1. Steurer & Margula: SRI in EU Member States CSR HLG Meeting on 31 March 2008 SRI in EU Member States: Government initiatives, expectations by the financial sector and conclusions Presentation given at the meeting of the EU High-Level Group for CSR Brussels, 31 March 2008 Dr. Reinhard Steurer Sharon Margula MA RIMAS - Research Institute for Managing Sustainability Vienna University of Economics and Business Administration www.sustainability.eu www.sustainability.eu/csr-policies www.sustainability.eu www.sustainability.eu/csr-policies

2. Steurer & Margula: SRI in EU Member States CSR HLG Meeting on 31 March 2008 Context and general remarks 1.The project: „Analysis of national policies on CSR, in support of a structured exchange of information on national CSR policies and initiatives“ is commissioned by DG Employment (Tender No VT/2005/063) 2.The subjects: of the three analyses were identified in the CSR HLG meeting on 30 May 2006 3.Parts of the study (re-arranged):  Introduction to SRI (including SRI ratings)  Survey of SRI initiatives  Instead of case studies: Description of SRI initiatives found Survey of SRI experts from the financial services sector  Synthesis

3. Steurer & Margula: SRI in EU Member States CSR HLG Meeting on 31 March 2008 Orientation Part I: SRI Initiatives in Europe 1. Setting the scene 2.Methodological remarks on the survey 3.What instruments did we find in the survey? Overview and examples Part II: Expectations of the financial services sector 4.Methodological remarks 5.Key messages Part III: Conclusions 6. Focussing on rating methods and the importance of transparency Part IV: Wrap-up 7. Project review and outlook

4. Steurer & Margula: SRI in EU Member States CSR HLG Meeting on 31 March 2008 Orientation Part I: SRI Initiatives in Europe 1. Setting the scene 2.Methodological remarks on the survey 3.What instruments did we find in the survey? Overview and examples Part II: Expectations of the financial services sector 4.Methodological remarks 5.Key messages Part III: Conclusions 6. Focussing on rating methods and the importance of transparency Part IV: Wrap-up 7. Project review and outlook

5. Steurer & Margula: SRI in EU Member States CSR HLG Meeting on 31 March 2008 SRI in Europe: Setting the Scene  SRI is a concept that combines investors’ financial objectives with their concerns about social, environmental and ethical (SEE) issues (Eurosif, 2006)  SRI is the application of CSR and SD principles in investment decisions --- it embeds CSR in the functioning of shareholder capitalism  The SRI market:  Market share of SRI: 10-15% of total investments in European funds under management;  Investments in European sustainability or SRI funds: up 30% between 2005 and 2006  SRI or sustainability stock indices (DJSI, FTSE4Good)

6. Steurer & Margula: SRI in EU Member States CSR HLG Meeting on 31 March 2008 Methodological remarks 1.Literature review: Instruments of CSR Policy and typology of instruments Studies on SRI initiatives SRI ratings

7. Steurer & Margula: SRI in EU Member States CSR HLG Meeting on 31 March 2008 Methodological remarks 1.Literature review: Instruments of CSR Policy and typology of instruments Studies on SRI initiatives SRI ratings 2.Survey of public administrators (via HLG for CSR) 12 Nov 07 - 18 Jan 08 90 contacts 24 EU MS reached 16 EU MS provided information on SRI initiatives

8. Steurer & Margula: SRI in EU Member States CSR HLG Meeting on 31 March 2008 Institutional affiliation of interview partners Ministry of Labour and Social Affairs: 7 (44%) Ministry of Economic Affairs: 3 (19%) Ministry of Finance: 2 (12%) Other governm. institutions: 4 (25%)

9. Steurer & Margula: SRI in EU Member States CSR HLG Meeting on 31 March 2008 Methodological remarks 1.Literature review: Instruments of CSR Policy and typology of instruments Studies on SRI initiatives SRI ratings 2.Survey of public administrators (via HLG for CSR) 12 Nov 07 - 18 Jan 08 90 contacts 24 MS reached 16 MS provided information on government initiatives 3.Countries covered: 7 MS provided relevant information on SRI initiatives Several countries and initiatives excluded because no specific SRI focus (SD strategies, CSR strategies in general, initiatives on reporting)

10. Steurer & Margula: SRI in EU Member States CSR HLG Meeting on 31 March 2008 Countries covered in the survey Green: explicit SRI initiatives Orange: no specific SRI initiatives

11. Steurer & Margula: SRI in EU Member States CSR HLG Meeting on 31 March 2008 Methodological remarks 1.Literature review: Instruments of CSR Policy and typology of instruments Studies on SRI initiatives 2.Survey of public administrators 12 Nov 07 - 18 Jan 08 90 contacts 24 MS reached 16 MS provided information on government initiatives 3.Countries covered: 7 MS provided relevant information on SRI initiatives Several countries and initiatives excluded because no specific SRI focus (SD strategies, CSR strategies in general, initiatives on reporting) 4.Accuracy and completeness of the results: Non-governmental initiatives on SRI not covered

12. Steurer & Margula: SRI in EU Member States CSR HLG Meeting on 31 March 2008 Orientation Part I: SRI Initiatives in Europe 1. Setting the scene 2.Methodological remarks on the survey 3.What instruments did we find in the survey? Overview and examples Part II: Expectations of the financial services sector 4.Methodological remarks 5.Key messages Part III: Conclusions 6. Focussing on rating methods and the importance of transparency Part IV: Wrap-up 7. Project review and outlook

13. Steurer & Margula: SRI in EU Member States CSR HLG Meeting on 31 March 2008 CSR policy instruments 1.Informational or endorsing instruments: Campaigns, guidelines, trainings 2.Partnering instruments: Agreements, networks, PPPs, dialogues 3.Financial or economic instruments: Subsidies, grants, prices/awards 4.Legal (mandating) instruments: Laws, regulations, decrees 5.„Hybrid instruments“ Strategies, action plans, platforms, centres Source: Fox T, Ward H, Howard B. 2002; World Bank; http://www.iied.org/pubs /pdf/full/16014IIED.pdf CSR policies study on awareness raising, see www.sustinability.eu/ csr-policies

14. Steurer & Margula: SRI in EU Member States CSR HLG Meeting on 31 March 2008 Overview of SRI initiatives Informational instruments Financial or economic instruments Legal instruments Hybrid instruments Government-sponsored guidelines (1) Information resources, e.g. websites, studies, reports, etc. (2) Tax incentives (3) Economic incentives, e.g. loans, grants, subsidies, etc. (1) Laws (6) Governments applying SRI to public funds (1) All SRI initiatives are economic incentives for CSR

15. Steurer & Margula: SRI in EU Member States CSR HLG Meeting on 31 March 2008 Focus of SRI initiatives Environmental only: (7,7 %) Social and environmental: (38,5 %) Sustainable Development (26,9 %) Ethical (23 %) Social only: (3,9 %)

16. Steurer & Margula: SRI in EU Member States CSR HLG Meeting on 31 March 2008 Target groups of SRI initiatives Pension Funds; 42,9% Private Investors; 28,6% Broad Spectrum of Investors; 21,4% Employees; 14,3% Companies incl. Banks; 21,4%

17. Steurer & Margula: SRI in EU Member States CSR HLG Meeting on 31 March 2008 Orientation Part I: SRI Initiatives in Europe 1. Setting the scene 2.Methodological remarks on the survey 3.What instruments did we find in the survey? Overview and examples Part II: Expectations of the financial services sector 4.Methodological remarks 5.Key messages Part III: Conclusions 6. Focussing on rating methods and the importance of transparency Part IV: Wrap-up 7. Project review and outlook

18. Steurer & Margula: SRI in EU Member States CSR HLG Meeting on 31 March 2008 TypeInformational: guideline InitiativeSustainable Money Guide CountryThe Netherlands Purpose Promote transparency by providing information on SRI, screening/rating methods and available SRI funds FocusSustainable Development, social and environmental Target groupPrivate investors Successful? Helped to popularize SRI Reduced lack of transparency ChallengeUpdated only every two years --- not always up-to-date Website http://www.imprimadebussy.com/ireports/default.asp?a pp=DGG&doc=dgg2006&bhcp=1

19. Steurer & Margula: SRI in EU Member States CSR HLG Meeting on 31 March 2008 TypeLegal: regulation InitiativePublic Pension Funds Act (2000/192) CountrySweden Purpose Requires all Swedish National Pension Funds to dispose an annual business plan on how SRI principles are taken into account FocusEnvironmental, ethical Target groupPension funds Successful? Exact wording Investigation committee: Evaluation report in Nov 08 Joint Ethical Council of funds promotes SRI ChallengeUpdated only every two years --- not always up-to-date Websitehttp://www.ap3.se/en/

20. Steurer & Margula: SRI in EU Member States CSR HLG Meeting on 31 March 2008 TypeEconomic: tax incentive InitiativeCommunity Investment Tax Relief (CITR) CountryUK Purpose Generate income in less developed communities by providing tax incentives to those who invest in eligible businesses FocusSustainable development Target groupPrivate investors or companies Successful? Aims to realise win-win: investors benefit from tax incentives, less developed communities from investments Websitehttp://www.hmrc.gov.uk/specialist/citc_guidance.htm

21. Steurer & Margula: SRI in EU Member States CSR HLG Meeting on 31 March 2008 Type Hybrid: Government agency applies SRI to public funds (legal basis, informational activities, platform for SRI) InitiativePension Reserve Fund (FRR) CountryFrance Purpose Invest capital in line with five SRI principles developed by the FRR FocusSustainable Development Target groupsPublic, retirees, companies Websitehttp://www.ap3.se/en/

22. Steurer & Margula: SRI in EU Member States CSR HLG Meeting on 31 March 2008 Discussion of Part I Part I: SRI Initiatives in Europe 1. Setting the scene 2.Methodological remarks on the survey 3.What instruments did we find in the survey? Overview and examples Comments on SRI in general? Questions of clarification? Comments on SRI initiatives?

23. Steurer & Margula: SRI in EU Member States CSR HLG Meeting on 31 March 2008 Orientation Part I: SRI Initiatives in Europe 1. Setting the scene 2.Methodological remarks on the survey 3.What instruments did we find in the survey? Overview and examples Part II: Expectations of the financial services sector 4.Methodological remarks 5.Key messages Part III: Conclusions 6. Focussing on rating methods and the importance of transparency Part IV: Wrap-up 7. Project review and outlook

24. Steurer & Margula: SRI in EU Member States CSR HLG Meeting on 31 March 2008 Methodological remarks  Purpose: complement survey on SRI initiatives and learn what SRI experts expect from governments  Interviewed persons: 5 SRI experts from 5 different financial services companies from 5 different European countries  Time: 17 Jan 2008 – 29 Feb 2008  Limitations: Only 5 experts interviewed; results give an impression (rather than a representative picture) of what governments should do regarding SRI

25. Steurer & Margula: SRI in EU Member States CSR HLG Meeting on 31 March 2008 Key messages (1 of 3)  Personal experiences with government initiatives on SRI:  Legal disclosure requirements for pension funds  Disclosure requirements for all companies (annual reporting)  Frontrunners in Europe: Norway (petroleum fund), UK, France, Belgium and the Netherlands  Additional types of initiatives not considered in the survey:  Disclosure/reporting requirements  SRI by governments, or “lead by example”

26. Steurer & Margula: SRI in EU Member States CSR HLG Meeting on 31 March 2008 Key messages (2 of 3)  Most relevant SRI initiatives (i.e. effective but difficult to adopt)  Legal disclosure/reporting requirements (5 mentions)  (Economic/fiscal instruments are seen critical)  Most practical SRI initiatives (i.e. effective and politically feasible)  Informational instruments, like guidelines for SRI, and communicating own SRI practices to the public  Disclosure requirements for pension funds  Key target groups for governmental SRI initiatives  Pension funds  International bodies like the UN and the OECD

27. Steurer & Margula: SRI in EU Member States CSR HLG Meeting on 31 March 2008 Key messages (3 of 3)  Key drivers behind SRI  Mainstream investment community  Environmental and social pressures  Not among them: governments (named only once)  Key challenges and obstacles for SRI  Conflicting time perspectives (exception: pension funds)  The “business case” for SRI is still contested  How governments can help in this respect  Inform key actors and stimulate debate on SRI (with conferences, seminars, etc.)  Adopt legal CSR disclosure and reporting requirements  Lead by example

28. Steurer & Margula: SRI in EU Member States CSR HLG Meeting on 31 March 2008 Key messages (3 of 3)  Key drivers behind SRI  Mainstream investment community  Environmental and social pressures  Not among them: governments (named only once)  Key challenges and obstacles for SRI  Conflicting time perspectives (exception: pension funds)  The “business case” for SRI is still contested  How governments can help in this respect  Inform key actors and stimulate debate on SRI (with conferences, seminars, etc.)  Adopt legal CSR disclosure and reporting requirements  Lead by example Key messages (2 of 3)  Most relevant SRI initiatives (i.e. effective but difficult to adopt)  Legal disclosure/reporting requirements (5 mentions)  (Economic/fiscal instruments are seen critical)  Most practical SRI initiatives (i.e. effective and politically feasible)  Informational instruments, like guidelines for SRI, and communicating own SRI practices to the public  Disclosure requirements for pension funds  Key target groups for governmental SRI initiatives  Pension funds  International bodies like the UN and the OECD Key messages (1 of 3)  Personal experiences with government initiatives on SRI:  Legal disclosure requirements for pension funds  Disclosure requirements for all companies (annual reporting)  Frontrunners in Europe: Norway (petroleum fund), UK, France, Belgium and the Netherlands  Additional types of initiatives not considered in the survey:  Disclosure/reporting requirements  SRI by governments, or “lead by example” Illustrating the importance of disclosure requirements…

29. Steurer & Margula: SRI in EU Member States CSR HLG Meeting on 31 March 2008 Key messages (3 of 3)  Key drivers behind SRI  Mainstream investment community  Environmental and social pressures  Not among them: governments (named only once)  Key challenges and obstacles for SRI  Conflicting time perspectives (exception: pension funds)  The “business case” for SRI is still contested  How governments can help in this respect  Inform key actors and stimulate debate on SRI (with conferences, seminars, etc.)  Adopt legal CSR disclosure and reporting requirements  Lead by example Key messages (2 of 3)  Most relevant SRI initiatives (i.e. effective but difficult to adopt)  Legal disclosure/reporting requirements (5 mentions)  (Economic/fiscal instruments are seen critical)  Most practical SRI initiatives (i.e. effective and politically feasible)  Informational instruments, like guidelines for SRI, and communicating own SRI practices to the public  Disclosure requirements for pension funds  Key target groups for governmental SRI initiatives  Pension funds  International bodies like the UN and the OECD Key messages (1 of 3)  Personal experiences with government initiatives on SRI:  Legal disclosure requirements for pension funds  Disclosure requirements for all companies (annual reporting)  Frontrunners in Europe: Norway (petroleum fund), UK, France, Belgium and the Netherlands  Additional types of initiatives not considered in the survey:  Disclosure/reporting requirements  SRI by governments, or “lead by example” Illustrating the importance of disclosure requirements…

30. Steurer & Margula: SRI in EU Member States CSR HLG Meeting on 31 March 2008 Discussion Part II: Expectations of the financial services sector 4.Methodological remarks 5.Key messages Comments on key messages? Questions of clarification?

31. Steurer & Margula: SRI in EU Member States CSR HLG Meeting on 31 March 2008 Orientation Part I: SRI Initiatives in Europe 1. Setting the scene 2.Methodological remarks on the survey 3.What instruments did we find in the survey? Overview and examples Part II: Expectations of the financial services sector 4.Methodological remarks 5.Key messages Part III: Conclusions 6. Focussing on rating methods and the importance of transparency Part IV: Wrap-up 7. Project review and outlook

32. Steurer & Margula: SRI in EU Member States CSR HLG Meeting on 31 March 2008 Four (plus one) conclusions  Government initiatives on SRI: scarce in numbers but significant in qualitative terms  North-South and West-East divide: Governments that lead in other CSR policy areas are likely to lead also in the SRI context  “Walk the talk” or “lead by example”: not only on SPP but also regarding governmental investment decisions  Regulations on CSR reporting and disclosure: key instruments to foster SRI (but: separated in research, in the compendium, and the selection of the policy analyses – see next slide)

33. Steurer & Margula: SRI in EU Member States CSR HLG Meeting on 31 March 2008

34. Why reporting requirements are so important for SRI  Professional SRI decisions are not based on subjective choices, but on objective criteria and assessments  SRI ratings or screenings conducted “in-house” or by agencies employ  SRI rating strategies that make use of  Rating criteria

35. Steurer & Margula: SRI in EU Member States CSR HLG Meeting on 31 March 2008 SRI rating strategy Definition/Criteria Negative screeng/ simple exclusions Excludes single sectors (such as arms, alcohol, tobacco) or companies from particular countries (human rights violations) Ethical exclusions Excludes companies based on a large number of negative criteria and/or filters (as opposed to just tobacco or weapons) Positive screening Invests in companies with a commitment to CSR, or that produce “positive” products and/or services Best-in-class Selects leading companies from sectors in terms of CSR performance Norms-based screening Selects or excludes companies with regard to their compliance with international standard, such as the UN Global Compact, OECD or ILO guidelines Pioneer/thematic screening Invests in selected sectors/companies that play a key role in the transition to SD (renewable energies etc.) Engagement Attempts to raise awareness for CSR and SRI among companies, IntegrationIncludes SRI considerations in traditional financial analyses

36. Steurer & Margula: SRI in EU Member States CSR HLG Meeting on 31 March 2008 Why reporting requirements are so important  Professional SRI decisions are not based on subjective choices, but on objective criteria and assessments  SRI ratings or screenings conducted “in-house” or by agencies employ  SRI rating strategies with particular  Rating criteria  Disclosure of sufficient and valid information on CSR is the basis for SRI ratings in particular, and SRI in general  No legal requirements for CSR/SD reporting, no consistent and reliable basis for SRI decisions

37. Steurer & Margula: SRI in EU Member States CSR HLG Meeting on 31 March 2008 The fifth conclusion …  Government initiatives on SRI: scarce in numbers but significant in qualitative terms  North-South and West-East divide: Governments that lead in other CSR policy areas are likely to lead also in the SRI context  “Walk the talk” or “lead by example”: not only on SPP but also regarding governmental investment decisions  Regulations on CSR reporting and disclosure: key instruments to foster SRI (but: separated in research, in the compendium, and the selection of the policy analyses – see next slide)  Governments in the EU are followers rather than driving forces behind the SRI agenda  Perception of SRI experts,  Few governmental SRI initiatives,  Hesitant regarding CSR reporting requirements.

38. Steurer & Margula: SRI in EU Member States CSR HLG Meeting on 31 March 2008 Discussion Part III: Conclusions 6. Focussing on rating methods and the importance of transparency Comments on conclusions? Questions of clarification? Comments on SRI ratings?

39. Steurer & Margula: SRI in EU Member States CSR HLG Meeting on 31 March 2008 Orientation Part I: SRI Initiatives in Europe 1. Setting the scene 2.Methodological remarks on the survey 3.What instruments did we find in the survey? Overview and examples Part II: Expectations of the financial services sector 4.Methodological remarks 5.Key messages Part III: Conclusions 6. Focussing on rating methods and the importance of transparency Part IV: Wrap-up 7. Project review and outlook

40. Steurer & Margula: SRI in EU Member States CSR HLG Meeting on 31 March 2008 Some figures on the CSR policies study conducted HLG meetings attended5 (since spring 2006) CO2 emissions caused? Staff worked on studies6 Initiatives documented85 on CSR Awareness Raising 103 on SPP 14 on SRI Types of initiatives found4 + 1

41. Steurer & Margula: SRI in EU Member States CSR HLG Meeting on 31 March 2008 Overview of SRI initiatives Few partnering instruments despite voluntary character of CSR policies Indirectly, all SPP initiatives are about economic incentives for CSR Informational instruments used most in context of CSR Legal, not mandating instruments Strategies, platforms, centres

42. Steurer & Margula: SRI in EU Member States CSR HLG Meeting on 31 March 2008 Some figures on the CSR policies study conducted HLG meetings attended5 (since spring 2006) CO2 emissions caused? Staff worked on studies6 Initiatives documented85 on CSR Awareness Raising 103 on SPP 14 on SRI Types of initiatives found4 + 1 Survey contacts> 200 Institutional affiliations7 different types of ministries

43. Steurer & Margula: SRI in EU Member States CSR HLG Meeting on 31 March 2008 Institutional affiliations in different CSR policy fields Economic ministries more important than environmental ones CSR policies mainly located in social policy domain CSR policies mainly located in social policy domain (except for SPP)

44. Steurer & Margula: SRI in EU Member States CSR HLG Meeting on 31 March 2008 reinhard.steurer@wu-wien.ac.at RIMAS - Research Institute for Managing Sustainability Vienna University of Economics and Business Administration www.sustainability.eu www.sustainability.eu/csr-policies Thanks for your support!