April, 2011 - Rodney Schwartz

The Financial Times of 16 April 2011 reported that the Church Commissioners (CC), which manages over £5 billion on behalf the Church of England and its staff, will vote against excessive pay awards in the companies in which they have a stake. Specifically, this will be where bonuses are more than four times basic salary—irrespective of judgements about the worth or value of the specific senior executives. The Archbishops’ Council said the CC will “support variable remuneration which genuinely rewards success and aligns the interests of executives, shareholders and wider society.”

Although I believe the relevance of this one single criterion is open to challenge, the announcement of this bold position by the CC is to be applauded. It also begins to address a key question I have raised before: does the standing presumption that fund beneficiaries only care about financial performance hold up to scrutiny? It is this presumption on which much of the fund management sector’s behaviour is based—and that holds back social investment in the UK. Once this key premise is challenged, the pathway to investment strategies which take social impact into account becomes far clearer.

The CC is able to take this stance from a position of strength in several respects. First, its financial performance has been good—its funds have risen by 15.2% since last year, well ahead of comparator performance of 12.7%. I happen to believe that, over time, investors like the CC, who practice a form of ethical investing, will outperform mainstream competitors. Secondly, the CC is on very firm doctrinal ground. Much writing in the Bible is in opposition to greed, particularly its excess. I cannot say if the CC has surveyed its beneficiaries, as we have suggested all fund managers do regarding their beneficiaries’ ethical preferences, but it is very unlikely that its clergy would object to such a stance. We wish other ethically based groups would show similar consistency. Far more common is the sort of story I heard last week about a well-known organisation whose endowment is invested in shares of a company whose actions cause the sort of damage the charity spends resources combatting. Such harmful inconsistency is what comes from pretending investment and expenditure on good works lie in two separate and unconnected worlds.

By virtue of its strong moral authority, which we have commented on in a blog post from January 2009 (A Golden Opportunity for the Church Commissioners), the CC inhabits a leadership position. By taking a moral stance whatever the consequences, it opens the way for the moral or social impact of actions to be taken into account in investment decision making. Once this occurs, all investments with strong social impact are in play and we then come to the beginning of three dimensional (risk, financial return and social impact) investing. Watch this space!

First Published in Third Sector in April 2011.

I attended my six consecutive Skoll World Forum (SWF) last week. As ever, the featured speakers and the audience were extremely impressive and captivating. Every year I feel utterly exhausted by the end, but every year I return again knowing that this remains the key Forum for social entrepreneurship and investment in the world, despite the continued overrepresentation of practitioners from the USA.

Past SWFs have generally been a bit light on social entrepreneur, and heavier on investors—but this has been rectified over the last few years. Also on the plus side the sessions seemed to flow better the fringe “Oxford Jam” meeting across the street is now a well-established and valued counterpoint to the forum itself.

The most significant impression I have is of inspiring people who grace this conference in considerable number. This year the highlight was Archbishop Desmond Tutu, who gave a series of impassioned discussions. Who also could fail to be inspired by the performance artist Peter Gabriel, who sang his hit song about Stephen Biko?. The SWF also introduced the Elders, a gathering of the global “great and good” including Tutu (who chairs the Elders) and Nelson Mandela as well as Jimmy Carter and a host of others. Such super celebrities undoubtedly have the power to do a great deal of good in the world and their activities were explained.

On the other hand, the misfortunes of another global celebrity hung over the conference. Mohammed Yunus, the social entrepreneur behind the Grameen Bank and the person widely considered to be the father of micro-finance, has been very much in the press these days. He is being investigated in his native country of Bangladesh. I will not go into the details, which are not familiar to me and there are widespread allegations that the case is politically motivated. In fact, there was an appeal at the SWF to speak out and campaign on his behalf. Surely, anything that is motivated by political purposes to denigrate such an important and successful individual is anathema to the spirit of social entrepreneurship and the Forum.

On the other hand, his misfortunes appear to be having a negative impact on the micro-finance sector at large, which is also suffering from a range of different issues, and underscore the risks in celebrity. There is no doubt that Yunus has made an enormous contribution to social enterprise and micro-finance, however the unfortunate consequences of this publicity and his strong identification with the sector are now having adverse consequences. For the social enterprise and investment sector to thrive on a long-term basis it needs a healthy and robust diversity of voices.

What do you think?

First published in The Social Edge in April 2011

Rodney Schwartz

Monthly Archives: April 2011

Church of England’s stance opens the way for more social investing

Rodney Schwartz