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SIC should re-consider “responsible” investment

SHETLAND Islands Council should seek further advice on investing its oil funds responsibly before discarding the idea, according to the UK’s main advisers on the issue.

This week finance staff informed the SIC’s executive committee that the £100 million the council has invested on the global markets would be harmed by operating an ethical investment policy.

Losses ranged from £390,000 a year by excluding just tobacco companies, to £1.4 million if they followed the example of the Norwegian State Pension Fund, which invests around £370 billion.

The Norwegian fund has a list of 54 companies, including tobacco firms and arms manufacturers, with whom it will not invest.

Staff had calculated the price of disinvesting from the only six companies on that list which are also on the UK stock exchange. Last year alone it would have cost the council £1.56 million, they said.

However EIRIS, one of the world’s leading experts on ethical investment, suggest the SIC’s approach to the issue is outdated and advised taking a fresh look at its policies.

EIRIS head of communications Mark Robertson said there were many things local authorities and pension funds “can and should do” to invest responsibly, rather than screening out stocks.

More large funds are taking the view that it is in their best long term interest to invest responsibly, to ensure the companies they place their money with are well-managed and have a good environmental, social and governance (ESG) record to reduce risks.

Mr Robertson pointed to the examples of highly profitable companies like oil giant BP and media multinational News Corp, which have seen their stocks plunge due to their recent ESG performance.

“Rather than screen out companies, you focus on companies that not only perform well financially but also have a better ESG performance,” Mr Robertson said.

EIRIS is a non-profit, independent organisation that recently advised the National Employment Savings Trust, one of Europe’s largest, on its responsible investment policy.

It is a former adviser to the Norwegian State Pension Fund and Strathclyde councils among hundreds of clients worldwide.

Councillor Betty Fullerton, who tried to persuade the executive committee to cut tobacco companies from the portfolio, said the council should seek all the advice it could before making a decision.

“We need to explore all the avenues and possibly update our way of thinking as councillors of what we mean by ethical investment. Perhaps it is time to tackle it from the other end and ensure the fund managers we employ are behaving responsibly,” she said.

Councillor Jonathan Wills, who brought the issue up in the first place, said he was very interested to hear about EIRIS. “I suggest council officials contact these people and report back, so we can take a less parochial view of what we do with our investments.”