting record? Disclose votes and guidance explaining votes
83. Please indicated how your (proxy) voting record can be obtained (a URL would be sufficient): http://www.cis.co.uk/servlet/Satellite?c=Page&cid=1124867053603&pagename=CISv2%2FPage%2FtplCISv2ViewSRIVoting&loc=l
84. Do you systematically report (privately and/or publicly) on your RI/ESG issue-related engagement activities, results and progress? To a large extent
85. Please indicate how your reporting on RI/ESG issue-related engagement activities, results and progress can be obtained (if it is publicly available, a URL would be sufficient): SUMMARY VOTING RECORDShttp://www.co-operativeinvestments.co.uk/advisers/company_voting_records.php
86. Did you communicate on RI/ESG issues and the PRI to beneficiaries or plan participants in 2007? No Answer
87. Please indicate how your communication on RI/ESG issues and the PRI to beneficiaries or plan participants can be obtained (if it is publicly available, a URL would be sufficient):
88. Are you undertaking any additional efforts to raise awareness of the PRI and RI/ESG issues amongst stakeholders? To a large extent
89. What evidence do you have of the impact on external investment manager practices? Please check those that apply. Not applicable
90. Have you sought to determine what impact your overall RI/ESG issue-related efforts (voting and engagement, investment decision making, disclosure, etc.) have had on corporate behavior or performance? To a large extent
91. Have you sought to determine what impact your RI/ESG issue-related approach has had on the performance of your portfolio? To a large extent
92. Have you sought to determine what impact your RI/ESG issue-related efforts, requests and guidance have had on the consideration of RI/ESG issues by your external service providers excluding external investment managers (for example: research providers, consultants, etc.)? To a small extent
93. Do you report on progress and/or achievements relating to the PRI or RI, and how would you like to publish your response to this assessment? Please automatically publish our responses to the reporting and assessment tool in full on the PRI website
94. What was your most significant achievement in 2007 in relation to your implementation of Principle 6? Launch of the Co-operative Investments website, which explains out how we integrate ESG, and the publication of SRI Guides for IFAs.
95. What was your biggest barrier in 2007 with relation to your implementation of Principle 6? Enter text response here.
96. Please add any overall comments and clarifications related to Principle 6 here. Enter text response here.
Emerging Markets
97. To what extent have you actively thought about how to integrate RI/ESG issues within investment decision making and ownership practices with regards to emerging markets investments? To a small extent
98. Please describe your activities with regards to integrating RI/ESG issues within investment decision making and ownership practices with regards to emerging markets investments. We use six external fund managers for emerging market investments. Two of these (accounting for 48% of our emerging market investments) have active governance and voting policies.
99. To what extent do you believe the integration of ESG issues in emerging markets is as relevant as the integration of ESG issues in other markets? To a greater extent
100. To what extent did you employ the following approaches in your 2007 active ownership strategy in emerging markets?
(Proxy) voting To a moderate extent
Direct engagement conducted privately To a small extent
Direct engagement conducted publicly Planning to in 2008
Collaborative engagement Planning to in 2008
Filing shareholder resolutions Not at all
Co-filing shareholder resolutions Not at all
Other (Please specify): No Answer
101. To what extent have you developed a comprehensive RI/ESG engagement capability regarding business activities in emerging markets? To a small extent
102. Please list the three most often addressed RI/ESG-related issues in your shareholder engagement initiatives in emerging markets?
1. supply chain labour standards
2. climate change
3. human rights
103. Have you sought information from companies regarding their adoption of/adherence to norms, standards, codes of conduct or international initiatives related to RI/ESG issues in emerging markets?
Adoption To a small extent
Adherence To a small extent
104. Do you take RI/ESG considerations into account when selecting and approving emerging markets external investment managers? To a small extent
105. Do your consultants factor RI/ESG issues into their short listing of emerging markets external investment managers? Not at all
106. Do you have evidence that you have played a role in the improved integration of RI/ESG issues by external investment managers investing in emerging markets? Not at all
107. To what extent have you worked together with other investors to improve the effectiveness of implementing the PRI in emerging markets? Not at all
108. Are you undertaking any additional efforts to raise awareness of RI/ESG issues in emerging markets? Planning to in 2008
109. Have you sought to determine what impact your RI/ESG issue-related efforts (voting and engagement, investment decision making, disclosure, etc.) have had on corporate behaviour or performance in emerging markets? No Answer
110. Please add any overall comments and clarifications related to the PRI in emerging markets here.
111. What is your top PRI-related goal/priority for emerging markets in 2008?
Closing Comments
112. Why did your organisation join the PRI? We are committed to incorporating ESG issues into our investment analysis and decision-making processes. We believe that the Principles will lend weight to the efforts of responsible investment leaders in what is already a rapidly growing area. We believe that we are already taking actions in accordance with many of the Principles. In the area of investments, our asset management arm is unique in the UK in offering a distinctive approach to responsible investing across all UK funds we manage internally, without exception.
113. Please describe the benefits you have enjoyed as a result of signing the PRI: We have worked on integrating ESG into our investment process for a number of years. PRI has provided a benchmark against which we can measure our progress in this area. Freedom to use the PRI logo on our literature.
114. To what extent do you believe the PRI has succeeded in changing investor behaviour and/or raising awareness or capacity on RI/ESG issues? Do you have any examples you could share? a large extent
115. 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. Annual conference in Africa or Europe
2. This survey is very resource intensive and may be beyond the capacity for smaller institutions (and some larger ones!) so make it shorter and easier
3. make more use of existing SIFs
116. What are your top three PRI-related goals/priorities for 2008?
1. To improve reporting of our activities and progress towards implementing the Principles.
2. To further embed ESG issues into our investment analysis and decision making processes.
3. To capitalise on our leadership in this area when pitching for external business using the  Values AND Value principle. We are assisted significantly by the strong internal buy-in for our integrated approach.To encourage peers to become members of PRI.
117. Please rank the six principles from most difficult to implement to least difficult to implement:
Most difficult
1
Principle 4
2 Principle 5
3 Principle 6
4 Principle 3
5 Principle 1
Least difficult
6
Principle 2