Any other business

What tea with the WI taught me about responsible investment

11 September 2021

9:00 AM

11 September 2021

9:00 AM

Late-breaking exam results: many of the City’s top fund managers have failed a vital test of ‘stewardship’ — defined for this purpose as ‘the responsible allocation, management and oversight of capital to create long-term value for clients and beneficiaries leading to sustainable benefits for the economy, the environment and society’. That mouthful comes from the Financial Reporting Council’s UK Stewardship Code; asset management firms seeking to become ‘signatories’ to the code were asked to submit essays describing their own investment principles, highlighting their approach to hot-button ‘ESG’ (environmental, social and governance) issues. Out of 189 applicants, 64 failed to reach the pass mark, while some major firms chose not to apply at all.

Absentees from the approved list include Schroders, JP Morgan, Goldman Sachs, Credit Suisse, BNP Paribas and the bond fund Pimco. Is London’s much-vaunted fund management community so delinquent in ethics that one third can’t pass a basic test? Or might it be the wrong test?

The truth behind this story is that the codification of ESG as a means of assessing the moral correctness of any proposed investment is still a muddle — and one that’s much exploited in the marketing hype of investment products. Likewise, no one has proved the fashionable claim (promoted by Larry Fink, head of the investment giant Blackrock, among others) that companies and funds which score highly on ESG measures generate better long-term returns for investors than supposed sinners that score worse. For a start, there’s no consensus on what those measures should be. All we can really say is that the best companies and fund managers are also likely to have higher ethical standards woven into their cultures, whether or not they meet external codes and metrics.

If all that sounds abstruse, here’s a simple parable. I was once invited to address a Women’s Institute conference at Scarborough and found the assembled ladies furious that they had been barred from enjoying free tea and coffee offered by Taylors of Harrogate, a business that had won awards for fair treatment of growers in Africa and Asia — but whose products did not carry the ‘Fairtrade’ mark insisted upon by the National Federation of WIs. The argument that Taylors’ terms might actually be better for growers than Fairtrade’s was not allowed to be heard. But whether we’re talking about hot beverages or sustainable investments, what really matters is sincerity of action, not badge-wearing or box-ticking.

Invitation to bad debts

What on earth possessed Bank of England governor Andrew Bailey to perform a U-turn on the issue of working from home? Having previously ordered staff to return to the office this month for at least one day per week (‘Physical presence with teams remains important,’ said his chief operating officer, Jo Place), he has now told them they don’t have to come in at all, at least for the time being.

My man in a pink coat who used to serve the governor’s soup says this may have to do with pressure from Unite and other unions represented in the Bank. It runs contrary not only to Rishi Sunak’s campaign to drag civil servants back to the workplace, but also to the Bank’s core task of maintaining financial stability. Banking crises are habitually associated with boom and bust in commercial property; the City is full of new-built office towers with almost no one in them. Follow the logic: for the Bank of England itself to say ‘Don’t bother coming back’ is a plain invitation to bad debts. Meanwhile, look out for a man in a pink coat in the crowd at the Old Trafford Test match.

Finish what you start

My call for suggestions of small but useful improvements to train travel if we can no longer afford grands projets brought a postcard from I.K. Gricer, long-retired railway adviser to my predecessor Christopher Fildes: ‘The principle is always finish what you’ve started. That includes the electrification of the Midland main line — an on-off budget item since 2012 that still requires diesel power north of Kettering. As for Crossrail…’ at which point the old gentleman seems to have dropped his fountain pen.

Another reader proposed the reopening of the 1899 Great Central line from Mary-lebone via Aylesbury to Sheffield, which fell to the 1960s Beeching axe. ‘Most of its masonry and earthworks still exist, including long-radius curves for high-speed running, and the completed Chilterns section of HS2 could provide a new fast link into London.’ Sounds good, so I consulted Gricer again: ‘Ah, but is the 2,997-yard Catesby Tunnel intact? And what of protected newts and bats?’

Final frontier

I’m sorry to hear that the Prime Minister’s younger half-brother Maximilian Johnson has lost his shirt down a Mongolian goldmine. Remote parts of the globe offer a cornucopia of high-risk ‘emerging market opportunities’ but even a website called Invest Mongolia — claiming that $10 billion has already been committed to deep mining and infrastructure projects in this sparsely populated former Soviet satellite — admits it’s ‘the final frontier’. I once crossed its inhospitable landscape by train and was hesitant even to step on to the platform at Ulan Bator, never mind take a punt on the local natural resources sector or even track down a restaurant to tip for you (though the Hazara curry house is well rated).

But Johnson reportedly risked £1.5 million of his own in the process of raising £14 million for the Zasag Chandmani mine project, in partnership with legendary Hong Kong dealmaker Simon Murray; much of the money then disappeared and fraud charges have been brought against a local owner whose whereabouts are unknown. If a veteran like Murray (close ally of Asia’s shrewdest billionaire, Li Ka-shing) can get burned there, Mongolia is no place for Boris-minors.

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