As institutional shareholders, on behalf of pension and other funds for whom we invest, we speak for over 4.5% of the [FTSE] and are committed to living up to our responsibilities. We believe that companies such as ourselves which do these things responsibly are genuinely ‘socially useful’, and they also provide the institutional investment for businesses which in turn create jobs and pay taxes.
We play a leading role as we move towards the ‘virtuous circle’ described in the IIWG Paper: a business model where an increasingly customer-friendly, business-efficient insurance sector delivers a ‘triple win’ for customers, shareholders and taxpayers. The research supported by us and undertaken by Business in the Community (BITC) last year made a convincing case that those companies who perform well against environmental, social and governance (ESG) criteria also tend to outperform in investment terms. We want to understand this link better and we will be supporting further BITC research in this area.
Engagement requires resources: time, effort, and investment in clever and dedicated people. So if pension funds, and politicians, rightly expect a higher degree of engagement by institutions, they have to recognise that this comes at a price. We are already one of the most active institutions on environment, social and governance (ESG) engagement, and the breadth and depth of our activity is likely to increase further. It is equally important for others to step up their activity on these issues.
Our industry needs to do more to encourage high standards of governance and corporate behaviour, as well as supporting the managers of those companies which do successfully deliver benefits to customers and shareholders. As part of our ‘socially useful’ role, this needs to be facilitated by creating the right mechanisms for institutional shareholders to work together, and by adjusting business models so that the costs of intervention are met by the ultimate beneficiaries.
