CUSU Guide to Campaigning for Socially Responsible Investment
An introduction to Socially Responsible Investment (SRI)
51 of the world‟s largest 100 economies are transnational companies and the power and influence of corporations is growing at an unprecedented rate. Cambridge colleges are wealthy and influential entities and where your college chooses to invest its funds has wider social, environmental and ethical implications. Through SRI your college can choose to use its money to make a positive impact with worldwide implications.
SRI is most effective when it incorporates a number of approaches used in combination. These approaches can be broadly categorised into:
; Positive screening
; Negative screening
This approach seeks to invest in those companies and funds with a commitment to responsible business practices, or who provide what is judged to be a positive product or service e.g. the renewable energy sector.
This approach looks to exclude investment in industries or companies deemed to contradict certain social, environmental or ethical standards.
Many Cambridge colleges invest heavily in a range of problematic sectors such as the arms industry, petroleum and tobacco, companies subject to boycotts and allegations of unethical activity, such as Nestle and Coca-Cola, or companies that have been complicit in funding and supporting governments with a poor human rights record, for instance in Sudan. Through divesting from problematic companies or exerting shareholder pressure on them your college can significantly impact on company behaviour.
Shareholders in a company have certain rights which they can use to encourage the company to change, and can take the form of dialogue, persuasion, voting at AGMs and EGMs, or public criticism. This approach is most effective when backed up by the threat of divestment if the company fails to engage or to respond to criticism.
What you chose to campaign on may depend on the situation in your college and your own specific interests. Whether you decide to call for the implementation of an SRI policy, divestment from Sudan, investment in sustainable technologies, or another issue CUSU is here to help with resources, information, and support.
The situation in your college
The state of college investments varies hugely from college to college- some colleges have great Ethical Investment policies, screen their investments, and are willing to respond to calls for further improvement. Other colleges refuse to take ethical considerations into account when making their investments. It‟s important to remember that all colleges can improve and there are numerous ways of persuading
colleges to do this, for instance by presenting a strong financial case for investing ethically when a college refuses to act on ethical grounds alone.
The CUSU SRI officer (email@example.com) can provide you with
comprehensive information about your college's investment policy and most recent available holdings, including pointers on companies which may be of concern.
What type of investments might your college have?
; Direct investments: Your college owns shares in a company and can engage with
or divest from this company directely.
; Indirect investments: These are probably not managed by the college. They may
be managed by a fund manager, mandated to act on the colleges behalf, or
invested in a variety of mutual funds. There are two main types of indirect
o Co-mingled/mutual/shared funds: This is when several investors invest
in one investment fund, and this fund then invests in companies. The
college can ask the fund to divest from/engage with problematic
o Tracker/index funds: These track an index of a market (eg. The London
Stock Exchange). The fund invests in a representative selection of
companies in this market. The college can ask for a fund to be re-
weighted so it no longer invests in a problematic companies.
What SRI policy should you call for?
It‟s up to you! If your college doesn‟t have a good SRI policy trying to get one established or strengthening the existing policy would be an excellent place to start. CUSU can provide you with a template SRI policy you can ask to be implemented.
On the other hand you can campaign on one specific issue, (eg. Sudan divestment), call for a positively screened fund to be set up, or that your college engages with a specific company. If you‟re not sure what would be most effective contact the CUSU SRI Officer to discuss your options.
Get grassroots support!
Try and get JCR and MCR backing for your campaign. The more student support you have the more your college will have to listen to you. Pass a resolution in your JCR and MCR calling for the college to implement your SRI demands which you can then
present to your bursar and your college governing body. Get a petition of signatures together to show you have support. A lot of colleges are very conscious of their students as being potential alumni donors; they will want students to be happy with how the college‟s money is managed.
JCR and MCR Presidents are especially important to have on board- talk to them about your campaign so they can represent you with college authorities. Sometimes MCR/JCR Presidents are required to sign off on college accounts; if they are sympathetic to your campaign they could refuse to do this until your requests are considered.
Also try and get fellows and college staff on board. They will often have a lot of influence in the college, particularly people like the Dean and the Master who will sit on the college governing committee.
Talk to your bursar
To get your SRI demands implemented you will almost certainly have to meet with your college senior bursar. This can be a little bit intimidating, especially if you‟re not familiar with financial terminology, but don‟t worry- it‟s often less complicated than
it sounds. Before talking to your bursar make sure you know exactly what your demands are and that you can explain them clearly. Read through the section on „problems you might encounter‟ and be prepared to answer questions.
The CUSU SRI officer could come with you to talk to your bursar or discuss what it might be best for you to say beforehand if you think you‟d find that helpful.
Making progress with an SRI campaign can often be slow work requiring lots of follow up. One of the best ways of achieving results is being very persistent. If you
keep hunting out your bursar, college students, and college authorities the chances are you will finally get through to them. Keep sending emails, making a noise about your campaign, and speaking to people in person. Get new students involved to keep the campaign alive and active.
Problems you might encounter (and how to deal with them!)
Your bursar may tell you that they are unable to implement an SRI policy because they have a Fiduciary Responsibility under Charities Law to maximise the returns
from college investments, and are therefore unable to take ethical considerations into account when managing investments. This is a common misperception of Charities Law and although trustees are required to maximise returns, the Charity Commission 1has stated that „an ethical investment policy may be entirely consistent with this.‟
There are good legal and financial arguments for an SRI policy.
Legal implications of SRI
1 CC14: Investment of Charitable Funds, February 2003
The view that financial return is the only permissible consideration in investment decisions has been widely discredited. The Charities Commission has identified three circumstances under which making ethical exclusions is acceptable:
a. A practical conflict with the charity‟s aims. Thus, many colleges choose not to
invest in tobacco since it conflicts with the medical research they do.
b. Investments which may make potential beneficiaries unwilling to be helped, or
alienate members/supporters. In this case, significant unease on the part of
students, fellows or alumni could legitimately be claimed as justification for
placing restrictions on investments.
c. While a. and b. allow exclusions even with a risk of significant financial
detriment, if a charity reasonably believes it will not entail such detriment,
they ‘may accommodate the views of those who consider it inappropriate on
moral grounds’, regardless of whether it falls into either of the previous two
Financial implications of SRI
The Charities Commission acknowledges the „increasingly held view that companies which act in a socially responsible way are more likely to flourish and to deliver the best long term balance between risk and return.‟
The vast majority of available evidence does not support the notion that SRI, whether in the form of positive screening or negative exclusions, has a damaging effect on financial performance. EIRIS (the Ethical Investment Research Information Service) concludes, „Performance is primarily a function of fund management skill. This consideration substantially differs from saying that investing responsibly leads to poor 2performance.‟
; The Joseph Rowntree Charitable Trust‟s SRI policy excludes around one third
of the FTSE All-Share (much more than most) and performance has still been
consistently in line with the All-Share from 1978-2002 (see also the Church of
England case study below).
; The Church of England Commissioners have for over ten years followed an
ethical investment policy including both positive and negative criteria, whose
general principles include environmental responsibility, responsible
employment practice, respect for human rights and for the communities in
which they operate. The policy excludes approximately 9% of the FTSE All-
Share index. From 1994-2003 their investment performance exceeded their
independent benchmark by 3.8%, with an average annual return of 10% 3compared with 6.4% for 300 similarly managed funds. Indeed, from 1994-
2004 it was the best-performing UK fund of its kind.
2 EIRIS Report, „Investing Responsibly: A practical introduction for charity trustees‟, 2005
Arms trade divestment
The issue of colleges‟ investment in arms companies is one of mounting concern to Cambridge students. Since 2005, Cambridge Students Against the Arms Trade have been campaigning, with CUSU‟s support, for colleges to disinvest. Around 1,500 students have signed a university-wide petition calling for disinvestment, and several hundred from across the university attended a demonstration on Senate House Lawn in Lent 2007.
CUSU‟s opposition to financial involvement with the arms industry is not based on simple pacifism, but on a deep discomfort at the way the arms trade currently operates, and a belief that, far from enhancing security, it often escalates global conflict and human rights abuse. Major arms firms such as BAE and GKN sell weapons to repressive regimes (such as Indonesia during the massacre of the East Timorese) and conflict zones (such as Colombia and the Congo), often with minimal regard for the consequences in terms of escalating violence.
Furthermore, the corruption endemic to the industry has become clear in recent months, with the media spotlight on investigations into alleged bribery and fraud by BAE Systems, one of Britain‟s leading arms exporters. Such improper practices fuel the oft-criticised culture of corruption amongst the leadership of some developing nations, at the same time diverting resources from health and education in some of the world‟s poorest regions.
The campaign believes reform is urgently needed, both to better regulate the sale of arms to oppressive regimes and conflict zones, and to stamp out pervasive corruption. Thus, the justification for disinvestment is two-fold – firstly, the moral concern over
the university‟s involvement with a corrupt and destabilising industry, and secondly, the hope that widespread disinvestment will send a powerful message to government and industry providing an impetus for reform.
Excluding arms companies from investment decisions does not imply a breach of trustees‟ obligations under Charities Law. Arms investments alienate potential
beneficiaries, members and supporters; in addition the evidence overwhelmingly suggests there is no risk of significant financial detriment. Typical avoidance criteria 4for the entire military sector will exclude only 1.9% of the FTSE All-Share. It is
worth noting that this figure is less than the percentage exclusion for tobacco avoidance policies, which many Cambridge colleges have already adopted. St Catharine‟s, Lucy Cavendish, St Edmund‟s and Selwyn colleges currently have ethical investment policies excluding arms companies.
SRI and Sudan: how your college investments can respond to the crisis in Darfur
The Sudan Divestment campaign has been running since 2006, with CUSU backing, mandated by an open meeting with the largest majority ever. It differs from the campaign against arms investments in that it asks for urgent, temporary, targeted
4 EIRIS Report, „Investing Responsibly: A practical introduction for charity trustees‟, 2005
divestment from specific companies, rather than a long-term policy for the exclusion of a particular sector. The aim of the targeted divestment campaign is to induce the Sudanese government into changing its actions in Darfur through financial pressure. The blacklisted companies are those which
o Have a relationship with the government or government sponsored project
o Impart minimal benefit to the country's people
o Have demonstrated no substantial corporate governance policy regarding the
situation in Darfur.
These companies are predominantly from the oil, mineral extraction and power industries; a full list of companies currently deemed to deserve scrutiny is available on request.
It costs large sums of money to sustain the operations of the janjaweed militia, Sudanese army and air-force in Darfur. A significant amount of Sudan‟s government
revenues come from revenue from external trade, especially oil. Many of the foreign firms with problematic operations in Sudan raise money from investors and savers in this country and elsewhere. Targeted divestment seeks to put pressure on foreign companies in Sudan to use their leverage with the government to call for and end to government sponsored atrocities in Darfur, the implementation of a peacekeeping force, and the full compliance with the terms of the Comprehensive Peace Agreement between North and South Sudan .
The actions of the national campaign, established by a current Cambridge student, have already undoubtedly been instrumental in Rolls Royce‟s decision to pull out of Sudan, citing humanitarian reasons.
The international Sudan Divestment campaign has resulted in several very positive changes in company behaviour in Sudan where companies have changed the nature of their operations and implemented significant humanitarian programmes.
So far the campaign has successfully achieved divestment in New Hall and St Catharine‟s colleges. There are several other Sudan Divestment campaigners in
Cambridge colleges and more information and a guide to getting your college to divest from targeted companies in Sudan can be obtained by emailing: firstname.lastname@example.org
Positive screening and ‘Green funds’
‘Dark-green’ funds and positive screening
CUSU advocates the investigation of positive screening, particularly where institutions are unwilling or unable to implement any negative screening. This can be a particularly fruitful approach for the majority of colleges, which invest primarily in funds rather than direct equities, allowing them to engage with issues of social responsibility in a way that is appropriate to their investment strategy.
One project which is being pursued in relation to colleges involves investing a small percentage of endowments in „dark green‟ funds, which actively support constructive
projects such as renewable energy sources. This approach has many advantages:
o The college is able to direct some of its investments to positively promote
the social and environmental values it holds rather than simply avoiding
o Because such funds are often relatively small, even an investment of
insignificant proportions relative to the endowment as a whole can have
tangible positive impacts on the encouragement of such projects and such
ways of investing.
o Many SRI funds also have an extremely good performance track record
(see below), often outperforming comparable funds which do not employ
ethical criteria. A 2005 report points out that such funds often allow
investors to “get involved with emerging environmental technologies…
before many conventional investment funds have identified the investment 5opportunity.” Thus, supporting them can be entirely compatible with the
university‟s obligation under Charities Law to maximise its returns.
Case Study: Jupiter Ecology Fund
The Jupiter Ecology Fund, launched in 1988 by Jupiter Asset Management, “invests in companies on a global basis that are responding positively to the challenges of environmental sustainability and are making a positive commitment to social 6wellbeing.” Like many „green‟ funds, it is experiencing rapid and consistent growth (30% in 2006-07), with high independent rankings for performance. As the fund‟s manager observes, “companies which focus on environmental and social solutions will benefit from an increased focus on resource efficiency and environmental performance”, and thus are likely to continue to perform well.
‘Light-green’ funds and negative screening
Another option for improving the SRI performance of investments held in funds is through supporting „light-green‟ funds which offer negative screens for ethically unacceptable companies, which can often be tailored to the investor‟s requirements. This provides a way to apply exclusionary principles to portfolios which are not weighted towards direct equities. This investment:
o Supports light-green funds, which are still a small (although rapidly
growing) element in the UK market
o Demonstrates a willingness to engage with the concept of SRI without
restricting or compromising the investment choices of those managing the
o Shares with dark-green funds the advantage of being a financially as well
as ethically sound investment, and therefore wholly consistent with
financial prudence and the legal obligations of charitable trustees. The
FTSE4Good index series, which measures the performance of companies
which meet social responsibility criteria and facilitates investment in these 7companies, performs well when compared with the FTSE All-Share
5 ‘Investing Responsibly: A Technical Guide for Financial Advisors’ 6 http://www.jupiteronline.co.uk/PI/OurFunds/UnitTrusts/SRIFunds/J3.htm 7 For more information on FTSE4Good‟s inclusion criteria and financial performance, a range of
reports are available at http://www.ftse.com/Indices/FTSE4Good_Index_Series/index.jsp.
CUSU SRI campaigns page:
Sudan Divestment UK Campaign:
The UK Social Investment Forum:
Cambridge Students Against the Arms Trade: http://www.srcf.ucam.org/csaat
The Ethical Investment Research Information Service: http://www.eiris.org.uk
Produces many useful publications, research reports and accessible guides to SRI
issues for investors, some of which are referenced in this paper.
Charity Commission Guidelines:
8 For example, see http://www.ftse.com/Indices/FTSE4Good_Index_Series/Performance_Analysis.jsp.