VALUES AND VALUE Communicating the Strategic Importance of Corporate Citizenship to Investors

VALUES AND VALUE
Communicating the
Strategic Importance of
Corporate Citizenship
to Investors
Findings of a 2003 CEO Survey of
the World Economic Forum Global
Corporate Citizenship Initiative in
partnership with:

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Contents
Preface
3
I
Corporate Citizenship and Investors
4
1. What role do institutional investors play?
2. Signs of change in the financial sector
II
The Investor Communication Challenge
11
1. Is anyone listening?
2. Defining corporate citizenship
3. Making and measuring the business case
4. Ensuring sufficient quantity and quality of information
5. Developing relevant skills and competence
6. Short-term versus long-term time horizons
III
Modes and Messages for Effective Communication
20
1. Frame corporate purpose, principles and values with clarity
2. Emphasise the social contribution of core business
3. Present a credible and measurable business case for corporate citizenship
4. Ensure consistency and coherence of message
IV
Conclusions
32
Industries and corporate headquarter countries of the companies that contributed to the report:
Banking, clothing and footwear, conglomerates, construction, electronics, food and beverage, insurance, logistics and transportation, mining
and metals, oil and gas, pharmaceuticals, professional services, travel and tourism, utilities
Belgium, Chile, Egypt, France, Germany, India, the Netherlands, Norway, Pakistan, the Philippines, South Africa, Switzerland, United Kingdom,
USA
This report is based on CEO, CFO and investment relations officers’ responses to a written survey and set of personal interviews, conducted
primarily with executives in signatory companies of the World Economic Forum’s Global Corporate Citizenship Initiative. Although this initiative
represents a small and self-selected group of companies, they offer perspectives from 14 different industry sectors with headquarters in 14
different countries. Some of the key messages are reinforced by the findings of research conducted by SAM Sustainable Asset Management in
2003, covering over 1,000 companies, and the findings of several global, European and American surveys of institutional investors – each
covering over 400 investors – which are listed in the footnotes.

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VALUES AND VALUE:
Communicating the Strategic Importance
of Corporate Citizenship to Investors
PREFACE
The World Economic Forum is pleased to issue this third report of our Global Corporate Citizenship Initiative, a programme
that concentrates on the leadership role of chief executive officers and boards of directors, and the key drivers of their
engagement in corporate citizenship at the international level. This report grew out of a discussion among CEO members
of the initiative at our Annual Meeting 2003 in which they reviewed the findings of last year’s report, Responding to the
Leadership Challenge: Findings of a CEO Survey on Global Corporate Citizenship. That study profiled practical examples of
leadership in implementing elements of the initiative’s ‘Framework for Action’, which offers a template endorsed by
over 40 CEOs for leading a company through a deliberate thought process on how to manage its impact on society and
relationship with stakeholders.
In last year’s survey, CEOs identified a sometimes sceptical investment community as having a particularly crucial
influence on thinking about corporate citizenship among business leaders and board members. In the discussion at last
year’s Annual Meeting, a number expressed the view that the initiative could make a useful contribution by examining
how member company CEOs and CFOs explain their emphasis on corporate citizenship to shareholders and institutional
investors and by drawing lessons from the range of these experiences and practices.
Thus, Values and Value explores how CEOs, CFOs, and investor relations officers communicate the strategic importance
of the social and environmental aspects of their firm’s performance to investors. It examines how these companies are
articulating both the business case and the leadership or values case for global corporate citizenship, highlighting some of
the challenges of communicating often intangible, non-financial but nevertheless quite relevant issues to owners. Based
on this analysis and the experiences recounted directly by many of our CEOs and CFOs, the report takes note of a number
of effective practices and offers a set of recommendations for those seeking to communicate the importance of corporate
citizenship to shareholders and investors.
We would like to thank our partner in this project, The Prince of Wales International Business Leaders Forum and,
in particular, Jane Nelson for applying her customary dedication and prolific understanding of the field of corporate
citizenship to this endeavour. Our appreciation also goes to Caroline Bergrem, the Forum’s Project Manager of the Global
Corporate Citizenship Initiative. Finally, we extend our gratitude to the CEOs of member companies of the initiative and
their teams. Their leadership is critically important to advancing the spirit and practice of global corporate citizenship.
Klaus Schwab
Richard Samans
Executive Chairman
Managing Director
World Economic Forum
Global Institute for Partnership and Governance
World Economic Forum
GENEVA, JANUARY 2004
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I Corporate Citizenship and Investors
“Never before in the
Business leaders in almost every industry sector and country face a complex
33 years of the World
and challenging set of economic pressures, political uncertainties and growing,
Economic Forum’s history
often contradictory, stakeholder expectations. Despite an improvement in
has the situation in the
economic conditions, severe constraints remain on costs and prices, the
world been so fragile, as
employment impact of jobless growth is a concern in some major economies,
complex and as dangerous
a pensions crisis looms on the horizon, and increased trade tensions are
as this year. We feel that
challenging global growth prospects. Geopolitical uncertainty shows few signs
we are living in a new world
– with new rules and new
of abating and non-traditional business risks, from international terrorism to
dangers – but certainly also
climate change and HIV/AIDS, continue to grow in both quantity and complexity.
with new opportunities.
At the same time, failures in corporate governance and ethics still dominate the
…Today we need a new,
headlines, and trust in business and its leaders remains low. Expectations also
enlarged concept of
continue to grow in terms of the public role of private enterprise – from helping
business leadership!”
governments to deliver the Millennium Development Goals to playing a
Klaus Schwab,
leadership role in zones of conflict and being more accountable for
Executive Chairman,
environmental, labour and human rights issues along global supply chains.
World Economic Forum,
Davos, 20031
And underpinning all this, CEOs and their executive teams face unrelenting
pressure to respond to new types of competition and to deliver sound and
credible financial performance in the short term.
As a result, many business leaders face unprecedented, and often unusual, demands on
their time and leadership skills. They are under pressure to demonstrate outstanding
performance not only in terms of competitiveness and market growth, but also in their
corporate governance and their corporate citizenship. They are being called on to engage
with activists as well as analysts, to be accountable for their non-financial as well as their
financial performance, to manage social and environmental risks as well as market risks,
and to cooperate as well as to compete – often with non-traditional partners focused on
unfamiliar issues. In response to these challenges, the concept of corporate citizenship or
corporate social responsibility is moving beyond the boundaries of legal compliance and
‘nice-to-do’ philanthropy, to a more central and challenging position alongside issues of
corporate purpose, governance, strategy, risk management and reputation.
In the pages that follow we look at the role of institutional investors in driving this trend
and some of the recent changes in the financial sector that are starting to move corporate
citizenship onto the mainstream investment agenda. These changes include:
• Increase in ‘active ownership’ and research by mainstream investors
• Growing influence of socially responsible investment
• New legal and listing requirements
• New international norms and conventions
• Ongoing ethical and governance crises in the capital raising chain
• More sophisticated activist campaigns
• Voluntary financial and reporting frameworks.
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1. WHAT ROLE DO INSTITUTIONAL INVESTORS PLAY?
Institutional investors – beyond the active but small socially responsible investment (SRI)
community – have rarely been seen as one of the drivers toward more responsible
business practices. If anything, the opposite has often been the case, both in reality and
“A confluence of corporate
perception. The massive pressure on corporate executives during the past decade to make
governance and socially
the numbers and to deliver on ever-rising short-term forecasts has frequently been cited
responsible investing has
as one of the drivers of recent corporate governance and ethics crises. It has also been a
stimulated activity. As well
factor in major cost-cutting exercises, which have resulted in employees being laid off,
as developing analytical
suppliers being squeezed and local community partners being dropped. In some cases,
pressure from the financial markets has been accompanied by corporate efforts to cut
skills, firms are also
corners on social and environmental legislation and norms.
collaborating in specific
areas, notably climate
“Our investors don’t care” has become a common refrain both from leading companies
change. Research has
who have been frustrated by the lack of investor support for their efforts to improve social
and environmental performance, and from the corporate laggards, happy to have a ready-
shown that incorporating
made excuse for their lack of investment and vision in this area.
social responsibility can
reduce portfolio volatility
A survey of CEOs carried out in 2002 by the World Economic Forum’s Global Corporate
and increase returns. The
Citizenship Initiative (GCCI) asked business leaders to identify the stakeholder groups who
create the greatest pressures or incentives for their corporate citizenship activities.
evidence is not conclusive,
Investors were ranked only seventh, after employees, government bodies, customers,
but rejects the view that
local communities, NGOs and boards of directors.
any kind of screening will
damage the risk/return
As outlined in the next section of this report, many CEOs, CFOs and investor relations
performance by narrowing
officers comment on the low level of shareholder interest in their corporate citizenship or
corporate social responsibility activities. Some claim that their investors have not asked
the available investment
them a single direct question relating to their social and environmental performance over
universe.”
the past few years, and probably not surprisingly, sell-side analysts are cited as being
Roger Cowe
particularly uninterested.
Risk, Returns and
Yet, there are signs that the tectonic plates are starting to shift. Changing societal
Responsibility
expectations, evolving regulatory frameworks, and the emergence of new business
Association of British
risks and opportunities associated with a company’s ethical, social and environmental
Insurers, 20042
performance, are resulting in a growing convergence between good corporate citizenship
and investor interests.
2. SIGNS OF CHANGE IN THE FINANCIAL SECTOR
“Environmental and related
Although by no means an exhaustive list in what is a complex, multidimensional and fast-
social issues in transactions
moving field, a few of the drivers for change in the financial sector are outlined below.
are becoming an integral
(i) Increase in ‘active ownership’ and research by mainstream investors
part of our risk analysis.”
In a limited, but interesting number of cases, during 2003 some of the world’s major
David Bushnell, Managing
institutional investors started to flex their muscles on issues related not only to improved
Director, Head of Risk
corporate governance and ethics, but also broader issues of corporate citizenship.
Management, Citigroup
A group of US State and City Treasurers and Trustees, with fiduciary responsibility for some
Global Corporate and
of America’s largest and most influential pension funds, not only made public calls for
Investment Bank3
governance changes at the New York Stock Exchange, but also joined environmental
groups and socially responsible investment (SRI) fund managers to call for greater investor
focus on the risks and opportunities posed by climate change. Speaking at an Investors
Summit in New York in November 2003, California State Treasurer Phil Angelides
commented, “In global warming, we are facing an enormous risk to the US economy and
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to retirement funds that Wall Street has so far chosen to ignore. The corporate scandals
over the last couple of years have made it clear that investors need to pay more
“Climate change – a
attention to corporate practices that affect long-term value. As fiduciaries, we must
take it upon ourselves to identify the emerging environmental challenges facing the
change in the average
companies in which we are shareholders, to demand more information, and to spur
weather conditions –
needed actions to respond to those challenges.”6
may have both positive
and negative effects in
In February 2003, the Association of British Insurers, whose 400 plus members transact
some 95% of the insurance business in the United Kingdom and account for over 20%
individual cases, but it
of investments in the London Stock Exchange, issued updated disclosure guidelines on
can never be without
socially responsible investment, first issued in 2001. In doing so, ABI stated “public
consequences.”
interest in corporate social responsibility has grown to the point where it seems helpful
Bruno Porro, Chief Risk
for institutional shareholders to set out basic disclosure principles, which will guide them
Officer, SwissRe
in seeking to engage with companies in which they invest.”7
Opportunities and Risks of
The American Federation of Labor and Congress of Industrial Organizations (AFL-CIO),
Climate Change, 20024
which represents the interests of some 13 million unionized working men and women in
the United States with over US$ 6 trillion invested in health, pension and savings funds,
intensified its ‘Capital Stewardship’ campaign. This campaign is aimed at using workers’
shareholder muscle to encourage more long-term, sustainable value creation.8
Also during 2003, the research departments of major financial institutions such as
SwissRe, JP Morgan, Morgan Stanley, Citigroup, UBS Warburg and HSBC produced
“We believe it is also
reports analysing the material business risks and opportunities created by issues such
crucial to take on board
as climate change, eco-efficiency, obesity and the Millennium Development Goals.
how pro-active the
companies are to bring the
While such actions remain limited among major institutional investors and some
observers query the wisdom of major pension funds and their trustees expanding the
right innovation to adapt
concept of fiduciary responsibility beyond the maximization of short-term results, these
their product portfolios and
are developments worth watching.
to adopt a sustainable
socially responsible
(ii) Growing influence of socially responsible investment
approach to the
At the same time, the SRI movement, whilst still representing a tiny percentage of global
funds under management, continues to grow in terms of size, sophistication, geographic
obesity issue.”
scope and influence.
Obesity: A Lingering
Concern, Morgan Stanley
According to the Social Investment Forum (SIF)9, between 2001 and 2003, socially
Equity Research
screened funds in the United States grew by about 6.5%, while the broader universe of
professionally managed portfolios fell 4%. During the same period, shareholder advocacy
Consumer Staples: Global
activity increased by 15%, and 2003 is on track to be a record year for filings of social
Insights, October 20035
and environmental as well as corporate governance resolutions. The SIF also reports that
there is a wide and growing array of SRI products available in more than 21 countries.
The credible performance of many SRI funds and indices, such as the Dow Jones
Sustainability Index and FTSE4Good, challenges the critique that this is an asset class
for people with values, who don’t care too much about value. Although negative
screening remains an option for many ethical investors, most SRI fund managers have
moved beyond this limited approach to also offer investment strategies such as positive
screening, best-in-class stock selection and industries of the future, with a strong
emphasis on both the financial and non-financial performance of companies.
SRI fund managers have also become more active in engaging with executive
management teams, not only through proxy voting at annual general meetings but also
through regular dialogue and meetings. Many are increasingly involved in debates on
public policy, with the aim of shaping an enabling environment that is more conducive to
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aligning financial sector interests with a shift towards more sustainable patterns of
economic growth.
One important development over the past year has been the emergence of collective
initiatives by major SRI Investors. These initiatives have served to leverage the influence of
the SRI community on both corporate behaviour and public policy. A few examples are
outlined in Box 1.
BOX 1: COLLECTIVE ACTION BY INVESTORS
1International Corporate Governance
shareholder value in the long term and therefore want to enhance
Network (ICGN)
their understanding of how companies are addressing this issue.”12
Initially founded by pension funds in 1995, the ICGN now has more
than 300 members – mainly fund managers – representing assets
4
in excess of US$ 10 trillion. It aims to “link shareholders to
Just Pensions
company management” by producing principles for companies and
The objective of the Just Pensions initiative is to “contribute to the
investors to adhere to. One of its current activities is helping to
Millennium Development Goals, by improving the social and
reformulate the OECD corporate governance principles, which will
environmental impact of foreign trade and investment in developing
be published in 2004. 10
countries.” Affiliated to the UK Social Investment Forum, which has
over 250 members, Just Pensions produces industry sector
2
research notes focused on the corporate citizenship challenges
The Carbon Disclosure Project
facing 12 FTSE industry sectors and has developed a self-
On 31 May 2002 a group of 35 investors representing assets of
assessment tool for pension fund trustees to determine whether
US$ 4.5 trillion wrote to the chairmen of the FTSE500 companies
social, environmental and ethical decisions have been sufficiently
requesting “investment-relevant information relating to greenhouse
covered in their investment decisions.13
gas mitigation.” Nearly half of the companies (245) provided
information. The initiative was so successful that the exercise was
repeated in November 2003; this time 89 institutional investors,
5 Investor’s Statement on Transparency in the
Extractives Sector
representing assets of US$ 9 trillion, supported the request for
In May 2003, a group of institutional investors representing
information. 11
£1.75 trillion (US$ 3 trillion), issued a statement in support of the
Extractive Industries Transparency Initiative (EITI). Launched in
3
September 2002 by United Kingdom Prime Minister Tony Blair, with
Pharmaproject.org
the support of leading mining and energy companies, as well as
In March 2003, 12 institutional investors produced a framework
NGOs, the EITI aims to increase transparency of payments made by
for pharmaceutical companies to use as a guide for disclosure in
extractive sector companies to governments and government-linked
annual/social reports in the context of “the public health crisis
entities. The statement commends the EITI and the efforts made by
in emerging markets”, with a focus on issues relating to access
companies and governments already engaged in the initiative, and
to patented medicines. The investors involved in the initiative
calls on the engagement of new companies, as well as inviting
believe that “the sector’s response to the crisis could impact on
other investors to join the statement.14
(iii) New legal and listing requirements
Over the past few years, the passage of the Sarbanes-Oxley Act and the recent SEC
Mandate on Proxy Voting Guidelines in the United States have also intensified investor
interest in corporate citizenship and corporate governance. These developments have been
matched and, in some cases, surpassed in other major capital markets. Reviews of
company law and the implementation of new disclosure and listing requirements in
countries such as the United Kingdom, France, Sweden, Germany, Belgium and Australia,
for example, have also involved an increased focus on the non-financial performance of
companies.
At the same time, although environmental, labour, human rights, and health and safety
legislation has had mixed results, both the threat and the actual implementation of new
regulation remain important drivers of the corporate citizenship agenda. Such regulation
creates both risks and opportunities for business. These risks and opportunities obviously
vary widely by industry sector and country, but in a growing number of cases investors
cannot afford to ignore them.
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(iv) New international norms and conventions
Increased corporate citizenship and the role of business in development were also central
features in several international commissions and conventions during 2003. Although these
have a less direct impact on corporate behaviour than national laws and regulations, they
nonetheless contribute to growing awareness by business leaders and investors of the
strategic importance of responsible business practices. Examples of such international
actions during 2003 have included the signing of the United Nations Convention against
Corruption and adoption of the Norms on the Responsibilities of Transnational
Corporations and Other Business Enterprises with Regard to Human Rights, by the UN
Sub-Commission on Promotion and Protection of Human Rights (a 26 member expert
advisory body to the UN Human Rights Commission). The Norms, which are essentially a
roadmap for companies for addressing human rights, go before the full UN Human Rights
Commission for consideration in March 2004. Other UN initiatives that have included a
strong focus on the global role and responsibilities of business include the ILO’s World
Commission on the Social Dimensions of Globalization, UNDP’s UN Commission on the
Private Sector and Development and the UN Financing for Development Initiative.
(v) Ongoing ethical and governance crises in the capital raising chain
The pressure on business leaders to play a more proactive role in restoring public trust in
private enterprise has also been kept high during 2003 by ongoing ethical crises and media
headlines. The spotlight has been particularly intense on the financial and professional
services sectors, driven by a combination of the legal proceedings underway in cases such
as Enron and Tyco and the emergence of new conflicts of interest and ethical problems
along the capital raising chain. These have ranged from problems in the US Mutual Fund
industry and the NYSE’s governance structure, to ongoing public concern about conflicts of
interest between auditing and consulting services, risk rating and risk management
services, and research and investment banking services.
(vi) More sophisticated activist campaigns
While lawyers and lawmakers have been shining the ‘corporate citizenship’ spotlight
on business and its investors from one direction, from another direction, social and
environmental campaigners continue a relentless and increasingly sophisticated pursuit of
‘big business’ and the companies that finance it. Non-governmental organizations such as
Friends of the Earth, the World Resources Institute, Human Rights Watch, Amnesty
International, Global Witness and Oxfam are starting to target the financial sector in some
of their campaigns, seeing it as a key leverage point to influence corporate behaviour on
issues ranging from climate change and human rights to access to essential medicines and
fair trade. They are bringing in people with financial expertise and undertaking increasingly
rigorous and analytical research on the business risks and opportunities associated with a
company’s ethical, social and environmental performance.
(vii) Voluntary financial and reporting frameworks
Not all of the impetus for greater corporate citizenship and responsible investment is
coming from external stakeholders or being imposed from the outside on the business and
financial community. In recent years there has also been increased collective action by
CEOs on a variety of corporate citizenship issues and in a number of countries and industry
sectors. The past two years have been particularly notable for new voluntary initiatives in
the financial sector.
Financial sector initiatives have included the launch in 2003 of the Equator Principles, an
agreement by 14 of the world’s major project finance banks working in partnership with
the International Finance Corporation (IFC). These principles are aimed at strengthening
social and environmental criteria in project finance and the signatory banks have agreed to
adhere to the IFC’s rules and guidelines on sustainable development for projects over a
certain size.15
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In September 2002, the Corporation of London supported the launch of the London
Principles of Sustainable Finance.16 Developed by the Forum for the Future in
consultation with over 50 financial institutions, these seven principles propose conditions
under which financial market mechanisms can best promote the financing of sustainable
development. They are a framework to encourage innovation rather than a binding
agreement requiring compliance. They focus on the following critical services that
financial institutions offer to companies and can use as a mechanism for influencing
corporate behaviour:
• Pricing assets and exercising ownership
• Providing new finance
• Risk management.
Another example of collective action is UNEP’s Finance Initiatives, which bring together
17
major banks and insurance companies. First established in the early 1990s, these
initiatives have grown in size and influence and have become increasingly focused on
mainstreaming responsible investment and banking practices during the past few years.
Of particular relevance to investors has been the establishment of an Asset Management
Working Group by 12 leading firms. Its aim is to develop the ability of mainstream fund
managers to identify and respond to social and environmental issues relevant to their
profession. During 2003 the group worked on the following four projects:
• Understanding the materiality of key environmental and social criteria
• The fiduciary responsibility of institutional investors
“We take the view that,
• Engagement with pension funds
where appropriate, well-
• The meaning of socially responsible investment in emerging markets.
designed and targeted
Another important voluntary development has been the establishment of the Global
regulation can play a
Reporting Initiative (GRI) as an independent body, supported by a multistakeholder
helpful role. When I was
governance structure.18 The GRI was first initiated in 1997, as a joint initiative of the
the pensions minister
United Nations Environment Programme (UNEP) and the Coalition for Environmentally
in 1999, I introduced the
Responsible Economies (CERES), a group of more than 80 investor, environmental and
requirement that pension
community organizations. In 2002, the GRI became independent, and is today an official
collaborating centre of UNEP offering a framework for companies to help them report on
funds should state whether
their triple-bottom line performance – economic, social and environmental. Work is
or not they had a policy
currently under way to develop sector-specific indicators to ensure more relevant
on socially responsible
information for different industry sectors. The financial sector is one of the first
investment and if so what
being assessed.
it was. That has been an
During 2003, the UN’s Global Compact grew to a participation of some 1,000 CEOs and
effective, light touch
their companies, over half of them from developing and transition economies.19 One of
intervention, which has
the Global Compact’s new projects will focus on the role of the financial sector and how
stimulated a great deal
it can integrate the Compact’s Nine Principles for business performance on human
rights, labour and the environment into investment research and stock exchange
of work around the social
listing criteria.
and environmental
consequences of
The growing interest among investors in corporate citizenship and sustainability issues
investment.”
is illustrated in the findings of two major surveys of institutional investors during 2003,
Stephen Timms,
which are summarized in Box 2.
UK Minister for Corporate
Despite the trends and initiatives outlined above and the survey results summarized in
Social Responsibility
Box 2, many in the investor community – pension fund trustees, fund managers, buy and
sell-side analysts, researchers and financial consultants – appear to remain focused on
short-term results and limited financial performance indicators. How are CEOs and other
executives communicating the importance of their corporate citizenship activities to
these institutional investors and do investors care? What are the challenges and what
are some of the best practices and recommendations for others? We explore these
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questions in the following pages, drawing on the findings of interviews and a survey of
companies participating in the World Economic Forum’s Global Corporate Citizenship
Initiative, in addition to other research listed in the back of the report.
BOX 2: CHANGING INVESTOR ATTITUDES TO CORPORATE CITIZENSHIP
Investing in Responsible Business: The 2003 Survey of
Formula for Confidence: Resetting Investment Criteria
European Fund Managers, Financial Analysts and
After the Boom and Bust
Investor Relations Officers20
2003 International Survey of Institutional Investors21
One of the GCCI member companies, Deloitte, collaborated
In their seventh annual survey of institutional investors, Russell
with CSREurope and EuroNext during 2003 in a survey of 388
Reynolds Associates interviewed nearly 400 institutional
mainstream fund managers and financial analysts (including
investors in the US, United Kingdom, France, Germany, Japan
both sell-side and buy-side analysts) across nine European
and China, with the aim of finding out how they are making
countries (Belgium, France, Germany, Italy, the Netherlands,
their investment decisions, what they consider to be the most
Spain, Sweden, Switzerland and the United Kingdom). Interviews
desirable CEO traits and characteristics for the board of
were also conducted with the investment relations officers
directors, and how much influence they think they have on the
(IROs) of 80 major companies representing a total market value
companies in which they invest. The survey found an interesting
and turnover of more than 1,000 billion Euros. Their findings
array of similarities and differences between these six major
constitute the first comprehensive European picture of how
economies and capital markets. Among their findings:
social and environmental performance informs decisions and
attitudes among mainstream fund managers/analysts and
• Consistent with the rebellion against the ‘returns at all costs’
among IROs in major companies. A few highlights of the survey
mentality, investors in all countries say they believe CEOs
are outlined below:
should practice social responsibility (59%) rather than
operate as though returns are all that matter (35%). Investors
• The financial community sees a clear link between non-
in France and Germany feel strongly that CEOs should be
financial risks and shareholder value. Investor relations
socially responsible (89% and 79%, respectively), while
officers are nearly unanimous, with 89% agreeing on this
those in the United States have split opinions – 53% think it
issue, while fund managers and analysts are marginally more
is important for a CEO to be socially responsible, and 47%
cautious (76%). However, 15% of those interviewed did not
think it is healthy for the CEO to focus on returns only.
see any link between the two.
• Two thirds of investors say a company’s corporate
• For 79% of fund managers and analysts, the management
governance practices are a very important consideration
of social and environmental risks has a positive impact on a
when making decisions about investment opportunities.
company’s market value in the long term, but no impact in
Looking at the United States, the importance of corporate
the short term.
governance as a decision factor has jumped to 71% in 2003
from 53% in 2000. The quality of a company’s board of
• The view is echoed by IROs who believe that good social
directors has nearly doubled in importance to 45% in
and environmental performance in the long term strongly
2003 from 25% in 1997.
influences a company’s brand and reputation (69%),
economic performance (46%) and market value (36%).
• 52% of fund managers/analysts and 47% of IROs believe
that social and environmental considerations will become a
significant aspect of mainstream investment decisions over
the next two years.
• 96% of IROs think that dialogue with shareholders on these
issues is increasing. 95% of them strongly feel that
companies will voluntarily integrate better social and
environmental practices into the way they do business and
85% are convinced that the next three years will see more
legal requirements imposed on companies for social and
environmental reporting.
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