The Campaigners’ Guide to Financial Markets

THETHE CAMPCAMPAIGNERS’AIGNERS’ GUIDEGUIDE TTOO FINFINANCIALANCIAL MARKETSMARKETS

Effff ective Lobbying of Companies and Financial Institutions

Nicholas Hildyard Mark Mansley

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Contents Preface – 7 Acknowledgements – 9

1. FINANCIAL MARKETS - A NEW POLITICAL SPACE – 11 A world transformed – 12 The impacts of globalisation – 14 The growing power of the private sector – 16 The shifting space for change – 17 Lobbying the markets – 18 The power of the market – Markets as “neutral ground” – NGO strengths: market weaknesses – Increasing consumer awareness – Globalisation and increased corporate vulnerability – The rise of ethical shareholding – Changing institutional cultures – New regulatory measures – A willingness to change? The limits of market activism – 33 Is a financial campaign appropriate? – 33 Boxes The increasing economic power of the private sector – 13 What are financial markets? – 14 Changing the framework: From Seattle to Prague – 18 Project finance – 20 Consumer and shareholder activism – 23 A bank besieged: Consumer power against bigotry – 25 Huntingdon Life Sciences: Naming and shaming – 27 First do no harm – 30 The impact of shareholder activism – the US experience (by Michelle Chan-Fishel) – 33 Put your own house in order – 34 Internal review – 33

2. UNDERSTANDING THE MARKETS – PSYCHOLOGY,,, ARGUMENTS AND OPENINGS – 37 Using the mentality of the market to your advantage – 38 Exposing the risks – 39 Key pressure points and how to use them – 41 Management quality – Business strategy – Financial risk: company analysis / project analysis – Non–financial risks – Political risks – Legal risks – Environmental risks – Reputational risks Matching the pressure points to the financial player – 54 Boxes Reading the balance sheet – 40 ABB – Moving out of dams – 43 Three Gorges: Bond issues challenged – 47

3. CAMPAIGNING IN THE MARKET::: STRATEGIES,,, TACTICS AND TIMING – 57 Strategies,,, Tactics and Timing – 58 Industry-wide campaigns – 59 Changing company practices – 59

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Infrastructure projects – 61 Financial market practice – 62 The main options for intervention – 63 Analysis and revaluation – 63 Engagement and reducing “bad practice” – 64 Direct campaigning and moral persuasion – 68 Timing – 70 Key intervention points – 71 Initial public offerings –71 AGMs and shareholder resolutions – 71 Creating political space – 74 Boxes Genetic slump – 60 Specimen letters – 65, 66, 70 Wording your resolution – 68 Potential and limitations of shareholder activism – Insights from the US (by Michelle Chan Fishel) – 69 Pull out of Burma: Protests,,, boycotts and shareholder action – 72 BP: Mobilising investors for change – 75

4. PLAYERS IN THE MARKET – 77 Understanding your audience – 78 Analysts – 80 Types of analyst – 80 What sort of people are analysts? – 82 What are their success factors? – 83 What are their outputs? – 83 What information do analysts use? – 84 When do they do their research? – 84 What time frame do analysts have? 84 Engaging analysts – 84 Presenting your research – 85 The need for preparation – 85 Timing your intervention – 85 Institutional investors – 86 Types of institutional investors – 86 Investment institutions – 87 Who’s who in the institutions? – 90 What are their success factors? – 95 Fund managers – 97 Who are they? – 98 What are their success factors? – 98 Competition – 99 Information overload – 99 Style of fund managers – 102 Mergers and change – 103 Engaging fund managers and investors – 103 Approaching fund manager – 104

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Campaigns targeting fund managers – 105 Practicalities of running a fund management campaign – 106 The ethical investment sector – 107 The ethical niche – 107 Types of organisation – 107 Who works in ethical investment organisations? – 109 What are their success factors? – 111 How can ethical investors help? – 111 Working with ethical investors – 112 Conclusions – 112 Banks and project finance – 113 Banking – Risk and reputation – 113 Getting access to senior management – 114 Understanding project financiers – 115 Stages of project finance – 116 Boxes The Bakun campaign – Lobbying the analysts – 81 The World Bank bonds campaign – 82 Organising a shareholder resolution: The Balfour Beatty campaign (by Kate Geary and Hannah Griffiths) – 91 Questions to fund managers – 96 The “Ethics for USS” campaign (by Jess Worth and Kate Geary) – 100 Ethical investment organisations outside Europe and North America – 108 Table 1: Socially Responsible Investment networks and research organisations – 110

5. GETTING INFORMATION FOR A FINANCIAL LOBBYING CAMPAIGN – 119 Structuring your research – 120 Where do I find . . . ? Company annual reports – 126 Company websites – 128 Overview of the company – 128 The company’s record – 128 Environmental policies – 134 Subsidiaries and parents – 135 The products a company manufactures – 136 Names of the shareholders – 137 Help in launching a shareholder action – 139 What companies a financial institution is investing in – 139 How well a company is performing – 140 Analysts’ reports – 141 Who’s financing a private-sector infrastructure project – 141 What public money is backing a project – 142 Names of company analysts – 143 Names of fund managers – 144 Names of company advisors – 145 Names of company directors – 145 Who’s importing and exporting what – 148 What research a company is funding – 148 Boxes and tables Table 2: Key directories for corporate research – 124 Table 3: Company reports on the Web – 127

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Table 4: Top corporate research web sites – 129 Table 5: Web sites with attitude – 135 Table 6: Directories detailing corporate ownership – 137 Spotting key investors – 138 Table 7: Infrastructure project databases on the Web – 142 Table 8: Pension fund directories – 143 Table 9: Directories with details of key company officials – 145 Table 10: Importers and exporters – Directories and web sites – 147

6. FURTHER RESEARCH – SKILLS AND RESOURCES –149 Where to go for information – 150 Libraries – 151 Uses of libraries – Choosing your library – How to use libraries The Web – 154 The dangers – Search engines – Types of search – English isn’’’ t the only language – Filtering software – Other techniques – Free trials The Media – 157 Media on the Web – CD-Roms – Indexes – Finding trade journals – Alternative media – Press databases Company and industry sources – 162 Trade associations – Professional associations – Trade journals – Market research Government sources – 165 Using company registrars – Finding you way round government- Regulatory agencies – Government departments and quangos Parliaments – 171 Statistical sources – 173 Verbal sources – 173 Conferences – News conferences – Interviews Financial Instutions – 175 Ethical investors Boxes Basic skills and techniques – 152 Table 11: UK business and copyright libraries – 153 Table 12: Tried and tested engines – 155 Table 13: Guides and portals – 157 Table 14: Trade journal publishers – 159 Table 15: Press databases on the Web – 160 Table 16: Trade associations – 163 Using EDGAR to challenge companies – 167 Table 17: Regulatory agencies on the Web – 168 Table 18: Statistical sources on the Web – 172 Table 19: Ethical investors – 175

7. RESEARCHING SECTORS – 177 Agribusiness and biotechnology –178 Oil and gas – 182 Mining – 185 Dams – 187 Pulpwood plantations and the paper industry – 189 Carbon trading – 192 References – 197 Glossary – 201

6 The Campaigners’ Guide to Financial Markets PrPrefefaceace

his Guide arises out of the international campaign in the Tmid-1990s by environment and human rights’ groups in Malaysia and elsewhere to stop construction of the Bakun hydroelectric dam in Sarawak, Malaysia. The dam, which would have caused the involuntary relocation of some 10,000 indigenous people and the flooding of 70,000 hectares of land, would have been built and operated by a private sector consortium, headed by the Bakun Hydroelectric Corporation.

The campaign halted the project (although there is now talk of reviving the dam, albeit in a scaled-down form). Key to the campaign’s success was the lobbying of potential investors in the dam – and of the financial analysts who advised these investors.

Since the Bakun campaign, both authors have worked on other campaigns where lobbying investors has proved a major tool to exert pressure so as to stop environmentally-damaging and socially- inequitable projects – or at least to lessen their impact.

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A key lesson from such campaigns is the recent changes in the political and that their effectiveness is greatly economic landscape, both in the enhanced when activists understand the developed world and in the developing culture and psychology of the financial countries, that have made lobbying institutions that they are seeking to financial markets a fruitful area for influence. This Guide focuses on the public interest groups seeking to financial institutions that dominate the challenge unsustainable patterns of UK markets. It summarises the investment and development. It looks at arguments that are most likely to make how globalisation has curtailed many an impact on these institutions; the avenues that campaigners previously approaches to campaigning that have used to seek change, for example proved most effective; and the areas in through lobbying governments – and at which a campaign is likely to have the how consumer and shareholder activism most political purchase. It is also is carving out potentially fruitful new intended to provide campaigners with political space for campaigners within some of the “nuts-and-bolts” practical- the financial markets. It concludes with ities of financial market campaigning – a brief summary of the pros and cons of where they can find the information they financial market campaigning for public need, how they can identify key interest groups. personnel to lobby, and so on. Part Two explores the key The UK focus reflects both the psychological features of financial importance of the City of London as an markets, the pressure points that emerge international financial centre and our from them and the best ways of matching own history of campaigning. Much of these pressure points to the concerns of what is in the Guide will apply in other specific market players. In particular, it financial markets: the culture of US stresses how speculation frames the financial institutions, for example, is mentality of financial markets, giving broadly similar to that in the UK. But rise to two prime motivators: greed and the Guide comes with an important fear. The resulting preoccupation with caveat: what “works” as a lobbying weighing up financial risks provides a tactic in London may backfire series of leverage points that disastrously if transposed, unadapted, campaigners can use to their advantage. to, say, Kuala Lumpur or Tokyo. The section outlines key risks – Financial institutions do not have a financial, political, legal and non- single culture: their reach may be financial – that campaigners should global but their modes of operation are accentuate, along with ways that often defiantly local. Moreover, their environmental and human rights culture – like any culture – is not fixed: concerns can be “translated” into it is constantly evolving, not least in arguments that can exert pressure on response to the successes and failures investors. of campaigns aimed at pushing it in new directions. Although the tactics and Part Three considers the main areas in strategies discussed in the Guide which financial market campaigning is undoubtedly have application outside likely to bear fruit. These include: the UK, readers from other countries targeting individual companies and should bear in mind the need to tailor private sector-financed infrastructure them to their own local circumstances. projects; reducing the flow of investments to particular sectors of A guide to the Guide industry (and redirecting it to more sustainable sectors); and pressing for The Guide begins by outlining some of financial institutions to adopt new rules

8 The Campaigners’ Guide to Financial Markets that would place sustainability at the campaigners who are unfamiliar with heart of their investment decisions. financial market campaigning. How Three main strategies for intervention does one research a company? How are discussed, and specimen letters and does one find out the names of other campaign tools provided. shareholders? What are the most useful sources of information? And where can Knowing one’s audience is critical to one find them? effective campaigning, whether in financial markets or elsewhere. Part We hope that the Guide encourages Four provides an insight into how some public interest groups to consider the of the key players in the market think. possibilities of using financial markets Who are they? What motivates them? to press for change. Although financial How do they judge success? What market campaigning is only one of a information is most valued by them? number of options open to campaigners How best to engage with them? The (other tactics are often more section looks specifically at: analysts; appropriate) and leaves many issues institutional investors, such as pension unaddressed, it provides opportunities funds; fund managers; ethical investment that can enhance the effectiveness and funds; commercial and investment banks; reach of most campaigns. We hope that and public finance institutions, such as the Guide will empower campaigners to export credit agencies. seize these opportunities where they are available and appropriate. Finally, Parts Five, Six and Seven Nicholas Hildyard provide some practical information for Mark Mansley

Acknowledgments The authors would like to thank Greg Muttit for bringing coherence to Parts Five, Six and Seven of the report and for sharing his encyclopaedic knowledge of researching companies and industrial sectors; Monique Baker for researching key sources of business information available in libraries and on the web; Kate Geary, Hannah Griffiths, Jess Worth and Michelle Chan-Fishel for the case studies and other boxes they contributed; Larry Lohmann for the research sections on pulpwood plantations and on carbon trading; Sarah Sexton and Larry Lohmann for their invaluable work during the final editing of the manuscript; and Melissa Dann of Wallace Global Fund for her encouragement throughout the project. Many colleagues in the socially reponsible investment community and the non- governmental community offered invaluable comments on the drafts: their insights, criticisms and encouragement were greatly appreciated. In particular, we would like to thank the folowing for their substantive comments: Peter Bosshard, Tess Tennant, Mark Campanale, Margie Law, Greg Muttit, Kate Geary, Michelle Chan-Fishel, Julie Tanner, Doris Shen, Hannah Griffiths, Rebecca Spencer, Simon McCrae and Robert Rosen. The final text - and any errors in it - is of course the responsibility of the authors. Finally we would like to thank Wallace Global Fund (WGF) for supporting the project financially.

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10 The Campaigners’ Guide to Financial Markets Part One

FinancialFinancial marmarkketsets –– AA neneww politicalpolitical spacespace

11 The Campaigners’ Guide to Financial Markets AA WORLDWORLD TRANSFORMEDTRANSFORMED

n February 1999, the New York Times ran an article on the I economic crisis that 18 months earlier had led to the collapse of the Thai currency, before rippling through Asia and Russia and threatening Brazil and Latin America.1 The South-East Asian economic collapse had not only brought hardship in the South, the article pointed out, but had also caused thousands of small investors in the North to lose their hard-earned savings.

The article cited the example of Mary Jo Paoni, a secretary from Cantrall, Illinois. Like many others, Mrs Paoni had no reason to suspect that her pension, which she had thought was safely invested in a secure US-based investment fund, would be affected by the collapse of the Thai economy. She could not have been more wrong. Quite unbeknown to her, Mrs Paoni’s future security rested in large part on the success or failure of a housing development in Bangkok of which, thanks to an investment decision taken by her pension fund manager, she had become part owner.

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Mrs Paoni’s pension fund had bought For example: shares in two Thai investment funds – the Thai International Fund and the Thai New trading rules Euro Fund – which between them had New international and regional trade bought more than one million shares in agreements – from the Uruguay Round of Bangkok Land, the company that had the General Agreement on Tariffs and Trade (GATT) to Latin America’s Southern developed the Muang Thong Thani Cone Common Market (MERCOSUR) housing development site and which had agreement and the European Union’s Single gone bankrupt in the wake of the Thai Market treaty – have led to the dismantling currency collapse. or lowering of tariff barriers, reducing many previous restrictions on the movement of Not that Mrs. Paoni knew any of this; no goods and services. one had told her. Had they done so, she As a result, cross-border trade has expanded might have expressed strong disapproval massively as companies have moved to of the “giddy investment sprees” exploit the new markets and business undertaken in Asia and elsewhere with opportunities that have been opened up. her money. “When things are rough”, World trade, which has grown 12-fold since she told the New York Times, “you don’t the Second World War, is now worth some start spending like a drunken sailor. $4,000 billion a year – and is expected to There are some people who take risks, rise by 6% a year over the next ten years. but not us.” Deregulation For the New York Times, Mary Jo The accompanying deregulation of financial Paoni’s story illustrated the way in markets – often a condition imposed on which globalisation now gives “just indebted developing nations by the about everybody some tiny financial International Monetary Fund in return for new loans – has lifted or eased restrictions stake in everybody else.” on the movement of capital in and out of countries. Exaggerated and US-centric though this claim may be – only a tiny minority in Until 1985, equity investment – that is, the the developing world (and relatively few in the Northern industrialised countries) have the private pensions and investments that would give them such a Global reach stake – it nonetheless highlights how the growing inter-connectedness of world The increasing economic power financial markets has transformed the of the private sector nature of investment and the risks and impacts associated with it. The combined assets of the world’s 50 largest banks and financial companies account for 60% of That growing interconnectedness reflects the world’s global capital. profound structural changes that have In 1970, there were approximately 7,000 occurred within the global economy corporations operating internationally: today over the past two decades. Combined there are more than 50,000. with the impacts of new technologies, The top ten UK supermarket companies have an annual turnover equal to the income of the such changes have recast previous poorest 35 developing countries. patterns of power, changing the The top UK supermarkets make profits of relationship between governments, between £1 million and £2 million a day. communities and corporations and It would take a fruit farm worker in South Africa, earning the current daily rate of pay, 15 centuries challenging social and environmental to earn the annual £1.2 million salary of a major campaigners to operate in new ways if UK supermarket chain’s chief executive. they are to be effective.

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purchase of shares in a company – was Americas and Europe. largely domestic: by 1994, however, cross Between 1996 and 1998, more than 20,000 border equity capital flows were running at new alliances were brokered by companies more than 1% of total world stock market worldwide, many of them between capitalisation. “Twelve years ago,” competitors.6 Sectoral boundaries have comments the Financial Times, “just 2 per become as blurred as the national origins of cent of US pension fund portfolios were many businesses have been obliterated. In invested in non-domestic equities. By 1999, mergers and acquisitions pushed the 1998, the percentage was 12 per cent.”2 In UK into the lead as the world’s biggest the UK, investments abroad account for overseas investor, beating even the US. 50% of the earnings of the Total global cross-border investment in companies listed on the Stock 1999 was up 25% on 1998’s figure, which Exchange’s FTSE index.3 7 Rapid privatisation in turn was up 41% on 1997’s. programmes have Private sector flows New technology Although the bulk of cross- often led to a Although financial markets have a long border flows are between the history of cross-border money flows, capital “fire sale” in which rich industrialised countries, now moves around the globe at lightning the public interest the privatisation of state speed 24 hours a day. assets and the (often has lost out. enforced) withdrawal of the New computer technologies enable almost state from infrastructure instantaneous transfers of money from one investment in developing market to another (and out again) at the countries and the former Soviet bloc has touch of a few keys. Not only has the cost encouraged a surge of private investment to of trading plummeted but the new electronic the most profitable sectors of the networks make it possible to trade around “emerging markets” in Asia, Latin America the clock. and Eastern Europe. (Africa has largely been sidetracked.) In the past decade, nearly $2 trillion in The social and private capital – as opposed to official development aid – has flowed from richer environmental impacts Northern countries to favoured developing and transition countries in the form of of globalisation equity, bond investments and commercial loans.4 Such economic changes have brought Privatisation high rewards – and risks – for investors: Privatisation – again often a pre-condition they have also had profound social, for further loans to indebted countries – environmental and developmental has further fuelled the cross-border flow of impacts. capital, as previously state-run services have been snapped up by US and Western In both North and South, many hard-won European companies seeking to establish a environmental and social legislative 5 presence in newly-opened markets. gains have fallen foul of new trade Increasing interdependence agreements or have been swept away as national and local governments have Global markets have become further intertwined by cross-border mergers and competed with each other to attract acquisitions, which have accelerated as foreign direct investment. The companies have sought either to buy up increasing mobility of capital has also their rivals in other countries or to enter enabled companies to relocate into strategic alliances that will give them a production from one country to another strong global presence in all three of (or threaten to do so) in order to exploit the world’s major trading blocks: Asia, the lower environmental and labour

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What are financial markets?

inancial markets are where offers shares for sale to the management of the company. those who want money public, or places extra shares link up with those who for sale, or is involved in a The company can raise Fhave money and who are merger or acquisition. This extra finance by issuing extra prepared to make it available – involvement includes: shares – and can also buy back for a future profit. “sponsoring” companies when its shares if it wishes to. Intervention in this process by they are first listed on the stock While publicly-listed seeking to persuade lenders exchange (for example, by companies will obtain their and investors to place their backing their application); core capital in the form of money in one company rather marketing the company to shares, they can also raise than another, or to attach investors; advising on financing money by borrowing from the conditions to their strategy; and buying shares with banks, or by issuing bonds (a investments, is the central aim the intention of selling them on. tradable form of a loan of most financial market whereby the company agrees activism. Public companies to give the buyer of the bond Companies are the market a certain amount of interest players who seek money. Their every year, and then repays Most large companies are the bond after a specified primary funding comes from “publicly listed” or “quoted” on their “share capital”, also called number of years). These ways a stock exchange. This means of raising capital – known as “equity” or “common stock” that: (US). The shareholders who debt finance – may create buy the shares own the Their shares can be bought some additional opportunities company, elect the directors and sold by the general public for campaigners, but and receive a share of the (thus they are sometimes called shareholders still have the profits in the form of “public companies” – this does main power and influence over dividends. not mean that they are state companies. owned). The shares of companies form The publicly-listed the basic raw material of much The price at which their company is vulnerable to of the financial markets. The shares can be bought and sold takeovers – if another most important owners of is changing constantly. In the company or organisation can shares are the investment short term, the price will acquire more than 50% of the institutions, such as pension depend on supply and demand company’s shares, then it will funds and life insurance for their shares – if more have effective control. Again, companies (see p.86). These people are buying than selling, various stock market rules institutions buy shares for then the price will go up, and govern this process. vice versa. These prices are long-term investment A key time for the company is purposes, and collectively own published in newspapers and are posted on the Web. when it is first listed on the a large proportion of the stock market – its IPO or Initial shares of most companies. The The companies have to Public Offering (see p.71). The specific decisions about which abide by the rules of the stock company must obtain approval shares to own, and when to market. Typically this means from the stock exchange to buy and sell them are made by that companies must disclose list its shares and, to do so, it fund managers (see p.97) – any information that could must publish a full description organisations and individuals affect their value so that of the company and its specialising in equity market everyone can see the activities. investment. information at the same time Different financial institutions and no one gets an unfair Private companies deal in company shares. advantage. Private companies Closest to the stock exchange Companies have to produce Note that most small are the stock brokers and a detailed annual report and companies, but also some investment banks. Their accounts, as well as interim large ones, are private securities departments trade reports every three or six companies – that is, they are company shares on a short- months. not listed on the stock term basis, helping to exchange and their shares establish the price of the The company must hold an cannot be bought and sold by shares. Their analysts research Annual General Meeting (AGM) the general public. This makes companies, providing open to shareholders, at which it harder to bring influence to commentary for other directors are elected, and bear on them via the market. investors. Their corporate reports and accounts put to a A number of disreputable finance arms are heavily vote. This meeting can be used logging companies come into involved when a company as a forum to question the this category.

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standards and thus boost profitability. In many cases, this has led to increased The growing power of environmental degradation and the private sector With the state violations of human withdrawing from rights. Among the chief political beneficiaries of globalisation is the private sector. infrastructure Similarly, the rapid Indeed, the international business privatisation of development, the community now enjoys more economic state entities has private sector now power than it has done for half a century. often led to a “fire Mergers, acquisitions and corporate plays an increasingly sale” in which the alliances have led to the emergence of dominant role in public interest has mega-corporations, many of which have lost out: in many development. revenues far in excess of those of many instances, the sell- countries – General Motor’s annual offs have fuelled income, for example, is larger than that corruption or left poorer people of Denmark and Thailand combined, excluded from essential public whilst the sales of the world’s 10 services. The privatisation of natural biggest companies exceed the combined resource industries, such as forestry, Gross National Product (GNP) of the has often resulted in widespread world’s 100 least developed countries – environmental destruction, not least including all countries in Africa.11 because privatisation has frequently been accompanied by the dismantling of Moreover, with the state withdrawing state agencies responsible for (often under duress and with little overseeing environmental protection. institutional ability to stand up for the public interest) from infrastructure The developmental impacts of development and the provision of many increased trade have also been deeply essential services, the private sector uneven. As the United Nations’ now plays an increasingly dominant role Development Programme (UNDP) in development. In the past, notes in its 1999 Human Development infrastructure projects were largely Report, “The top fifth of the world’s planned and commissioned by public people in the richest countries enjoy authorities and paid for with public 82% of the expanding export trade money, often in the form of loans from and 68% of foreign direct investment – Multilateral Development Banks the bottom fifth, barely 1%.”8 (MDBs), such as the World Bank, and For 59 countries in sub-Saharan Africa other public bodies. Increasingly, and the ex-Soviet bloc, average however, the MDBs are moving to the incomes have contracted, whilst those private sector, with governments acting in Latin America have risen by just 6% as facilitators rather than financiers. during the years of market liberalisation Instead of funding projects through – as against 75% in the 1960s and states, the MDBs are now funding 1970s when the region’s economies private companies directly or providing were relatively closed.9 UNDP’s guarantees on their investments. conclusion is stark: The change is reflected in the growth of “Economic integration is dividing private capital flows to the developing developing and transition economies and transition countries. As recently as into those that are benefiting from 1992, public financial flows were global opportunities and those that are greater than private capital flows: by not.”10 1996, private flows were more than five

16 The Campaigners’ Guide to Financial Markets times larger.12 In the mid-1990s, the agenda has come to dominate private sector financed about 10-15% of government policies worldwide, so infrastructure investments in the Third demands for interventionist policies (in World, with the World Bank predicting which the government takes action to that private investors could soon be direct economic activity) are providing as much as 70% of increasingly rebuffed with the argument infrastructure investment. Already, that stricter controls on private money funds industrial facilities, industry would undermine “There is no denying mines, dams, ports, toll roads, coal-fired the competitiveness of power plants, nuclear facilities, companies. Many of the that multinationals have plantations and dams (see Box, “Project traditional avenues for contributed to labour, finance”, p.20). Many of these projects achieving social and environmental and have considerable adverse social and environmental reform – environmental impacts. Exerting pressure namely through human-rights abuses as to direct investment towards governments – have thus they pursue profit environmentally-sustainable become less effective, if around the globe . . . opportunities, such as mass transport and not (temporarily) closed The global economy is clean power, is a major challenge facing off entirely. Indeed, many campaigners. of the rules agreed under still pretty much in the The growing power of the corporate free trade agreements robber-baron age.” prevent states unilaterally Business Week,,, sector, however, has not been matched by November 2000 regulatory controls over their adopting progressive environmental and social practices: on social, economic or the contrary, in many countries, the environmental legislation. processes and policies associated with The move to the private sector, globalisation and free market reform particularly in infrastructure have weakened the regulatory capacities development, has also meant that of state institutions. Similarly, various several avenues developed by public attempts to influence the practices of interest groups to influence the outcome transnational corporations (TNCs) of projects are less effective than they through UN-instituted Codes of Conduct used to be. Because the World Bank and 13 have been abandoned, often under other public development agencies are pressure from industry. Indeed, no longer so directly involved in concerned politicians, like many infrastructure projects, for example, the campaigners, often lack an understanding links developed between Southern of how to control and manage the private groups and Northern non-governmental sector in a “free market”. They too face a groups (NGOs) to pressure project challenge of having to learn new ways of developers by lobbying MDB defending the public interest. representatives have, in many instances, lost some of their political purchase. The shifting space for Ordinary people seeking to pressure project developers to abandon change destructive projects or to limit their negative impacts are at a further In this respect, GATT and other “free disadvantage since, unlike the MDBs,14 trade” agreements have dramatically the private sector generally lacks any squeezed the political space open to binding standards requiring them to take public interest groups pressing for account of the social and environmental progressive social and economic impacts of investments. Few companies investment policies. As the free market monitor such impacts and most lack

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rudimentary environmental “due pressure on private sector project diligence” procedures.15 (Due diligence developers, it also increases the refers to the background research that a competitive pressures on companies to prudent investor, lender or company disregard the impacts of their activities. executive might be expected to carry out before making a business decision.) Moreover, even where environmental Lobbying the markets: risks are considered, the focus is typically on the risks that the A new political space environment poses to the investment – rather than the risks that the investment One response to concerns about poses to the environment. The lack of globalisation has been the flowering of international rules binding companies to international campaigns to challenge the act in a socially responsible manner not new trade rules and to change the only reduces the leverage available to framework in which markets operate concerned citizens seeking to exert (see Box, “From Seattle to Prague”,

Changing the framework - From Seattle to Prague

ith the coming into transnational corporations. As a will be used to close markets to force of the 1994 first step to controlling the South, there are demands GATT agreement and footloose money, for example, for a social clause to be theW establishment in 1995 of governments are being pressed incorporated into the WTO the World Trade Organisation to adopt the so-called Tobin which would mandate certain (WTO), many social move- Tax (named after Nobel prize- defined labour standards. ments have emerged to press winning economist James Tobin Infraction of the social clause by for major changes in the who first proposed it in 1972), a country, according to current “financial architecture” of which would tax international proposals, would lead to trade world trade and investment. capital transactions, raising sanctions against that country, Spurred by industry and considerable funds which could authorised by a joint body of government attempts to be invested in a new UN- the WTO and the International liberalise capital flows still administered global Labour Organisation. further, a broad global alliance development fund. of trade unions, development At the international level, groups, environmentalists, Regulations are also demanded campaigns by Non- consumer groups and anti- for TNCs, a starting point for governmental organisations poverty groups are now any new regulatory framework have successfully highlighted demanding changes to WTO being the Code of Conduct for many adverse social and rules that would ensure the TNCs developed under the environmental impacts of right of states to regulate auspices of the United Nations globalisation. Indeed, in the investments within their own in the 1970s – although it wake of the protests against the borders. In particular, should be stressed that such WTO in Seattle in 1999 and the campaigners are seeking new Codes of Conduct are not IMF and World Bank in Prague in rules that would disallow any substitutes for wider measures 2000, criticisms of globalisation takeovers, mergers, to address the disproportionate that were once considered the amalgamations or strategic power that TNCs exert in the province of radical groups have alliances deemed detrimental global economy. In addition, entered the mainstream. As to the public interest through activists are pressing for anti- Business Week put it shortly the increased concentration of trust legislation (laws intended after the demonstrations in economic power in fewer and to prevent companies Prague, “There is no denying fewer hands. establishing monopolies) to be that multinationals have introduced at an international contributed to labour, There is also deepening level to prevent the abuse of environmental and human-rights support for measures to tax corporate power. abuses as they pursue profit speculative capital flows around the globe . . . The (short-term, easily withdrawn More controversially, at least global economy is still pretty investments which entail no from the point of view of many much still in the robber-baron commitment to the host Southern groups and age. If global capitalism’s flaws country) and to limit the governments, which are aren’t addressed, the backlash economic power of concerned that the measures could grow more severe.”

18 The Campaigners’ Guide to Financial Markets p.18). Human rights, environment and Box, “Genetic slump”, p.60). development groups have also been Underpinning such successes are a quick to develop new strategies in order number of factors that make the lobbying to influence the social and environmental of investors and other players in the outcomes of private sector development financial markets an increasingly fruitful projects and investment, both North and arena for campaigning. These are South. considered below. One arena where NGOs are proving increasingly effective at pressing for 1. The power of the market change is, ironically, the market itself. One reason why campaigners have Using a variety of tactics – from turned to the financial markets lies in the consumer boycotts to shareholder immense power exercised by the actions – public interest groups have financial community – from banks to successfully used their power within the institutional investors – over the private retail business sector. market Financial institutions own most listed Bonds, securities and and the companies (that is, companies whose financial derivative options now shares are publicly traded on a Stock market to Exchange). They can collectively move across the globe at challenge appoint the company directors and can lightning speed, 24 hours a number even instruct companies what to do, of a day. including requiring them to institute damaging rules that would screen out private environmentally-destructive projects. sector They also provide new money, without projects, or have forced companies to which projects and company expansion take steps to address issues ranging from would not happen or would be seriously environmental degradation to gay rights, delayed. from child labour to workers’ rights. In addition, financial markets (see Box, Consumer activism within the retail “What are financial markets?”, p.14) market has a long history: boycotts on value and price economic activity – for sugar, for example, were a key feature of example, through share prices and anti-slavery campaigns in the 19th interest rates – effectively determining a century. By contrast, activism within company’s viability. Such pricing financial markets dates back to the signals also influence and constrain the 1970s and 1980s, when the anti- actions of governments: exchange rates, apartheid movement developed for example, send a strong signal to a shareholder campaigns to push for government on the merit of its key companies to disinvest from South economic policies, such as public Africa. Campaigners have been quick to spending. learn, however, notching up notable successes. Campaigns directed at major Bringing pressure to bear on financial institutional investors – for example, institutions and markets can thus have a pension funds – have also proved major influence over corporate productive in encouraging some behaviour, the direction of infrastructure companies to move out of development, and the environmental and environmentally-destructive sectors social outcome of investments. (such as large-scale hydroelectric dams) or in undermining investor confidence in 2. Markets as “neutral ground” areas such as genetic engineering (see There is a widely-held perception

19 The Campaigners’ Guide to Financial Markets

Project finance

n the past, infrastructure borrowings are financed on a (it borrows money). Equity projects, particularly in the “non-recourse” basis – the investment can come from the South, were predominantly banks and other investors have various parties involved in the Ifinanced by governments, no “recourse” to the sponsor’s deal, or from investors with the government taking all assets if the project fails. specialising in project finance, the risks of the project. In or both. recent years, the private Common structures of project sector has increasingly taken a ownership are “Build-Own- Investors look for a major role in developing, Operate” schemes, under which reasonable return on their building, operating and the project developers retain investment, which reflects the financing large infrastructure ownership of the project, or risks of the project (typically projects. “Build-Own-Operate-Transfer” around 12-20% per annum). schemes, under which the host But a notable feature of Raising the money for private government takes over the project finance is that a sector infrastructure projects project after a specified substantial proportion of the is known as “project finance”. number of years. Projects total finance is in the form of Although a relatively generally have a long life span – loans borrowed from banks specialised part of the whole typically 15-30 years, with and others – between 50% and financial markets, it can be a reasonably predictable cash 90% of the total cost. particularly significant part for flows – the revenues are usually campaigners because large backed by strong, long-term infrastructure projects can be contracts (for example, to buy particularly controversial and the electricity generated). For further information on project objectionable. Usually a company is especially finance, we recommend the Harvard Business School’s “Project Finance To secure so much borrowing, created to own and manage the Portal” – it has many useful the value of the project’s project. This company raises background documents and links to assets and the strength of its the finance as both equity (that other useful sites. The portal can be revenue contracts are very is, shares in the project which accessed at www.hbs.edu/ important. Generally, these investors buy) and through debt projfinportal .

amongst many commentators and politically-motivated theatre, the politicians that markets are politically puncturing of investor confidence in a neutral. This can bring added project or sector gives a campaign a credibility to campaigns. credibility in many quarters that might When it comes to weighing up the pros otherwise be denied. Politicians in and cons of a project or a commercial particular find it hard to argue with sector, number crunching, as opposed to markets: to do so suggests a disregard political ideology or vested interests, is for “sound” financial policies and assumed to determine investment reveals their own biases in a light that decisions. By contrast, campaigners are campaigners can more easily expose, viewed as having axes to grind that often forcing them onto ground that devalues their objectivity. These NGOs are better equipped to exploit. perceptions are demonstrably false: The rejection of nuclear power by the investors, particularly institutional financial markets is a case in point: investors, have as many political biases investors were scared off by the largely as any other interest group, reflected not unknown financial liabilities of nuclear least in the information they chose to act accidents and nuclear waste disposal. upon – but they are nonetheless biases that campaigners can use to their 3. NGO strengths,,, market advantage. weaknesses Whereas pickets and protests can be NGOs are often strongest in areas where shrugged off by opponents as financial institutions are at their weakest

20 The Campaigners’ Guide to Financial Markets and most vulnerable. that NGOs often enjoy with community groups, both North and South, grant The power of public interest groups lies NGOs a privileged insight into local primarily in their ability to reflect and conditions that is not available to most influence public opinion. Not only do financial institutions: where local they have better links to the public than communities choose to use NGO many financial institutions, but their colleagues as a conduit for relaying organisations are also specifically concerns to companies and investors, geared to channelling public opinion in that privileged local knowledge ways that will bring maximum pressure provides campaigners with a powerful to bear on an issue. The Internet and tool for leveraging companies and other new technologies have investors alike. A company’s reputation, dramatically increased their ability to for example, is of major concern to organise internationally and to build investors: revelations that a company is cross-sectoral alliances. involved in human rights abuses or Such powers give NGOs several major complicit in degrading the environment advantages over many financial can knock many millions off the value of institutions. First, unlike NGOs, its shares. Yet financial analysts – financial institutions – particularly whose job it is to alert institutional investment banks and pension funds – clients to such threats to share values – are relatively insulated from public generally lack the institutional capacity opinion (except as expressed through the to undertake detailed research into the computer print-outs that trace share day-to-day, on-the-ground operations of dealing) and frequently lack the political the companies and projects in which infrastructure to anticipate and assess they invest, relying instead on consumer boycotts and other information garnered almost exclusively interventions that NGOs are well-placed from within the financial sector itself. to organise. To date, such boycotts have Companies are often in a similar largely been aimed at denying markets to position, relying on assurances from retail companies by puncturing demand plant managers or suppliers that for branded products. The recent pollution permits are being observed or rejection by consumers in Europe and that working conditions are not in elsewhere of genetically-engineered breach of corporate commitments or foods, however, has demonstrated the national or international law; they are ability of boycott campaigns to influence thus vulnerable to well-documented investments in whole sectors of the case studies that bring the concerns of market, not just specific companies or affected communities to the attention of product lines. Moreover, as NGOs analysts and the general public. As a themselves have discovered, the same spokeswoman for Heals, the UK tactics can successfully be brought to furniture store, remarked when bear directly on financial institutions – confronted by Greenpeace research particularly those, such as commercial tracing timber sold by Heals to illegal banks and pension funds, which depend logging operations in the Amazon, “I’m for their business on maintaining their shocked. We don’t want to be involved reputation as a strong and trusted in this. Perhaps our due diligence is “brand”. The campaign by gay rights rubbish.”16 In addition to enabling groups against the Bank of Scotland is a campaigners to place direct pressure on case in point (see Box, “A bank companies – not least by revealing besieged”, p.25). deficiencies in their corporate governance – the passing on of local Second, the close collaborative links knowledge to analysts (assuming that

21 The Campaigners’ Guide to Financial Markets

this meets with the approval of partners more than, “Mmmm, I’ll give that fair in affected communities) can also bring trade coffee a try to see what all the fuss potential allies within the investment is about” – they point to potential new community, leading to a two-way political space on which to build exchange of information that can benefit campaigns. Where the actions of both parties. individual consumers are coordinated – and with the Internet, they increasingly 4. Increasing consumer awareness are – consumers have proved themselves highly effective at Consumers are more aware of expressing their opposition to corporate environmental and social issues – and practices that harm the environment or are increasingly prepared to demand people. It is rare, however, for that they are taken into consumer action alone – for example, Companies are also account in commerce and through boycotts – to shift corporate fearful of small investment. behaviour. Invariably, other tactics have investors acting as a The free trade agenda also to be brought into play. herd - selling their may have brought Fast food chains, clothes stores, oil, car, shares in a company companies and investors agribusiness and construction all at once because of new markets, but it has companies, banks and medical research also spawned a more laboratories have all been targeted with adverse publicity . active consumerism. considerable success. In Europe, With the government concerns over food safety, tropical increasingly unwilling to deforestation, child labour and climate regulate, says Sheila McKechnie,17 change have prompted consumer director of the UK Consumers’ boycotts which, combined with other Association, consumers are lobbying efforts, have helped pave the increasingly using their purchasing way for bans, policy changes and new power to control corporate behaviour legislation. via the market – a trend also noted by the Henley Centre, a prestigious Companies which fail to take account of management think-tank.18 this shift towards increasing consumer activism can find their markets According to research conducted by the evaporate and their share price accountants PriceWaterhouseCooper, nosedive. “What we fear most,” a Shell four out of ten people around the world executive told a meeting of the Prince of had boycotted a company for ethical Wales business and environment group reasons during 1999.19 In the UK, the in 1998, “is not new legislation but figure was lower – 3 out of 10 – but as consumer revolt.”21 the Financial Times notes that still “equates to about 12 million The consumer backlash against consumers acting on their concerns”.20 genetically-engineered foods, for In addition, whilst a majority of those example, contributed to Monsanto’s polled thought that companies working share price plummeting by 11% from in countries with poor human rights March to August 1999: other important should use their influence to campaign factors included market fears that the for improvement, one in five believed company had overstretched itself that the companies should simply refuse financially through a massive spending to work in such countries. spree buying up competitors.22 Although such polls should be read “Monsanto massively misconceived with caution – making a decision to what sustainability is all about,” John purchase ethically may amount to no Elkington, director of Sustainability, an

22 The Campaigners’ Guide to Financial Markets

Consumer and shareholder activism

Target Issue Tactics Impact Outcome

Bank of Bank entered into Pickets at bank’s £402 million Bank announces it Scotland deal with right- headquarters. knocked off the will pull out of wing TV evangelist bank’s share value. deal Pat Robertson, a Protests from Bank’s reputation vociferous churches. for taking strong opponent of Consumer boycott ethical positions is women’s and gay of Bank of severely dented rights. Scotland. Bank accepts it will have to work hard to win back public support

Del Monte Non-recognition Consumer Public Unions recognised of union rights in protests, including embarrassment. in return for an company’s Costa dumping of end to the Rican fruit bananas outside European plantations. UK headquarters. campaign against the company

BPB P Proposed drilling AGM resolution Resolution won Major “wake-up operations in calling for end to support of 13% of call” to financial Alaskan nature Alaskan operation shareholders. institutions: reserve. and move away power of from oil environmentally production to motivated alternatives. resolutions demonstrated

Huntingdon Europe’s largest Protests outside Shares plummeted Company CEO Life Sciences contract medical laboratory. when fund admits campaign research company. managers Phillips “almost succeeded Picketing of & Drew sold its in company’s houses of major 11% stake. destruction” Accusations of shareholders and animal cruelty. company analysts. Trading in shares suspended in 1998.

Lehman Three Gorges Dam Letter writing by Some of the Campaign Brothers in China. The dam major US banks have continues will force environmental become more Morgan Morgan resettlement of groups. cautious about Stanley Dean 1.2-1.9 million risking their Witter Witter people and cause Shareholder lobby reputation on the against banks. J.P. Morgan major project environmental Boycott of Dean BankAmerica damage. Witter’s “Discover” Smith Barney All five banks had credit card. Credit Suisse sponsored bonds First Boston that would have supported the dam.

Premier Oil Oil operations in Protests and Executives Company Burma. Accused of shareholder forced to defend criticised publicly benefiting from lobbying at their position at by UK slave labour. Premier’s AGM. AGM. government

23 The Campaigners’ Guide to Financial Markets

environmental consultancy, recently Kidder, president of the US-based told Green Futures. “Corporations and Institute for Global Ethics: financial institutions are now having “Increasingly there is no place to hide. to learn fast. And it’s this which has What I see happening, especially in the the potential to profoundly reshape US, is that every company that has any markets.” 23 kind of international activity has attracted around its periphery a bunch of web sites devoted to exposing 5. Globalisation and increased everything this company does.” 25 corporate vulnerability According to a survey undertaken by the UK’s Ashridge Centre for Business and Globalisation and new technologies Society, a sizeable number of companies have made companies have already responded to such In the UK, according to more vulnerable to pressures in their investment decisions. organised consumer The survey found that 36% of the recent polls, three- protest. world’s 500 biggest companies had quarters of occupational abandoned a proposed investment out of With the growth of the pension holders wanted concern for human rights issues, whilst Internet, business is 19% had disinvested from a country on pension funds to use their finding it harder to human rights grounds.26 influence to encourage hide its failings from socially responsible a public that is increasingly willing 6. The rise of ethical behaviour by companies. to act against shareholding companies that New patterns of share ownership are violate ethical standards or threaten the bringing new ethical concerns to the environment. Moreover, the very global market. inter-connectedness of companies means that a consumer backlash in one Consumer-driven pressure for change on part of the world can be difficult to companies is mirrored within the contain. Lean production strategies investment community, as changing have also made companies more patterns of share ownership give vulnerable: the more global companies concerned investors a more prominent are in their operations, the more local place in the markets. Although the outsourcing operations there are to “go control of some assets – for example, wrong”, sparking possible consumer stocks and bonds – remain concentrated revolts in local markets globally. in relatively few hands, an increasing number of people in industrialised “If there’s a problem in a company’s countries own shares. In the US, nearly global supply chain, all it takes is one half of all households own shares modem in Indonesia to alert the world directly or indirectly, through mutual about it”, says Aron Cramer, vice funds or pension plans, a greater president of San Francisco’s Business proportion than at any time in history: for Social Responsibility, which the percentage of families with some advises Gap, General Motors and other stake in the market rose from 31.6% in companies on their practices abroad. 1989 to 48.8% in 1998.27 “People’s expectations of the social and environmental role of businesses Small investors acting alone may carry have absolutely changed in the past little clout in the boardroom. By five years.” 24 contrast, the big institutional investors, such as pension funds, in which many That view is echoed by Rushworth individuals have a stake as pension

24 The Campaigners’ Guide to Financial Markets

A bank besieged - Consumer power against bigotry

t seemed a deal made in deal: Edinburgh University sold its shares in the bank, heaven. Scotland’s biggest Students’ Association, whose which had previously enjoyed bank, the Bank of Scotland, annual turnover is some £7 a favourable rating amongst Iwanted to establish itself in million, anounced that it was socially-responsible investors, the US. To do so, it teamed considering withdrawing its while stockbrokers Rathbone up in 1999 with US television account from the bank, while announced that they would evangelist Pat Robertson to the Scottish Trade Union sell their holdings if the bank form an on-line banking Congress threatened to responded to its concerns operation that would be withdraw the business of with “purely commercial promoted via Robertson’s 1.8 100,000 members who held a justifications”. million-strong Christian Bank of Scotland affinity card. As the boycott began to bite, Coalition network. For the The ecumenical “Action for the bank’s share price rapidly bank, the deal seemed to Churches Together in Scotland” tumbled, falling 10 per cent. offer the opportunity to also said it was considering The crunch came when establish a market at virtually withdrawal, stating that Robertson himself responded no cost. Robertson stood for everything to critics by lambasting its member churches were Scotland for “tolerating” Bank of Scotland customers, against. however, were shocked at the homosexuals. Others who did not hold deal. Robertson is known for The ensuing outcry intensified his extreme right-wing, anti- accounts with the bank also found ways to bring pressure to the campaign, forcing the women and anti-gay views. bank to announce that it was “Many of those people bear. Edinburgh City Council wrote to the bank, deploring its scuppering the deal. By the involved with Hitler were time of the withdrawal, over satanists”, he has said. “Many actions: “People do not want the name of a major Scottish 500 customers had moved of them were homosexuals. their accounts. The two things seem to go institution associated with the together.” Women have also politics of bigotry”, said Council The bank’s board survived a come in for abuse: “That leader Keith Geddes. Across the heated Annual General National Organisation for border, Duncan Lustig-Prean, a Meeting, held just weeks after Women is saying that, in order London-based property firm, the announcement of the to be a woman, you have to informed legal firms that the withdrawal. But the company’s be a lesbian.” “The feminist company would refuse to assign reputation was severely agenda”, Robertson wrote in certificates of consent to dented by the proposed deal. 1992, “is a socialist, anti- transfer where a Bank of Many analysts argue that family, political movement Scotland mortgage was restoring that reputation will that encourages women to involved. take intense effort. leave their husbands, kill their Ethical investors, charities with Sources children, practice witchcraft, credit card ties with the bank Marshall, A. and Collier, A., “One destroy capitalism and and ordinary Bank of Scotland Hell of a Deal”, The Independent, become lesbians.” 14 April 1999; Levene, T., “Revolt customers joined the campaign, spreads over TV preacher”, The Gay rights groups responded selling shares, withdrawing Guardian, 27 March 1999; Braid, M., by urging a boycott of the investments and closing saving “Gay Jibe may lead to bank bank. Students and trade accounts. The Edinburgh-based boycott”, The Independent, 3 June unions also rallied against the Ethical Investment Co-Operative 1999. holders, yield a stick hefty enough to investors acting as a herd – disinvesting change company policy. When united, rapidly from one sector because of small investors may also yield an adverse publicity or a sudden volatility influence that is disproportionate to their in the market. numbers: a case in point is the “Gas Unsurprisingly, the major financial Greed” campaign, organised by institutions are increasingly preoccupied Professor Jo Lamb from Glasgow, with the state of mind, behaviour and which mobilised a substantial number of even the identity of the average US retail small shareholders to support a investor. One consistent finding of resolution challenging pay awards to the research aimed at gauging the behaviour executives of British Gas in the mid- of today’s investors is a concern for the 1990s. environmental impacts of their Companies are also fearful of small investments.

25 The Campaigners’ Guide to Financial Markets

In the UK, for example, a National pension funds and other institutional Opinion Poll survey conducted in investors (such as insurance companies August 2000 revealed that three- and unit trusts) to change their quarters of occupational pension investment policies. holders want pension funds to use their influence to encourage socially responsible behaviour by companies.28 7. Changing institutional cultures One-third of those interviewed were The institutional culture within financial prepared to accept such investments markets is changing and there is more even if they damaged their pension’s willingness to embrace environmental financial performance. and social concerns. Although such findings have yet to work The business of financial institutions is their way into mainstream investment to make money. Nonetheless, the major practice amongst pension fund players in the financial markets are well managers – and are resisted by many – aware that the business of making money they provide strong evidence of a has its social and political limits: stretch demand for socially responsible those limits too far and the institutions of investment. Indeed, the value of the money-making become vulnerable to a UK’s 44 ethical investments have public backlash that can threaten their exploded from almost nothing in 1980 29 very existence. When popular unease to more than £2.8 billion in 2000. over particular institutional practices This compares with only £370 million becomes sufficiently vocal and in 1992 – and represents a rise of 35% widespread, financial institutions have over 1999, according to the Co- 30 historically shown themselves willing to Operative Insurance Society. Studies change in order to survive. by Bank Sarasin, an investment management company, conclude that Having long ignored environmental and returns from such investments are “at social considerations in their least comparable with those of more investments, there are signs that traditional equity investment”.31 Many companies and institutional investors analysts confidently predict ethical are beginning to respond to growing investments to triple again by 2005. public concern over environmentally damaging and socially oppressive Shareholder actions demanding investment. The protests against the corporate responsibility are also on the World Trade Organisation (WTO) in rise. In the US, shareholder resolutions Seattle in 1999 – when demonstrators calling for companies to address social severely disrupted negotiations for a and environmental criteria doubled in new round of trade liberalisation – may the early 1990s, reaching 300 by have been “perplexing” to the business 1996.32 The value of the investments community but nonetheless prompted controlled by investors who have filed many business executives to rework such resolutions (or supported them) their approach to globalisation. has also grown – from $473 billion in 1995 to $736 billion in 1997. Discussions of the backlash against globalisation are no longer confined to Although covering only a minuscule whispered coffee-break conversations fraction of the investments made in business seminars: whole sessions globally every year – and just 1% of are now devoted to the implications of total unit trust investment in the UK – “Seattle” for future business strategy. As such trends suggest fertile ground on Business Week recently commented: which campaigners can work to press “Many of the radicals leading the

26 The Campaigners’ Guide to Financial Markets

Huntingdon Life Sciences “Naming and shaming” on dangerous new ground

n February 2000, shares in But the HLS campaign has also private investors – and Huntingdon Life Sciences been accused of trying to directors of companies – (HLS), Europe’s largest intimidate shareholders into personally aware of the Icontract medical research selling their shares. Fund impacts of their investments. laboratory, plummeted after managers at Phillips and Drew As John Vidal reports, “In the institutional investors were and their clients, whose home US, the head of a large targeted by animal rights’ addresses and telephone Japanese corporation which campaigners angered by the numbers had been published by was responsible for much company’s cruelty to animals. Stop Huntingdon Animal Cruelty deforestation in the Far East The collapse began when fund (SHAC), received abusive was reportedly so shocked managers Phillips and Drew, telephone calls, including death about the scale of what his the company’s biggest threats. The Phillips and Drew company was doing that he institutional investor, decided building had to be evacuated immediately changed the to sell its 11% stake in the following hoax bomb calls. policy.” company. Other investors SHAC denied that the calls had quickly followed, halving HLS’s been made by its members, but share price in just one day. did not condemn the practice. Dangerous ground “We condemn terrorism. But a Subsequently, the Royal Bank bomb hoax is not terrorism.” of Scotland announced that it But in crossing the line was pulling the plug on HLS’ between “public” and bank overdraft. Germany’s Naming and shaming “private”, the “naming and banking group, WestLB shaming” of individuals rather Panmure, also severed its ties than institutions courts a with the company, resigning as As John Vidal, environmental dangerous politics. Instead of HLS’s broker in June 2000. editor of The Guardian, notes, it protest being a means of was probably inevitable that engaged persuasion, it can fund managers would sooner or rapidly descend into the Persuasion or later be targeted personally by intimidatory intolerance of direct action groups. Not only the lynch mob. A letter to one intimidation? do they constitute “one weak HLS employee, for example, link in the chain between read: “Do you want a petrol companies and unethical bomb shoved through your As a campaign, the HLS action letter box? Do you want to achieved its aim of deterring behaviour” but, equally important, “there are very few have the living shit kicked out investors – at least in the of you? If the answer to these short-term. But the tactics people involved” – just 30 individual fund managers questions is ‘no’, you had used by the campaign have better quit HLS.” caused considerable control hundreds of billions of controversy, not least amongst pounds worth of investment. Such intimidation “works” other pressure groups. “Naming and shaming” is a precisely because it affects not only the targeted A key feature of the campaign campaign tactic that has a long individuals but others in their was the direct targeting of and effective history: indeed, it immediate circle: children, individual shareholders and is generally an essential neighbours, relatives are all fund managers by direct prerequisite of most successful impacted – even though they activists. In most instances, this campaigns. Without naming the have no involvement in the took the form of peaceful companies involved in, say, a activities being challenged. In protest: the British Union for destructive project, there is the process, opportunities for the Abolition of Vivisection little prospect of putting public debate and reasoning are Reform Group, for example, pressure on them to withdraw closed down. Fear becomes wrote to 1,700 investors in from the project or to change the basis for action – and HLS, letting them know that its direction. Likewise, without democracy loses out. unless they sold their shares the names of institutional investors that are backing such within a week, they would be Focusing on individuals rather companies, would-be ethical visited by demonstrators. than institutions also runs the investors are denied the Several hundred investors sold risk of trivialising the issue. information that would enable up: many of them had been HLS does not abuse animals them to act on their unaware of HLS’s use of because its directors are investments. animals in research and were depraved: it abuses animals shocked to learn of its There is a strong case, too, for because there are no activities. campaign tactics that make institutional rules to prevent it

27 The Campaigners’ Guide to Financial Markets

from doing so, many dissent in innovative ways to that, as a result of the conditions that justify making attract attention to a cause and campaign, Huntingdon will money out of the practice, draw in support, has long relocate overseas or go and a wider culture that tacitly proved its effectiveness as a private in order to hide its approves. Bringing in new tool for change. activities more easily from rules that would change the public scrutiny. Alternatively, framework in which But where direct action overseas or private investors companies and investors encourages violence – or is may pick up Huntingdon’s operate requires campaigns effective only because it is business, leaving animals no that seek to change not only violent – it is invariably socially better off, and, indeed, personal behaviour but also regressive, not least because it possibly in the hands of even national laws and the invites repressive responses worse companies. institutional culture of which close down the space for financial and other peaceful democratic protest. In The lesson from HLS may not institutions. Tactics that lead the wake of the HLS campaign, be that direct action achieves to socially responsible for example, the what “moderates” have failed investment being identified pharmaceutical industry called to achieve through less with extremism are, at best, for new legislation to clamp confrontational means, but unhelpful to such efforts, at down on what it called that violence usually tends in worst, counter-productive. “economic terrorism”. HLS itself the end to support the status Not only do they scare off has written to Prime Minister quo. Tony Blair urging him to bring potential allies within financial Sources “extremist animal rights groups” Sources institutions; they also justify Vidal, J., “Cents and Sensibility”, resistance by the old financial within the remit of terrorist The Guardian, 15 February 2000: guard. legislation. Company law may Vidal, J., “This time it’s personal”, also be changed to make it The Guardian, 12 April 2000: Ward, much harder to obtain A., “Institutional investors Undermining other information about shareholders criticised for caving in to animal and directors, which would rights group”, Financial Times, 14 campaigns affect all shareholder February 2000: Ward, A., “How campaigns. animal rights group hit company in Non-violent direct action, the pocket”, Financial Times, 14 which uses the theatre of There is also a real possibility February 2000

protests may be on the political fringe. Moreover, for a younger generation of But they have helped to kick-start a middle managers, environmental profound rethinking about concerns (albeit of a “light green” globalisation amongst governments, variety) are increasingly accepted as mainstream economists and part of everyday culture. Whereas a corporations that, until recently, was decade ago, ethical investment staff carried on mostly in obscure think were seen by City institutions as “lowly tanks and academic seminars. This cheap staff to stick in a back room out assessment is badly overdue.”33 of the way”35 – and raising questions about the environmental and social Internally, too, companies and financial impacts of an investment spelled exile institutions are facing pressures to take from the fast track – today, ethical on board environmental and social investing is no longer the barrier that it issues in their investments. No one likes once was to career prospects, and may to be employed by a company that is even enhance them. viewed by the public as a pariah. Such internal cultural change has yet to “The desire to be part of the solution translate into significant change on the rather than part of the problem is a trading floor: with the exception of the powerful incentive for change”, says small but fast-growing “socially one business executive in a major responsible” investment market, global mining corporation. “One is used to investors still reward unsustainable taking flak from activists. It is a development.36 As one shareholder in different matter when one’s own Total-Fina, a major oil company, children start badgering you over reportedly shouted to protesters at the 34 breakfast, lunch and dinner.” company’s AGM in Paris, “We don’t

28 The Campaigners’ Guide to Financial Markets give a damn about human rights in As Stephen Timms, the then Pensions Burma, we’re shareholders.” But Minister, told Pensions Week in July internal dissent within the investment 1999: “The issues that (the socially community does provide a platform upon responsible investment movement) which sympathetic insiders can build.51 raise cannot be ignored in a world in which ordinary people, many of whom Some progress is already apparent: will be members of occupational although the vast majority of City pension schemes, are becoming analysts (see p.80) still show a macho increasingly concerned about the disdain for environmental and human conduct of companies and the ways in rights concerns, recent MORI research which investments are made on their indicates that even this may be changing. behalf. People want to know how their A 1997 poll, for example, revealed that savings are applied, and I think they one in three analysts and institutional are right to do so.”39 investors now believe that a company’s contribution to society and the From July 2000, pension funds have communities in which it operates affects been legally required to state: its financial performance.37 Almost half “The extent (if at all) to which social, of the institutional investors polled – and environmental or ethical considerations 38% of analysts – also stated that are taken into account in the selection, knowing about a company’s contribution retention and realisation of investments; to society and the community affected and their policy (if any) directing the their opinion of it. exercise of rights (including voting rights) attaching to investments.” 40 As for the companies themselves, a The new measures do not oblige pension survey commissioned by Control Risks, funds to operate an ethical investment the London-based international business policy, but they do place fund managers risk consultancy, found that 71% of under increased pressure to do so. businesses believe social and ethical Comments Matthew Harragin, the factors have become a more important ethical investment director at part of their agenda over the past five stockbrokers Rathbones: years. At the same time, 77% say they “The ethical dimension now has to be believe that such factors will be even more discussed, and once it is officially on important over the next five years.38 the agenda, it is far harder to ignore. Pension trustees who go hell for leather for companies causing pollution or 8. New regulatory measures selling arms to all and sundry may have some explaining to do.” 41 New regulatory measures have Given that pension funds together with strengthened the hand of NGOs in insurance companies currently own pushing for environmental and social more than half of all UK shares in terms considerations to be taken into account of value, the potential implications for in investment decisions. socially responsible investment (SRI) are profound. As Green Futures, a In the UK, new regulations introduced as business and environment magazine, part of package of reforms to regulate notes pension funds and insurance pension funds substantially redefine the companies have: framework in which investors will “a key role in making environmental operate in the future. The regulations issues a mainstream investment reflect growing concern amongst pension consideration. Both have liabilities that holders as to how their pensions are are very long-term in nature, so they being invested. should have a strong interest in long-

29 The Campaigners’ Guide to Financial Markets

First, do no harm! Conflicting agendas and financial market campaigns

any financial market embarking on financial market to be handled with care. If campaigns arise out of campaigns should take into companies that are relatively local community account: progressive are targeted, then oppositionM to specific projects poorer performers will feel or out of the experiences of Ensure that affected people little incentive to change – and oppressed groups, such as maintain the initiative. may even feel a strategy of women and minorities. Although cultural traditions of denial is more appropriate. advocacy and support work Just to argue that a relatively Where groups opt to lobby vary widely around the globe, progressive company is likely investors, it is important that ensuring a democratic and to respond is not a good the campaign remains firmly mutually accountable enough reason for targeting rooted in the concerns and relationship between NGOs and them. A campaign agenda political realities of those it is affected groups is vital to driven by “Who is a convenient intended to support. Because maintaining trust and good company or shareholder to financial market campaigns communications. target?” rather than “Who is involve institutions that are far ignoring the issue? Who removed from the local Maintain a long-term engagement. deserves to be targeted?” is community, the risk of unhelpful in developing metropolitan NGOs Staff turnover in NGOs is high political space for future substituting their own agenda and the focus of their work is campaigns. It may even and voice for that of affected often driven by donor fashions. damage your credibility. communities is particularly Many projects which local acute. Conflicting agendas can communities seek help in In general, companies are quickly emerge that can do opposing, however, require more likely to respond to considerable damage to long-term campaign work. pressure to improve their movement building at both environmental and social the local and global levels. performance if they feel that Campaigning techniques campaigners will target poor One area of potential conflict performers, rather than the lies in the pressure that As well as ensuring that your leaders in the field. This financial market campaigns campaign does not undermine applies particularly when generate to “engage” with your partners’ campaign targeting financial institutions. companies. Indeed, forcing a strategy, bear in mind that the Here the case for social company to negotiate is often political space that is opening responsibility is even less a prime aim of campaigns. up within financial Institutions widely accepted that among Certainly, institutional themselves is often fragile. A many companies. Targeting investors are unlikely to badly-constructed campaign the leaders is likely to deter support you unless they have may not only achieve little in others from taking social and discussed the issue with the the way of tangible results for environmental issues seriously. company and satisfied yourself but may also damage themselves that the company the potential for others to has a case to answer. Local campaign within the markets. communities, however, may Know when to stop be actively opposed to Aggressive and intimidatory “dialogue” – either because campaign tactics can be Even in a successful campaign, they have already tried this counterproductive. You may you may well reach a point avenue without success or achieve some headlines but you where the targeted because engagement does not could also inhibit broader institutions, having previously fit their political strategy. change. Not only are you likely responded positively to your to confirm the financial world’s lobbying, become less willing In such circumstances, a key worst image of campaigners, to listen to you. This may be maxim for campaigners is: but you could also legitimise because of obstinacy on their “First, do no harm”. It is critical the introduction of legislation part, but, equally, it may that conflicting agendas are that makes future action because they have reached the fully discussed prior to harder, not easier. limits of what they can do. launching a financial market Listen carefully to what the campaign. Where a resolution investors are saying and try to acceptable to local activists is Who to target put yourself in their shoes. Are impossible, a financial market they blocking you? Or do they campaign should be rejected. While it can sometimes be justified to target more have a point? You may have Past campaigns suggest other progressive companies and reached the point where it is important lessons that NGOs financial institutions, this needs time to try another approach.

30 The Campaigners’ Guide to Financial Markets

term market performance. And this is the UK Shareholders’ even more so given that they have Association lists it as “Give me ten nutters substantial assets invested in index its primary concern – funds, which ‘locks them into’ their shareholder resolutions throwing eggs at me 42 shareholdings.” questioning a any time rather than A further regulatory shift in favour of company’s one institution casting SRI campaigns comes in the form of a environmental impact its votes against re- new code of practice issued by the will thus have far Institute of Chartered Accountants of greater purchase. electing one of 43 England and Wales in 1999. Known as New reforms proposed my directors” the Turnbull Committee on Internal as part of the UK UK Company Executive Controls after its chair, a former government’s current financial director of the Rank Company Law Review Corporation, Nigel Turnbull, the code may also increase the pressure on updates previous advice to company companies to reconsider their social and directors on the measures they should environmental practices. Although the adopt to ensure that shareholders’ Review drew back from an anticipated investments and company assets are recommendation to make the welfare of properly safeguarded. Although the code society, rather than shareholder value, is not legally-binding on companies, it the overriding business objective of has the backing of the Stock Exchange, public companies, it nonetheless giving it semi-legal status. Any company proposes that directors should be wishing to list itself on the Stock required to consider the wider social Exchange now has to abide by the code. and long-term implications of their 45 Under the new Turnbull rules, company business decisions. It also directors in listed companies are recommends that companies be required obliged to take account of all to report on social and environmental “significant risks” which could damage issues in their annual reports. Although the company. And for the first time in a the Review falls far short of what is document of this kind, the code lists needed to make companies more environmental and social risks – in generally accountable to society as a addition to strictly financial ones – whole, it would among those that must be taken into nonetheless create account. Moreover, the code requires an opening to the “Increasingly there is no that directors put in place internal law to challenge place to hide. Every controls to manage these risks and companies that fail company that has any to take account of review them regularly to ensure their kind of international effectiveness. Directors are also wider issues in required to identify these risks in the their business activity has attracted company’s annual report and to describe decisions. around the measures taken to address them.44 its periphery a bunch of Publicly-listed companies had to comply 9. A willingness with the new code by the end of 2000. web sites devoted to to change? exposing everything the Senior industry figures say that the Turnbull code might well trigger a quiet The more company’s does.” revolution, transforming environmental politically-astute Ruthworth Kidder reporting from a PR-driven exercise to a financial Institute for Global Ethics corporate governance issue. With institutions are corporate governance increasingly a aware of the need to adapt – and are major focus of shareholder concerns – moving to get ahead of the game.

31 The Campaigners’ Guide to Financial Markets

The new pension regulations, combined environmental scrutiny has mushroomed with public pressure, have already from £3 billion a few years ago to £500 begun to shift practice within UK billion today. 47 pension funds. According to research Increasingly, fund managers not by the consultancy Environmental previously part of the SRI movement are Resources Management (ERM), 21 of becoming involved. Societe General the 25 largest UK pension funds (which Asset Management (with £120 billion) between them own one-third of the UK and Schroders Investment Management stock market) are (£120 billion), for example, are intending to vet at developing their own SRI policies. For a younger least part of their generation of middle portfolios against Moreover, as Giles Chitty, a consultant with financial advisers Holden Meehan, managers, socially responsible investment (SRI) notes, “The nature of SRI has changed. environmental criteria.46 Research has become wider in scope, concerns (albeit of a deeper in penetration and better at Four pension funds “light green” variety) identifying themes, which helps make – including British investment policy more strategic and are increasingly Telecom’s £29 focuses the search for suitable accepted as part of billion fund and, investment.” 48 following a their everyday culture. A number of institutional investors – the campaign by Jupiter Ecology Ecology Fund and NPI’s students, the Global Care Fund, managed by university lecturers’ Universities Henderson Global Investors, are two Superannuation Scheme (USS) – have examples – are now moving beyond announced that they will apply an SRI screening out “bad” companies to policy, focusing on engagement, across selecting shares in companies that are their portfolios (see Box, “The ‘Ethics best in their sector when measured for USS’ campaign”, p.100). Still against specific social and others – for example, CGNU’s Morley environmental criteria. Fund Management, which controls £200 billion worth of funds, Friends Ivory The extent to which such policies are and Sime and Henderson Global transforming financial institutions should Investors – are taking up a new style of not be exaggerated, however. For the pro-active shareholding, with fund most part, profit is still all that counts managers using their power as large with the vast majority of institutional shareholders to engage in “constructive investors. ERM’s survey, for example, dialogue” with companies, pressing for revealed that many funds do not have the change from within. If companies fail to specialist staff to undertake the address the fund managers’ concerns, promised SRI policies – and that “when disinvestment is likely to follow. questioned further about what their policy of engagement means, many of Local authorities, which control them didn’t know.” 49 substantial pension funds, have also been at the forefront of SRI. Even Rob Harrison from Corporate Critic, a before the new pension laws came into business ethics website, is still more effect, Norfolk, Lancashire and sceptical. “When the regulation was Nottingham County Councils have first being discussed with both a issued instructions for a portion of their negative screening and engagement funds to be managed on an SRI basis. component, the pension industry was All told, the value of UK investment predicting, among other things, the now subject to some form of social and collapse of the arms and tobacco

32 The Campaigners’ Guide to Financial Markets industries. Since negative screening was dropped, the industry now supports The limits of it, as it clearly no longer believes that engagement alone will change market activism anything.” 50 Nonetheless, Harrison concedes that the Financial market campaigns have clear new regulations are a useful first step limits – not least because they leave towards reforming corporate behaviour. unchallenged the underlying The commitment to undertake even fundamentals of the free market agenda. minimal screening offers space which They also pose many dilemmas for public interest groups can usefully activist groups – to what extent, for exploit to leverage change, ratchet up example, do they deflect from efforts to standards and publicise their concerns. achieve deeper structural change?

The impact of shareholder activism The US experience

istorically, so-called Corporation to include more resolutions. Experienced “social resolutions,” such environmentally and socially shareholder activists view as shareholder proposals conscious board members. In filing resolutions akin to Hon environmental, human December of 1999, after years ringing a doorbell: when you rights, worker and social of shareholder dialogue and file a proposal, the company issues, have never achieved a with new corporate leadership, comes to the door. Once the “technical win” at any Ford announced that it would door is opened, the company. This means that no pull out of the Global Climate shareholder begins or company has ever been forced Coalition, an industry lobby accelerates a dialogue to take action because a social group opposed to cutting process, which can create an resolution has received a carbon dioxide emissions. avenue for corporate change. majority vote. The lack of When a social resolution technical wins has led some But even when shareholder receives a significant number critics to argue that activity does not produce of votes (10% for example), shareholder power cannot immediate results, the actions well-governed companies effectively influence corporate of concerned and vocal usually feel the need to social behaviour. shareholders are an important address the issue at hand tool for social change: First, through a dialogue process, However, the ultimate impact when shareholders which hopefully leads to a of shareholder activism may be communicate their values and meaningful course of action. difficult to determine, as concerns to the companies they companies may make changes own, they exercise ownership To build a strategic campaign, as a result of shareholder responsibility, one of their most one must set realistic resolutions or dialogue, yet important rights and avenues objectives for what not publicly cite shareholder toward making companies more shareholder activism can concern and pressure as part accountable. When investors achieve, and share of the impetus for making express their social as well as information with and create/ such changes. For example, financial goals, they help make maintain an alliance with social shareholder concerns and Wall Street or the City more movements. Coordination is activity played a part in democratic and responsive to particularly important to dismantling apartheid in South societal concerns. inform shareholder dialogues Africa through disinvestment. and to keep companies from It also helped persuade Second, experience and “dividing and conquering” McDonald’s to phase out the evidence shows that sustained, individual activists through use of polystyrene packaging. strategic shareholder activism separate discussions. has helped social investors meet More recently, shareholders their goal of influencing Michelle Chan-Fishel have contributed to public corporate culture and social Reproduced from Friends of the pressure on Home Depot to performance. Building a Earth-US, Guide to Shareholder phase out wood sourced from sustained campaign means that Activism. The Guide can be environmentally-sensitive investor activists must have a downloaded from www.foe.org/ areas, and for the Maxxam strategy beyond simply filing international/shareholderinternational/shareholder.

33 The Campaigners’ Guide to Financial Markets

There is also a limit to what can For example: actually be achieved through lobbying financial institutions and markets. Campaigns directed against companies can be enhanced by targeting First, most companies will not respond shareholders... unless there is already external or Many corporate campaigns are often internal pressure for change. In that directed primarily at consumers, politicians respect, financial lobbying generally and the media. If letters are written to the pushes companies in directions in financial community, they are generally which they were already minded to go. directed solely to the company. For a little extra effort, considerably more pressure can Second, in a globalised world, there is be exerted by ensuring that the company’s a limit to what even the most successful major shareholders are also kept informed campaign can achieve unless and lobbied. As the chair of one major UK governments and international bodies company recently remarked: “Sticks and are prepared to step in and lay down stones may break my bones, but international rules. As Greenpeace institutional shareholders can fire me. remarks of the campaign for more Give me ten nutters throwing eggs at me responsible use of timber: “Logging any time rather than one institution casting its votes against re-electing one of companies may . . . seek to open up my directors.”52 markets which do not demand green products and they may try to Shareholders are a largely supplement losses made by increasing disorganised and untapped constituency logging rates. This also happens. It is that could prove a potent political force also the point where the influence of for progressive social activism. wood users reaches its limits and the responsibility of international Many members of public interest groups and trade unions are shareholders (via their governmental bodies and trade 51 pension funds) in major companies with federations is most pressing.” poor environmental rights records. That said, lobbying the major players in Mobilised into effective shareholder action financial markets – from banks to groups, they could help exert considerable political power within financial markets. pension funds and financial analysts – can add to the effectiveness of public interest campaigns in a number of ways. Is a financial campaign appropriate for your Put your own house in order appropriate for your organisation? arger NGOs should be aware of a particular hazard in a financial markets campaign. You A campaign targeted at financial may be investing in the companies or sectors institutions is just one of many options Lyou are targeting. This is because you may have significant assets in your pension fund, endowments available to activists. So the first or foundations invested in the stock market, and decision that any campaign needs to may be holding shares in those companies you seek to criticise. If the media finds out (and journalists consider is whether or not a financial will look – charities have been criticised on this markets campaign is even appropriate: point) you could end up looking foolish. It is easy other tactics and strategies – such as enough to check first, and to take action to deflect criticism. Better still, make should such funds have consumer boycotts, political lobbying, an SRI policy first – perhaps it should be your first legal actions or public demonstrations – step in financial campaigning. may be more effective.

34 The Campaigners’ Guide to Financial Markets

At this stage, it is critically important to targeting if the participants are public share ideas and strategies with partner (quoted) companies, or if finance is being groups, particularly those at the obtained from mainstream institutions grassroots – for example, local such as High Street banks. In contrast, it community groups or trade unions. Even will generally be harder to campaign if a financial markets campaign is going effectively when much of the financing is private or comes from offshore to form a small part of your overall institutions, which have no obligation to lobbying strategy, it may still have major disclose the names of investors. institutional and political implications for the way in which you work. For Targeting financial markets is likely to example, financial market campaigns are be worthwhile if the project appears inevitably focused on players in the marginal on financial grounds – in such market, which tend to be financial circumstances, it may not be too difficult institutions in the North; this can lead to to persuade investors to abandon it. grassroots groups (particularly those Conversely, where a project appears directly affected by projects) being financially attractive, it will be much harder to persuade the financial markets excluded from campaign decision- to avoid it, although not impossible. making, robbing them of the initiative (see Box, “First, do no harm”, p.30). Financial markets may offer a useful Financial campaigns also tend to go in option for a highly-focused campaign the direction of dialogue with parties when a more general campaign looks with whom many public interest groups unlikely to have influence, or when other have been at odds: whilst this can open avenues appear closed or difficult. up political space, it can also undermine Similarly, if the involvement of other strategies being pursued by partner investors is routine or minor, groups. Keeping others informed of your campaigning may prove fruitless. A key thinking – and working through your test here is the level and type of financial mutual concerns – is thus critical. institutions involved – a major commitment from a commercial bank or The following points may help you the presence of a leading investment are gauge how useful a financial markets indicators that a financial market campaign might be to your work: campaign may be appropriate. Financial markets may be worth Frequently, there will be synergies

Internal review

efore finally committing yourself to a financial markets campaign, it is worth asking yourself Bsome questions about what a financial markets campaign might mean to your organisation. Have you discussed the implications of the campaign – and in particular of possible engagement with companies – with your colleagues and partners? Will such engagement undermine their work? Will it cut off alliances with other groups? Are you committed to a financial markets campaign and to making it work? Are you prepared to spend the necessary time and money for a successful financial markets campaign – are there better alternatives? Are you happy with the less confrontational approach that successful financial market campaigning entails? What will be the implications internally among your employees and volunteers of such an approach? Are there possibilities of partnership or co-operation with other organisations? Do your existing partner groups feel comfortable with a financial markets campaign? Will it divert energy from other more pressing issues or more fruitful avenues for campaigning?

35 The Campaigners’ Guide to Financial Markets

between financial markets campaigns tactics that have proved fruitful in other and a more general campaign. Typically, areas of campaigning may not be mobilising a consumer boycott of a appropriate for lobbying financiers. Often company because of its involvement in a financial markets campaign will be certain activities will help make clear the most effective if the “in-your-face- damage being done to the company’s approach” of many consumer campaigns reputation and the risks it runs. This is eschewed in favour of a more subtle may help make financial institutions and considered lobbying. more open to your approaches, encouraging them to join you in pressing Financial market campaigns also use up for change. resources and time which could be put to better use elsewhere. Skimping on That said, there will often be resources is not an option, however: tensions between targeting the financial don’t expect financiers to take you markets and other campaign agendas, seriously if you don’t take them priorities and tactics. For example, seriously.

36 The Campaigners’ Guide to Financial Markets Part Two UnderUnderstandingstanding thethe marmarkketet –– PsyPsyccholohologgyy,,, arargumentsguments andand openingsopenings

37 The Campaigners’ Guide to Financial Markets USINGUSING THETHE MARKETMARKET MENTMENTALITYALITY TTOO YYOUROUR ADADVVANTANTAAGEGE

inancial markets are where those who want money link up F with those who not only have money but are also prepared to make it available – in the expectation that they will receive more money back at some point in the future.

Understanding the psychology of the market is key to intervening successfully in it so as to persuade potential lenders or investors not to part with their money if it is going to fund activities that are socially or environmentally destructive.

The most striking feature of financial markets is that they are speculative: that is, they all involve an element of gambling.

This makes financial markets different from the markets that most of us experience in our everyday lives. If we go to a shop, for example, the goods on sale are real, physical objects that we can take away in our shopping bags.

38 The Campaigners’ Guide to Financial Markets

What’s on sale in financial markets, away from environmentally and socially however, is the prospect of getting damaging activities towards more something in the future. Having been sustainable development paths. persuaded to invest in a particular company, someone may shelve out However deeply a fund manager or millions – and end up getting nothing at stock broker may care as an individual all. Or they may end up getting a hefty about the loss of wildlife to industrial return on their money. What they get agriculture or the dangers back depends on the relative risk of the that toxic chemicals pose investment they made. The riskier the to her children, neither of these concerns are likely venture, the more they expect to make Fear is as great a out of it – and the higher the likelihood to influence her of failure. investment decisions if an motivator in agro-chemical company financial markets Such speculation frames the psychology looks like a safe of the market. It brings the possibility of investment bet. But where as greed. Whilst huge financial gains and with them the campaigners are able to the business of plaudits of one’s peers – but the flip side demonstrate that the financial markets of speculation is failure. Even financial returns from the is to make money, investments that appear safe as houses investment are unlikely to (government stocks, for example) can, be as high as she is market players like houses, collapse and end up being expecting (the “greed” are constantly worthless. Those who invested in factor) or that the haunted by the Russian Government bonds before the company’s activities First World War, for example, lost carry substantial hidden strong possibility everything when the Tsar was deposed financial risks (the “fear” of losing it – and in the Russian Revolution. What had factor), the fund manager having to justify seemed the safest possible bet in 1914 is in a better position to bad investment was worthless by 1917. argue for disinvestment from the company or for decisions to their Unsurprisingly, fear is as great a using existing colleagues and motivator in financial markets as greed. shareholdings to bring superiors. Whilst the business of financial markets pressure for change. is to make money, market players are haunted by the possibility of losing it – In effect, the arguments and of having to justify bad investment that count in financial markets are not decisions to their colleagues and those that are based on an appeal to superiors. Evaluating the risks of an ethics or environmental self-interest investment is thus a constant (“investing in this company means that preoccupation. Indeed, when financial your children are more likely to get institutions are investing money cancer”) but to financial risk (“law suits entrusted to them by others (pension arising from cancer cases will cost this beneficiaries, for example), they are company a lot of money and your obliged by law to undertake what is investment won’t earn as much as you known as “due diligence”. thought”). But it should be noted that all financial activities carry some risk, and to simply Exposing the risks point out that there is a risk involved won’t tell an investor anything new. The This preoccupation with risk provides key concept in finance is the balance of campaigners with an entry point for any risk and reward. Some investments campaign aimed at directing investment (such as government bonds) are very

39 The Campaigners’ Guide to Financial Markets

Reading the balance sheet: How is the company doing?

he best way to get a are thus an important indicator measure of value, again linked quick view of a of value. Increasingly companies to growth – low growth company’s financial are looking at other ways to companies should have an healthT (at least as reported by repay investors, such as special above average yield, whereas the company) is to look at its dividends, share buy-backs and high growth companies will annual accounts. Here are stock splits, principally in order have a low or zero yield. The some of the issues to to reduce tax liabilities. importance of yield will vary consider: from investor to investor and from market to market. Results Other considerations Earnings is a fundamental Cash flow valuations figure. The greatest emphasis Having gathered the “Cash is king” goes the saying, is on the earnings after tax – information above, analysts will and many believe that cash “the bottom line” – and the then endeavour to pull it all flow analysis gives a more earnings per share (earnings together into a valuation of the realistic picture of a divided by the number of company. Whilst the current company’s real value than shares). But there is a never- year’s results may be known, other figures. Cash flow ending debate about how to next year’s figures are likely to valuations are based either on calculate earnings, as there is be an estimate, and the a simple ratio, like the PE scope to massage the figures following year’s can only be ratio, or on techniques such as and to change results, in the guessed at. The available discounted cash flow analysis. figures do not therefore give short-term at least. Another problem is with non-recurring much indication of a company’s Asset valuations items, such as charges arising future value. To overcome this, In certain situations, the from a major takeover, which analysts use a number of other balance sheet can be used as a can distort one year’s results means to value the company: guide to value – a company and affect valuations. Price Earnings Ratios whose market capitalisation is below its balance sheet value Intermediate financial Price-Earnings (PE) ratios are is often considered cheap. But indicators the most common way of balance sheets are subject to linking price to the current substantial distortion: assets These include operating earnings per share – price is may be worth far less or more margins, interest cover and expressed as a multiple of than they appear on the dividend cover, and the return earnings per share. This forms a balance sheet, which limits the on assets/capital employed. simple basis for comparing value of such figures – unless These indicate how well the different stocks. Thus if there a careful analysis is carried company is performing and are two similar companies, one out. In certain sectors, such as some of the risks it faces. trading on a PE of 20 and the insurance and property, asset Attention is also paid to other other on a PE of 30, the one on valuations are useful because figures such as: a PE of 30 would be regarded the balance sheet is more · EBITDA (Earnings Before as more expensive than the likely to reflect current values. Interest, Tax, Depreciation other, unless other and Amortisation), which is compensating factors can be Turnover valuations intended to give a identified. Essentially, it would Another way to value a indication of the underlying take 30 years of current business is focused on earning power of the earnings to repay an investment turnover, that is the company before more rather than 20 years. The most throughput of money in any variable factors. important other factor is one year. The argument is that · cash flow / cash flow growth – a higher PE ratio turnover shows the size of the per share. These figures would normally indicate a business, and, so long as indicate the actual cash higher expected growth rate. profit margins can be flowing into the company – For example, high growth compared to an industry and are intended to pharmaceutical or average, should indicate the exclude many accounting biotechnology stocks may trade bottom line potential. tricks. Note that it takes no on a PE of 50 or more, whereas Turnover valuations are most account of depreciation. a heavy industry stock (mining, useful in sectors such as · turnover which indicates pulp and paper, chemicals) may retailing, and least relevant in the overall business be on a PE ratio of 10. sectors such as high growth generated by the company. Dividend yield technology stocks. Turnover valuations are often used in Dividends This represents the dividend as takeovers as they give the a percentage of price – the acquiring company an This is the main way that opposite of the PE ratio. The example of the size of market companies repay investors and dividend yield provides another they are buying.

40 The Campaigners’ Guide to Financial Markets

(relatively!) secure investments – one is The company is going to be in a unlikely to lose all one’s money on position to repay any money it has them; but the trade-off is that the rates borrowed. of return on the investment are low. Below we list eight areas where Other investments (for example, campaigners can develop financial providing venture capital for start-up arguments that will exert technology firms) carry enormous risk, pressure on companies but if the gamble pays off, the investor by highlighting these The most powerful can reap huge gains. Some investors investor concerns. To campaigns are those prefer these high risk / high reward have maximum impact, investments; others prefer the slow and it is important to focus that use analysis to steady, safer, low risk / low reward on the issues that trouble demonstrate that the ones; many portfolios try to balance the investors, not those that two types. Your real input can be in project is not viable trouble NGOs. Where or a sound persuading investors that they’ve possible, this means underestimated the total risk of their presenting your investment. investment (for example, by neglecting concerns in terms that environmental or political issues), so play upon the the reward they expect no longer preoccupations of the financial justifies the risk. community and which financial markets will take seriously. Some key pressure 1. Management quality points – and how to For investment analysts, the quality of a company’s management is of utmost use them concern, although it is a factor that is difficult to assess and quantify. Analysts Many risks are considered routinely by look for evidence of a good track record investment analysts when valuing – that is, that the management has companies, using a range of financial delivered on its promises in the past. indicators (see Box, “Reading a Black marks are scored when a balance sheet”, p.40). Other company has become embroiled in considerations are also taken into adverse publicity; when concerns have account in order to build up a more been raised over corruption or legal complete picture of the company. liabilities; or when there is evidence of Ultimately, investors want to be incoherence in corporate policy. reassured that: Campaigners can call attention to The company’s basic finances are in “corporate governance” concerns to good order. show how a company’s depredations are The company is being competently run. in fact management failures that threaten The company’s business strategy to dent the company’s reputation or “stacks up” financially. otherwise damage its financial value. The return on any investment is Bear in mind, however, that investors in commensurate with the risks involved – different countries may differ the bigger the risk, the higher the considerably in how much weight they expected return. give to a particular indicator of “good The company does not face outstanding corporate governance”. In the UK, for legal liabilities or other “non- example, considerable attention is financial” risks. currently paid to whether or not the

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company has an environment policy. In “stagnant” or “insular”. the US, by contrast, this is not a major consideration. Check whether the company is a signatory to any sector-based Campaigners can call To assess a company’s environmental statement or guidelines. management quality, For example, more than 100 banks are now attention to “corporate campaigners should: signatories to the United Nations governance” concerns Environment Programme’s “Statement on to show how corporate Check whether Banking and Sustainable Development”, which commits the banks to incorporate misconduct is in fact a the company has an environmental policy environmental concerns in all aspects of business. Draw attention to how current “management failure” and a social policy... that threatens the practice violates the stated commitments – Compare any policy and the implications for management. In the company’s reputation or commitments with the case of dam-building companies, a useful otherwise damage its company’s operations on set of guidelines to cite are those of the the ground. Highlight any World Commission on Dams (WCD),54 financial value. violations – and draw which recommends inter alia that dams attention to how these should be built only when the project enjoys indicate a failure by demonstrable public acceptance. The management to institute proper internal Swedish construction firm Skanska has controls. Use other company statements stated that it will observe the WCD (for example, articles by senior guidelines and a number of other companies management or speeches made to business are considering following suit. seminars) to draw attention to gaps between stated policy and actual practice. Check the company’s annual report: Raise questions about the integrity of are there board level directors management – and the extent to which its responsible for environmental and pronouncements can be trusted. Point to community affff airs? the potentially severe consequences for the community afff airs? company’s image at a time when investors If there aren’t, raise this omission as a are becoming increasingly sensitive to corporate governance issue. Point to the corporate ethics when deciding on their damage being done to the company’s investment portfolios. If the company has reputation by environmental controversies no policy, highlight this lack as a major or community resistance. Relate these to the corporate governance failure. management’s failure to ensure clear lines of accountability for addressing the company’s environmental and social Compare the company’s policies and Compare the company’s policies and impacts. If the company does have an internal controls (or lack of them) to environmental director, demand that he or best practice elsewhere in the industry... she be held accountable for the damage If there are better guidelines which other done by the company, for example, by companies follow, cite them as evidence of being replaced. the management’s failure to keep pace with its competitors. As Michelle Chan-Fishel, a Check the company’s annual report to campaigner at Friends of the Earth-US, see what “non-financial” risks it reports... notes: “Argue that the company of the Does it assess environmental risks? Does it future will be ‘forward-looking’, reveal allegations of corruption that have ‘innovative’, ‘intelligent’, ‘dynamic’, been made against the company? Does it ‘setting the benchmark’ and characterised cite legal proceedings that have been by its environmental responsibility, good threatened against the company? If not, community ties and strong labour raise these omissions. For UK companies, relations.”53 By contrast, use the targeted cite the recent Turnbull Report (see p.31) company’s record and inferior management which now requires companies listed on the standards to portray it as “backwards”, UK Stock Exchange to report annually on

42 The Campaigners’ Guide to Financial Markets

ABB – Moving out of dams A sector-wide campaign

n March 2000, ABB – Asea International criticism of ABB’s unlikely to be more than 4% Brown Boveri, the Swedish- involvement in projects such as annually for the period 1990 Swiss power giant – Bakun (Malaysia), Three Gorges to 2020 – much lower than for announcedI that it was selling (China) and the Lesotho other power industries and in its hydropower division. Three Highlands Water Project sharp contrast to renewables months later, ABB announced a (Lesotho) had made the which are growing at 10-20%; new focus on alternative company defensive of its energy technologies, such as hydropower division. Since The industry is facing wind and solar – a market the 1996, the company’s annual mounting public opposition, company described as “huge”. reports and environmental declining political support and ABB stated that it expected to management reports regularly the drying up of development increase its sales of carried large sections on the subsidies for large dam renewables and small-scale issue of dams. projects; power generation from $400 Hydro is proving unable to million to $1.4 billion by the compete in the increasingly year 2004. A sector wide campaign competitive energy market. Private investors are reluctant Initially, campaigners focused to finance hydro projects, ABB and dams on ABB’s involvement in which are seen as high risk individual dams, conducting investments but with low rates classic letter writing campaigns of return. The report also The decision followed a to the company drawing its stressed that the problems decade-long campaign by attention to the environmental facing hydropower raised Swiss, Swedish and other NGOs and social problems its projects major issues for ABB to persuade ABB and other were causing. These generated shareholders about the power generation companies a huge public response – 25,000 company’s strategy and its to reconsider their postcards were sent to ABB commitment to management involvement in hydropower – a over its involvement in the excellence. Most obviously: campaign that had included Three Gorges dam from Swiss tactics from mass letter writing ABB’s failure to heed citizens alone. Protests were warnings about the flimsy to protests and shareholder also held outside ABB’s offices actions. financial viability of the Bakun in several countries. Such dam in Malaysia, from which it Since its birth in 1988 — the protests resulted in major was forced to withdraw, cast result of a merger between adverse publicity for the serious doubts over senior the European engineering company – denting its management’s corporate giants Asea of Sweden and reputation as a leader in judgment. Brown Boveri of Switzerland — sustainable development and ABB has established itself as exerting increased pressure on Opposition to dams in one of the world’s biggest and the company. which ABB was involved was most dominant engineering already having a negative and technology companies. Following the highly-successful impact on the company’s Major divisions include power investor-focused campaign image, with financial generation; power against the Bakun dam in implications for investors. Malaysia, the Berne Declaration, transmission and distribution; The need to “manage” the financial services; a Swiss NGO, and the Swedish Society for Nature Conservation adverse publicity caused by transportation; and industrial ABB’s hydro portfolio was and building systems. In (SSNC) commissioned a report from Eco-Asia (Consultants) Ltd, taking up considerable senior addition to supplying oil, gas, management time which might nuclear and petrochemical a UK-based consultancy, to review the long-term financial be more productively spent generating and distribution elsewhere. equipment, the company’s viability of ABB’s power sector energy divisions have been strategy. Entitled High Risk–Low ABB’s strategy of “chasing involved in numerous dams Return, the report forecast a orders” in Asia might be around the world, often acting shrinking hydropower market exposing the company to as lead equipment supplier. for companies such as ABB due unwarranted financial risks, to social and environmental often not recorded on the ABB has supplied some 2,200 protests and a lack of private generators for hydroelectric company’s balance sheet. and public finance. Describing dams — generating hydro as a “sunset” industry, it ABB was losing out to its approximately 150,000 MW, or argued: rivals by missing opportunities one-fifth, of the world’s in the renewable energy sector installed hydropower capacity. Growth in the hydro sector is – a “natural market for the

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company”. energy sector are having for the The WCD reported in The report concluded: future risks and returns of the November 2000, just months “Shareholders should call on hydropower industry.” The after ABB had announced its ABB to review its commitment resolution was supported by withdrawal from the hydro to hydro and to justify any several socially-responsible industry. The Commission continuing involvement in the investors, but rejected by the vindicated the majority of the context of the company’s vast majority of shareholders. concerns that non- overall business strategy.” governmental organisations had been raising about the Broadening the campaign social, economic and Shareholder action environmental impacts of It is unknown how far the Eco- large dams. It recommended Following publication of the Asia report influenced the ABB radical reforms in the planning report, the Berne Declaration management in its subsequent process for energy and water and SSNC ensured that its reappraisal of the company’s projects and made a series of findings were circulated to involvement in hydro. ABB has recommendations for new key ABB analysts, major ABB said that the decision was taken dam projects, including shareholders and financial on the basis of an overall ensuring the demonstrable journalists. The groups also market analysis – but that the public acceptance of affected mounted a shareholder company took the growing communities. resolution at ABB’s 1998 sensitivity of major shareholders Annual General Meeting, regarding social and NGOs are now urging industry calling on ABB to reconsider environmental concerns “very to adopt, as a minimum, the its power sector strategy and seriously”. Many of the recommendations of the WCD to shift its research and arguments in the report, and are lobbying investors to development to alternative however, were subsequently screen out projects that do energy technologies. taken forward by the Berne not comply. Already the Declaration and others to the Swedish construction giant The resolution recommended World Commission on Dams Skanska has stated that it will that “ABB undertake a (WCD), set up by the World adopt the WCD’s comprehensive study on the Bank and the International Union recommendations. ABB’s impacts which the growing for the Conservation of Nature withdrawal from the sensitisation regarding the (IUCN) in 1996 to review the hydropower industry provides social and environmental past performance of dams and a powerful argument for impacts of large dams; the to make recommendations for pressuringcompanies whose drying up of public funds for future guidelines. ABB’s Chief shareholders still view large such projects; and the global Executive, Goran Lindahl, was dams as a financially viable trend of privatisation in the one of the WCD Commissioners. sector.

the steps they have taken to institute Cite examples of protests against the internal controls for managing all risks to company... their businesses, including non-financial risks. Argue that the risks cited should fall If you have run a letter-writing campaign, within the remit of any such report – and let investors know how many letters the that failing to include them is evidence of company was sent (this is not information poor management. that the company itself is likely to impart). Where protests are international, give details Where you have evidence of of how many companies are involved. environmental damage caused by the Again, link the protests back to corporate company,,, document it in relation to governance concerns: what does the corporate governance failures... company’s poor handling of environmental Investors will be less interested in the and social issues tell investors about its number of fish killed by a pollution incident ability to handle other aspects of its than in what the incident tells them about business? Have the protests meant that the company’s management structures. senior management is now spending too Relate the damage done to deficiencies in much time on one or two controversial any environmental impact assessment that projects – to the detriment of other business was undertaken or to the failure of activities? Are there signs that the management to heed warnings that management is obsessed with the issue/ problems were afoot. If there are potential project? And that their judgement has legal liabilities, highlight these. become impaired?

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Stress the damage done to the change. Outside groups, which often company’s reputation by scandals, such have access to information that is not as bribery,,, pollution, the exploitation of generally available to workers,,, association with human rights’ shareholders, may be abuses or the failure to react quickly to able to draw attention Investors will be less ethical concerns when raised by the to weaknesses in a interested in the public. company’s business number of fish killed Stress that the best way of avoiding scandals strategy in a number of is to develop an ethical culture which areas: by a pollution incident underpins all a company’s business than in what the operations and practices. Underline the need Is the industry likely incident tells them for the company to give its workers and to continue growing in customers convincing signals of its own the long-term (five about the company’s moral commitment. Make the point that years plus)? management “reputation management” can backfire badly Are the growth rates as structures. if a company is not truly committed to the high as the company 55 values it claims to espouse. Stress that predicts? Are they likely companies which do not introduce deep- to be sustained? A key question here is the rooted commitments, grounded in strict health of the company’s market and that of internal controls, quickly find the problems the wider industry of which it is a part: do recurring. Emphasise that once a reputation consumers want to buy the company’s has been dented, it takes considerable products? Draw attention to any consumer expense and management time to get back boycotts or signs of shifting public attitudes into favour. that might threaten future sales. Make Are there historic or current links comparisons, if possible, with other industries which have been dented by between the senior managers and the consumer boycotts (see Box, “Genetic issue/project, such as non-executive slump”, p.60) Are rival companies leaving directorships or past employment? the sector? If so, link their withdrawal to If so, raise the issue of possible conflicts of prescient business management – “the interest – again an indication of poor market is dying and those with an eye to the corporate governance procedures. future are getting out whilst they can.” Cite Conduct a search of newspaper and any upcoming regulations that might affect other articles to learn of other the market – particularly if the company’s management concerns that have been environmental and social record shows it to raised in the financial press... be ill-equipped to respond to them. Cite these to bolster your concerns. The message: “We aren’t the only ones who are How strong is the company’s position worried about the management of this within the market? Is its share of the company.” market growing or shrinking? Here again, pressure groups are on strongest ground where opposition to a company’s 2. Business strategy activities is reflected in consumer spending. The credibility of a company’s long-term Boycotts, or the threat of boycotts, can business strategy – and in particular the severely dent a company’s share of the extent to which it is perceived to add market, particularly when other companies are able to pick up business because they value to the business in the future – is a are perceived to have a more responsible key concern for investors. Casting attitude to environmental and social issues. doubts on the wisdom of a company’s Link these threats to the company’s future overall strategy may undermine investor growth in terms of the company’s failure to confidence in the company’s address public concerns over the management – and open up space for environment or human rights.

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Does the company’s future growth company should be pursuing new sunrise rely on new strategic mergers? technologies in line with its stated long-term The last decade has seen a spate of commitment to sustainable development.” mergers between companies, creating giant Campaigners are on strongest ground when global conglomerates. Often these place the the activity or project is outside the companies in a stronger position – for company’s core business or is driven by a example, a cash-strapped company may division that represents only a small obtain the capital it needs to expand by segment of the company’s earnings. Argue teaming up with a cash-rich company. that the activities of this division are However, increasingly, mainstream jeopardising the financial prospects of the commentators are beginning to question the company as a whole. effectiveness of mergers in adding value for shareholders – something that campaigners Would alternative paths yield better can build upon. financial returns for the business? For example, when companies come from In critiquing the company’s current business different sectors – for instance, when strategy, highlight alternatives that point to pharmaceutical companies have teamed up higher financial returns for the company. If with chemical companies to form “life the company is involved in hydropower, for science” companies – the promised example, point to the declining market for synergies have not necessarily come about, hydroelectric dams – and compare it in large part due to a clash of corporate unfavourably to the expanding market in cultures, research techniques and the like. solar, gas and other energy alternatives. (See Some “life science” companies are now Box, “ABB – moving out of dams”, p.43) seeking to sell off their agricultural wings, Similarly, compare the company with others but are facing difficulties because an in its peer group. Is it missing out on outright sale to a major rival would involve strategic business opportunities that its rivals anti-trust problems. have already identified? Campaigners seeking to challenge new mergers can raise these issues to good 3. Financial risk – effect. Will the claimed “synergies” of the Companies and projects merger bring the predicted commercial benefits? Will the merger cause anti-trust City analysts – whose job it is to value problems? If the merger fails, will the new companies – tend to concentrate on company be able to unload any unwanted purely financial risks. NGOs are at a divisions? disadvantage in this area because they are likely to be less expert in Is the company an industry leader? conventional financial assessment – Will this project/issue help it maintain its analysts should be experts in this area, leadership? after all. Many of the largest companies are trying to reposition themselves as leaders in Nonetheless, there can be opportunities sustainable development – and their green to intervene, particularly when the credentials have become a major selling judgement of analysts appears to have point in the market. Even when these been distorted by political pressure, by credentials rest largely on PR, use the the prospect of large commissions, or company’s stated commitments to your even by the momentum of the market. advantage. Point to the damage being done But intervening in this area needs to be to the company’s long-term business strategy by its current activities or by its done carefully and without arrogance if potential involvement in a new project that investors are to listen. The types of risk could have adverse social and that campaigners may be able to environmental impacts. Highlight how the highlight depend on whether the project reflects the company’s past, rather campaign is directed against a specific than its future – “investment in this project company or a specific project, as is investment in a dinosaur sector: the detailed below.

46 The Campaigners’ Guide to Financial Markets

Three Gorges dam Bond issues challenged

n 1997, China turned to the sought to mobilise funding Credit Suisse First Boston and international capital markets from Western private sector Goldman Sachs, which to raise funds for the sources through the sale of mentioned Three Gorges in massiveI Three Gorges dam on bonds issued by the China the prospectus, raising fears the Yangtze River, triggering Development Bank (formerly the that the money would be used an international campaign by State Development Bank–SDB). for the dam. In May 1999, the NGOs to persuade Western Initially, the Three Gorges newly-constituted China banks not to back the project, Project Development Development Bank also which has become a symbol Corporation (which is in charge launched a new bond issue not just of environmentally of the construction of the dam) ($500 million), underwritten by and socially destructive sought to raise money on its Salomon Smith Barney and development but also of the own account by issuing bonds. Merrill Lynch, both of which silencing of dissent. Its three bond issues failed in put in $225 million. The the international capital remaining $50 million was put The dam’s massive 400- markets, however, because the together by 10 other banks, kilometre long reservoir project was not viewed as including Chase Securities, would drown 13 cities, 1,711 commercially viable. Barclays Capital and Deutsche villages, 116 towns and 1,600 Bank AG London. factories. A minimum of 1.3 In 1996, however, the Chinese million people (latest authorities changed tack, estimates put the figure at 1.9 issuing general-purpose bonds, million) would be forced to only part of which would be Arguments used leave their homes. Bribery and used to fund the dam. Instead In November 1997, some 46 corruption are reported to of the Project Development non-governmental beset the project, according Corporation issuing the bonds, organisations wrote to US to local farmers who claim the then State Development underwriters urging them to they are being cheated of Bank (SDB), whose largest stop underwriting SDB bonds. government resettlement borrower is the Three Gorges Subsequently, campaign-ers funds. Critics also charge that Development Corporation, used a number of arguments Chinese authorities have issued general obligation to pressure the banks to underestimated the land bonds. In Japan, Nomura withdraw from the bond available for resettlement, and Securities helped underwrite issues: that much of what land is one such bond issue but available is unsuitable for withdrew from a second after a The dam is not farming. These concerns have leading Japanese critic of Three commercially viable and been acknowledged by Gorges, Professor Kazuo Sumi, could affect the financial China’s Prime Minister Zhu pointed out to the Japanese future of SDB Rongji. In addition, there are Ministry of Finance that Nomura The groups pointed out that fears that the tight had violated Japanese securities SDB was committed to lending construction schedule, law by not disclosing SDB’s $3.6 billion to Three Gorges, coupled with shoddy relationship with the Three whose ultimate costs were still construction work, could lead Gorges. unknown and whose financial to a collapse of the dam, In January 1997, a group of six viability was questionable. risking the lives of millions There was a strong possibility downstream. In December US and European investment banks – Lehman Brothers, that SDB would lose money on 1998, Zhu criticised the the project, undermining its shoddy construction of new Credit Suisse First Boston, J.P. Morgan, Morgan Stanley, Smith ability to repay bond-holders. infrastructure to replace that The NGOs pointed out that being submerged. Barney and BankAmerica Securities – underwrote a $330 government estimates for the million bond issue for the SDB. project costs were grossly Raising international Later the same year, news underestimated, since they did broke that the same banks were not include the costs of capital considering a second bond resettlement. issue. As in Japan, the The dam is expected to cost The project could announcement prompted a damage China’s macro- at least $24.5 billion — storm of protest. although some unofficial economic performance estimates put the figure at Further bond issues linked to Excessive state investment in $75 billion. Hesitant to Three Gorges have followed. In commercially unviable commit money from its own December 1998, the Peoples’ infrastructure projects was budgetary resources, the Republic of China issued a $1 one of the main reasons for Chinese Government has billion bond, underwritten by the South-East Asian economic

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collapse in 1997 which campaigners argued. The resolution stated, “Morgan resulted in major unpaid debts damage to the banks’ corporate Stanley Dean Witter risks to Western banks. China itself reputation would be profound – exposing itself to negative had admitted that such an argument reinforced by the publicity and possible projects should be avoided – wide publicity which the boycotts of its brokerage yet project proponents were campaign was attracting, services and the Discover pushing ahead with Three including coverage in the card.” Gorges, whose planning and financial press. implementation exemplified The resolution, which was the problems of such state- opposed by the Board of run projects. Investing in Directors, called on the Three Gorges was thus Broadening the investor company “to issue a report to “inconsistent with China’s shareholders and employees modernisation objectives”, campaign by October 1999, reviewing jeopardising China’s macro- its underwriting, investing and economic performance and, In addition to writing to the lending criteria . . . with a with it, other more preferable banks, the International Rivers view to incorporating criteria investments. Network (IRN), which led the related to a transaction’s campaign in the US, took out a impact on the environment, Corporate responsibility full-page advertisement in the human rights and risk to the is undermined New York Times, adding to the company’s reputation.” In Many of the financial pressure on the banks’ public 2000, a second resolution was institutions involved in the reputation. The advertisement filed against MSDW and Chase bond issue, including Credit announced: “An Exclusive Bond Manhattan by Trillium: both Suisse First Boston and Offering – Here’s your chance these resolutions received Salomon Brothers, are to invest in a Grand Monument some 6% of the shareholder’s signatories to the United to China’s authoritarian regime. vote. After the resolution, Nations Environment Don’t fund China’s Three MSDW agreed to meet with Programme’s Statement by Gorges Dam.” Trillium and NGOs. Banks on Environment and Campaigners also made direct Further pressure has been Sustainable Development. The contact with BankAmerica and exerted through a letter statement recognises that Credit Suisse. In Switzerland, writing campaign by members “sustainable development is . . the Berne Declaration, one of of US environmental groups to . an integral part of [the] the main international NGOs the Chief Executive Officer of pursuit of good corporate opposed to the project, also the company. In addition to citizenship” and the need to approached ethical investment requesting that the company ensure “openness and funds with a holding in Credit issue a report on how it dialogue relating to Suisse, urging them to intended to assess the social environmental management reconsider their investment and environmental impacts of with all relevant audiences.” policy based on whether or not its investment policies, letter BankAmerica Corporation is a the Credit Suisse Group chose writers were urged to request signatory of the Coalition for to maintain its support for the the company: Environmentally Responsible Three Gorges Project. Economies (CERES) Principles, To commit to a public which state that participating In the US, pressure was also put policy of not acting “as an companies will “conduct all on the shareholders of Morgan issuer, intermediary, or aspects of their business as Stanley, which by 1998 had advisor for any stocks, responsible stewards of the merged with Dean Witter to bonds or private environment by operating in a form Morgan Stanley Dean placements” for the Three manner that protects the Witter (MSDW). The merger gave Gorges Development Earth.” Three Gorges clearly campaigners an additional Corporation or the State violates such principles, leverage point since Dean Witter Development Bank of argued the campaigners: had a High Street presence, China; including the Discover credit supporting the project thus cast doubts on the banks’ card. In April 1999, the ethical To commit to a process of commitment to sustainable investment fund Franklin determining how it can development and thus their Research & Development better incorporate integrity. Corporation (now called Trillium environmental and human Assets Management) tabled a rights criteria into its core Underwriting the bonds shareholder resolution on business operations; could damage the banks’ behalf of two stockholders. The To examine how the firm’s reputation resolution criticised the policies compare with Underwriting the bonds would company for having those developed by CERES, send a symbolic message to underwritten the first bond UNEP, the World Bank and the public that the banks were issue in 1997 and raised the US Export-Import Bank prepared to support the SDB questions about the impact of and to make regardless of the social, the decision on the company’s recommendations to the environmental, technical and reputation. “Even through Board; economic merit of its indirect involvement in the borrowers’ projects, Three Gorges Dam”, the To inform the investors,

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the public and its Declaration, the Swiss NGO at other socially and customers about existing the forefront of lobbying Credit environment-ally sensitive lending and underwriting Suisse, says “The fact that the transactions.” guidelines on the Chinese authorities resorted to environment and human using an indirect conduit for Doris Shen of IRN concludes, rights; and funding Three Gorges “NGOs have dialled a Wall demonstrates that they are Street wake up call. To commit to a policy of sensitive to the impacts which Investment firms can no full disclosure on the public criticisms can have on longer abdicate the impacts of environmental and human private funders. The need to their underwriting and rights risks of bonds or keep track of these private financing. Three Gorges Dam stocks that the company funding mechanisms challenges is one litmus test for any underwrites. NGOs to strengthen their environmental or social monitoring capacities.” policies they claim to have in place. It is unlikely the firms Outcome Julie Tanner of the National will change their behaviour Wildlife Federation, a US NGO until they feel the impacts on The second bond issue never actively involved in the their bottom line. Which is materialised, in part due to campaign, points to the need why IRN and other NGOs are the financial collapse in for fundamental reform in the calling on people to boycott South-East Asia. BankAmerica approach of financial the Discover card – and subsequently adopted a policy institutions to the environment pressure Morgan Stanley to to avoid providing direct and society. “In monitoring the stay out of Three Gorges until support to the Three Gorges firms involved in financing the the economic and social rights Project. Morgan Stanley Dean CDB bonds, it has become clear of those impacted are Witter is considering a similar that most of the leading banks secured. An activist web site – policy. In the meantime, a in Europe and the US lack www.floodwallstreet.org – has boycott of Morgan Stanley environmental guidelines and been a useful tool in Dean Witter’s Discover card is do not have environmental strengthening our efforts and underway to pressure the management systems in place communicating this issue to bank to implement to address social, environmental the media and the public.” environmental and social and reputational risks. Assessing criteria in a timely manner. the environmental and social impacts of projects should Sources Pressure from the campaign become part of everyday International Rivers Network, Letter led the China Development to Lehman Brothers, 6 November business. Shareholders and Bank to give verbal assurances 1997; Berne Declaration, Letter to customers of banks should to some of the banks that Credit Suisse Group, 5 July 1999; press them to develop and none of the money from a Shareholder Resolution No. 6, Morgan implement environmental subsequent bond issue in Stanley Dean Witter Annual General guidelines to ensure that their Meeting, April 1999; “Morgan Stanley 1999 would go to Three money does not fund Dean Witter and the Three Gorges Gorges. But NGOs insist that, environmentally and socially Dam”, to be credible, such destructive projects.” EnviroAction, March 1999. assurances should be in For further information, contact: writing and that monitoring The campaign has also opened International Rivers Network, Tel: + 1 mechanisms should be in 510 848 1155; Email: up new avenues for pressing for [email protected] Web: place, since the money is change and put campaign fungible. www.floodwallstreet.org and groups in touch with new www.irn.org constituencies. “Working with shareholders has allowed NGOs National Wildlife Federation, Tel: + 1 Lessons learned to develop high-level dialogues 202 797 6602 with major US investment banks FOE-US, Tel: +1 202 783 7400 Reflecting on the campaign, not only on Three Gorges but (ext.242); Email: [email protected] Peter Bosshard of the Berne also how the banks deal with Web: www.foe.org

A. Company analysis difficulty replacing it or could suffer if interest rates rise. Analysts specialising in Analysis of the financial risks to which credit risk look more widely at the risk companies are exposed includes looking at profile and consider many other factors, the level of debt on the balance sheet such as insurance cover. relative to equity or to assets, and the ratio of cash flow to interest payments on such Where a company is well-respected debt. For many analysts, the greatest amongst investors, it may be difficult to concern is the proportion of short-term debt identify and make a credible argument on in the balance sheet. If this is high, then financial risks. In such instances, there is a risk that the company could have campaigners would be well advised to work

49 The Campaigners’ Guide to Financial Markets

with a specialist or sympathetic analyst. affect cash flow and debt repayment? Where a company is already experiencing Cost and time overruns can significantly financial troubles, however, it may be alter the revenue flows from a project – and relatively easy to make a case against hence the time it takes to make a profit (if investing in the company on financial there is a profit to be made). Construction grounds. delays are therefore of critical concern, For example, if investors are deserting the particularly to those who have made short- company, campaigners can usefully draw and medium-term loans, since delays in this to the attention of other investors. As construction mean delays in the project Michelle Chan-Fishel of Friends of the generating an income and hence in debts Earth-US advises, “Suggest these people being repaid. Have the risks of overruns may be more informed, particularly if they been properly factored in? What is the have been long time partners.” 56 record of overruns elsewhere in the industry? If overruns are common, stress this – and highlight the likely implications B. Project analysis for creditors. Where finance is being raised for a specific project, detailed financial risk analysis Are external experts contracted by the forms a major part of the investment company truly independent? decision. If campaigners can successfully Many supposedly independent consultants puncture the financial case for investing, may have specific interests in securing they will strike at the core of the project. In further work on the project in question, the case of the proposed Bakun dam in such as monitoring the project towards Malaysia, for example, campaigners completion, or be keen to support the successfully deterred investors from development of the sector as a whole for backing the project. similar reasons. Highlight these conflicts of Project-specific financial risks worth interests and how they may influence the highlighting include: consultants’ judgement.

Are the forecasts of future returns Are the contracts underpinning the from the project fairlll y estimated? project robust? Are the assumptions used in the forecasts If the project involves the generation of disclosed and reasonable? In the case of electricity, for example a coal-fired power hydroelectric dams, for example, the station, it may involve an electricity supply expected electricity output depends company agreeing to purchase the power critically on the dam’s reservoir filling up as produced at an agreed price. This is known anticipated. If the river’s flow declines – as a Power Purchasing Agreement (PPAs). for example, because of a drought or In many instances, particularly where the because of water abstraction upstream – electricity company is state-run or semi- the dam’s reservoir level will be lower than privatised, such PPAs may have been expected. If historical data has been used to forced on the power company by the estimate the river’s flow, is it complete and government. If this is the case, legal robust? Is it appropriate to extend it into challenges may subsequently arise if the the future – for instance, if the river’s flow government changes. PLN, Indonesia’s has been estimated using meteorological state electricity utility, for example, is data, what allowance has been made for currently challenging a number of power climate change? Draw attention to any purchasing agreements that it signed when flaws in the methods for such calculations General Suharto was President, claiming it – and use them to cast doubts on the was forced into them, despite their being viability of the project. Similarly, for financially disadvantageous. Highlight this private sector-financed road schemes, risk. Raise questions also, where scrutinise the traffic forecasts: are they appropriate, about the credit-worthiness of robust? the power purchaser: if a power project can’t sell the power it produces, its revenue How are delays to the project likely to flow will be severely affected.

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What is the record of investor interest convertibility. in other similar projects? Have investors When a project shied away from them? What are the interest means that people rate risks? If so, highlight this. For example, “Hydro is rate risks? have to leave their proving unable to compete in the Long-term loans at increasingly competitive energy market. floating (that is, variable) homes and lands, Private investors are reluctant to finance interest rates are the norm resettlement issues hydro projects, which are seen as high risk for project debt in investments but with low rates of return.” international project can be translated into financing. Question direct financial risks How shaky is the economy of the host whether the assumed to a potential country? interest rates for the project are based on the investor. It is Creditors (in particular those who have real financial situation bought government bonds issued to finance important to state likely to be faced by the a project) will want to know whether the project – or on some these risks government is considered politically stable artificial projection. realistically and to and whether it is overburdened with debt. A Assuming unrealistically point to bring out here is the hidden debt focus on those that low interest rates may that many countries have taken on as a distort the financial impact the bottom result of the move to private sector financed viability of the project – projects. In order to attract private line. and undermine the investors, many governments in the South viability of alternatives. have committed themselves to billions of dollars’ worth of contractual obligations, all due in a lump sum, to protect investors and 4. Non-financial risks lenders against foreign exchange risks. The capital structure of many privately-financed When consideration of risks is infrastructure projects also generally broadened out from narrow financial includes a high percentage of debt, with risk to wider risks which could still project lenders taking government-supported have a financial implications for the contracts (in addition to the assets of the project or investment, many NGO project developer) as security. Raise the concerns can be raised directly. When a question: “Is the government project means that people have to leave overcommitted? And what are the their homes and lands, for example, implications of this for creditors?” resettlement issues can be translated into direct financial risks to a potential What are the currency risks for the investor. For instance, if the numbers to investor? be resettled have been underestimated, Many private sector-financed power the costs of the project – and the projects involve power purchasing political risk of opposition leading to agreements in which the project developers are paid in dollars but the income is earned construction delays – are likely to rise. by the national utility in local currency. This Likewise, human rights’ abuses are is viable so long as the host currency is evidence of a political climate of stable – but if it collapses, the host country repression – with political risks that can find itself in serious difficulties. The may deter investors. 1997 South-East Asian economic collapse, for example, has meant that many Power It is important to state these risks Purchasing Agreements have had to be realistically and to focus on those that renegotiated. This can result in reopening impact the bottom line, especially in the the whole project finance negotiations, with near term. In the case of the Bakun dam severe consequences for investors. Highlight campaign, for example, issues such as any indications that the local currency may resettlement (relatively few people be heading for a fall in value – or losing its involved) and decommissioning

51 The Campaigners’ Guide to Financial Markets

liabilities (too long- exacerbates the political risks of project Legal claims against term) were not failure by fuelling opposition. financially significant Quote the major credit rating agencies, for companies can result in – whereas concerns example Standard & Poor, which recognises huge liabilities that about overpriced the value of public participation in planning severely impact the power were very real. projects in developing countries.57 Local communities may be able to use this as value of an investment. Concerns about deforestation also had leverage for negotiations. In the US, legal claims some influence. (see by victims of asbestos Box, “Bakun – Highlight how double standards constitute a political risk for companies during the early 1980s Lobbying the analysts”, p.81) and investors... inflicted huge damage Many projects that companies back in the costs on the asbestos Key pressure points South – nuclear power plants, for example – involving non-financial would not be tolerated in their own industry, severely risks include: political countries. Point to the high risk that this will curtailing its activities. risks, legal risks and lead to protesters targeting the company. environmental risks. Quote industry-friendly reports to reinforce the point – for example, the 1997 report by These are dealt with below. the Control Risk Group, a business management consultancy, on environmentalism as a risk to investors: 5. Political risk “Western investors cannot afford to allow Political risks primarily revolve around their standards to slip in developing the threat to theinvestment from changes countries . . . Companies are increasingly in government, civil strife or other perceived as accountable to a constituency political upheavals: far wider than merely their shareholders and the relevant authority. Business can Highlight factors that pose a political therefore no longer rely on regulatory and risk to the investment, such as public scientific approval. Instead, they must win opposition. public acceptance of their ‘licence to Draw attention to the possibility of delays operate’.” 58 due to protests – and cite examples of where this has happened elsewhere (for 6. Legal risks example, delays due to the occupation of nuclear sites or direct action against mining Legal claims against companies can and oil installations or road schemes). result in huge liabilities that severely impact the value of an investment. In the Emphasise any risk that the project US, legal claims by victims of asbestos may be cancelled or renegotiated. during the early 1980s inflicted huge This is a strong possibility where the damage costs on the asbestos industry, project does not have cross party political severely curtailing its activities. support or does not offer a fair deal to certain groups involved. Highlight any risk of legal action If new environmental regulations are against the company or project. in the pipeline,,, draw out the implications Stress the possible liabilities to the company fff or investors... if the court decides against it. These can be huge. In 1999, for example, Asian workers New environmental regulations could add in the Northern Mariana Islands in the significantly to the costs of the project. South Pacific filed a suit against a US clothing company for $1 billion in damages. Stress that the failure to address local environmental concerns or to consult Emphasise any delays to a project that adequately with affected communities are likely to occur whilst impending court

52 The Campaigners’ Guide to Financial Markets cases are heard. the likely reduction in the life of the project How will these delays affect the flow of if the dam’s reservoir silts up faster than revenue from the project? expected as a result of deforestation. Highlight long- Highlight any possible future legal term risks to the disputes. project from The effectiveness of For example, where communities are to be environmental displaced, are legal claims – such as over playing the reputation change, for example indigenous claims to land and water rights – change, for example card will depend critically likely to lead to court proceedings? through global warming... on the ability of Draw attention to potential long-term To continue the campaigners to publicise legal liabilities. example of dams, their concerns over the Are there potential liability risks associated what would happen to company. with the project or issue, especially if they local river flows if the are not insured or managed? For example, area gets hotter and who will be legally responsible for any drier? Would this lead to reduced flows – pollution from the project? Who will pay up and therefore to problems in filling the in the event of a major industrial accident? dam’s reservoir? What would be the In the case of biotech companies, what are implications for electricity output – and thus the legal liabilities arising from cross- the project’s income? And what would be contamination by genetically-engineered the implications for dam safety if climate crops, health and safety lawsuits and anti- change resulted in increased flooding? trust cases? Would this increase insurance costs?

Stress new technologies that may make Raise the long-term financial legal suits against a company more likely... implications of possible environmental For example, cheap new testing devices are charges or taxes which may be becoming available that enable easy introduced to internalise environmental detection of genetically-modified (GM) costs. material in foodstuffs, leading to an increase These may have a considerable impact on in the detection of crops that exceed agreed the viability of a project or investment. GM content limits.

8. Reputational risks 7. Environmental risks As noted, companies are increasingly Highlight any direct financial costs that concerned about their public image – may be incurred through environmental may be incurred through environmental and their involvement in environmental damage. pollution or human rights’ abuse can For example, pollution incidents can result in have a major impact on their “reputation fines or a requirement to pay clean-up costs. risk”. Many are seeking to measure and Bring out how costly these can prove. Stress monitor their reputation more actively. that those affected by environmental damage caused by a project – for example, Different companies will have different loss of fishing rights – may seek damages sensitivities to reputation risk, however, for the losses suffered. with consumer-orientated companies or companies with strong brand value Bring out the financial implications for being more vulnerable. The investors of environmental degradation effectiveness of playing the reputation that is unrelated to a project but which card will depend critically on the ability nonetheless impacts on its viability... of campaigners to publicise their In the case of dams, for example, estimate concerns over the company.

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apparent in project finance. Consider the Matching the pressure numerous different participants in a typical private sector-financed Build points to the financial Operate Transfer power generation project. They include companies, player financiers and the public sector, all of which will come to the table with very The above are just a few of the risks different interests. connected with socially or The companies are likely to come in the environmentally damaging corporate form of: practices. To be effective in pointing them out, The project developers (who initiated however, it is critical that campaigners the project and brought together all the match the risks to the market players participants). They will often invest in the project company at an early stage and that they are targeting. Different players expect a higher return on this investment, as have different interests – and many it is more risky. risks that are of concern to one financial actor will not trouble another. This The power purchaser, often a opens up considerable political space government-owned utility, which contracts for campaigners to play one group off to buy the electricity generated. against another. The construction contractor. Indeed, a common error in financial The equipment supplier. market campaigning is to assume that The operator (often, though not always, all the players in the the same as the project company). market are the same. The fuel supplier, in the case of a power Different players in the At one level, this is project. certainly true: all market have different investors hope to Financiers will include: interests. Lumping all make a profit. But The lenders which provide the debt investors together as lumping them all together as “Wall finance for the project. These include private banks and multilateral development “Wall Street” or “The Street” or “The City” banks, such as the World Bank. City” denies (or more accurately, campaigners the but less helpfully in a Export credit agencies or the private sector arms of the MDBs, such as the nuanced mapping of campaigning context, as “capitalists”) World Bank’s Multilateral Investment splits, divisions and denies campaigners Guarantee Agency, which insure lenders against defaults on payments or political the nuanced mapping conflicting institutional risks. motivations that, if of splits, divisions and conflicting Any other independent investors in the exploited, can open institutional special purpose project company (note that space for change. motivations that might along with the developer and financial enable them to exert investors, other participants in the project will often be expected to invest in the pressure successfully. project company). When lobbying financial markets, understanding the differences between The public sector may be represented financial players is as important as through agencies of the host government, understanding their similarities. such as the energy ministry or the environment agency, whose perspectives Such differing interests are most on the project may well conflict.

54 The Campaigners’ Guide to Financial Markets

As negotiations for the project proceed, tensions. For example, there are clear it rapidly becomes clear that these divisions between creditors (those who players have very different interests. have loaned money to the One obvious schism is between the project) and equity companies involved and the financiers. holders (those who have Companies will want to maximise the bought shares in the When lobbying money they make from a project by project). Creditors will financial markets, charging the most they can. be primarily concerned understanding with avoiding risks and Conversely, financiers will want to pay getting their loans the differences as little up front as they can to maximise repaid, preferably as between financial their returns and minimise their risks. quickly as possible, When a project is financially robust, it players is as whereas equity investors important as may be easy for everyone to do well, or will be more interested at least adequately, out of it. But when it in the long-term understanding is more marginal, there may be prospects of the venture their similarities. considerable tension between the and with the possibilities different parties, which campaigners can of enhanced future seek to exploit. earnings. Another major division can be between Project developers will try to address the purchasers in a project finance deal these tensions through a complex (for example, those who will buy the network of contracts – a common feature power from a power project) and the of most projects. They may also seek to project backers (the project developer, get the various parties to become the financiers and other companies with investors in the project so that they all an investment in the project). The have a degree of financial interest. But, purchasers will want to pay a lower in many cases, tensions and resentment price for power: the project backers, by may remain, creating “contract stress”. contrast, will want a higher price to This can be a very useful factor for guarantee an adequate return on their campaigners – for example, when the investment. Even when there is power purchaser has been coerced into agreement on a base price, there is often paying more for power than it would disagreement on some of the details. have preferred. Similarly, the project developers will Whereas most projects, by their very seek to off-load any costs due to nature, consist of varied groups of construction delays onto the construction different parties, companies tend to be contractors who, in turn, will seek to more homogenous, and the competing minimise the penalties imposed on them. interests less obvious. But it is The host government, meanwhile, may important to realise that tensions and be anxious to avoid having to give a differing interests exist within sovereign guarantee to any export credits companies as well which can be useful that are obtained, whilst the export when directing a campaign at companies credit agencies and their clients or their investors. (generally the construction companies and the lenders) will generally be keen For instance, the marketing director of a to obtain such a guarantee, which company is likely to be more concerned ultimately means that the host about damage to a company’s reputation government underwrites any debt. than the finance director, because it is the marketing director that sells the Even amongst financiers, there can be company’s services. In addition, there

55 The Campaigners’ Guide to Financial Markets

may be different views between “old What do investors (for example,,, guard” managers who have been in the analysts) and the financial press consider company for decades and younger the important features of the companies managers who are often more sensitive involved? Which of your arguments to environmental concerns. reinforce these features? Which help to When pursuing an “engagement” type reveal new concerns? strategy, it may be possible to use these Which of your arguments have the differences positively – reinforcing the most financial impact, particularlll y in the sympathetic factions within companies short term? Give preference to and targeting the less sympathetic. In arguments that stress actual financial doing so, different arguments will have impacts. Where the issue is one of risk, different weight with different focus on the biggest and most likely risk. individuals. Try to be realistic... Don’’’ t rely on others Similarly, investors may have different sharing your assumption that some risks reasons for investing in a company and “should” be serious. different views on its valuation. This Do any of your arguments expose can be gauged by reading what the Do any of your arguments expose the company as having lied in the past or press and other analysts have the company as having lied in the past or having misled investors? commented about a company. Reinforcing the points made by more Do any of your arguments sympathetic analysts can put your demonstrate a lack of good practice,,, arguments on a more credible footing. particular compared with competitors? It is difficult to offer firm guidance as to If any investors or potential which of the above risks to focus upon, partners have withdrawn, why have they but campaigners might start by done so? Can you use or infer anything considering the following questions: from their withdrawal?

56 The Campaigners’ Guide to Financial Markets Part Three CampaigningCampaigning inin thethe marmarkketet

57 The Campaigners’ Guide to Financial Markets STRASTRATEGIESTEGIES,,, TTAACTICSCTICS ANDAND TIMINGTIMING

f you decide that a financial campaign is an appropriate part I of your overall strategy, the next step is to decide what you and your partners want out of such a campaign. This may lead you to reassess your involvement. Should you decide to proceed, however, there are a number of different areas where the financial markets could usefully contribute to a broader campaign strategy. They include:

Placing pressure through the financial markets on industry sectors which cause public concern. One aim may be to reduce the flow of capital to a sector (or redirect it to more acceptable companies); another to encourage the adoption of sustainable practices across the industry as a whole;

Using investors to target individual companies, asking them to cease certain activities or to adopt best practice;

58 The Campaigners’ Guide to Financial Markets

Directly lobbying investors to withdraw are Dead, which advised investors to financial support for individual, privately- abandon ship, the main argument being financed, destructive infrastructure projects; that the technology did not have a and market.59 Within months, major biotech Pressing financial institutions and firms were selling off (or attempting to companies to adopt new rules that would sell off) their agricultural biotech place “sustainable development” at the heart divisions. (See Box, “Genetic slump”, of investment decisions. p.60) Groups have also used financial Industry-wide arguments to persuade institutional investors to pressure companies campaigns involved in building or equipping dams to move out of the hydropower sector. A Objective: Changing the financial 1997 report directed at investors in markets’ perception of an industry Asea Brown Boveri, a Swedish-Swiss conglomerate involved in dam projects Approach: Typically analytical. The world-wide, highlighted the increasing emphasis is on changing perceptions unprofitability of the hydropower sector, of risks, growth prospects or consumer particularly given the move to private acceptability. Occasionally sector financing of new projects and the engagement, where new best practice increasing reluctance of the World Bank is important to emphasise. and other multilateral development banks to become involved in dam Many financial market campaigns are pojects (see Box, “ABB – moving out of aimed at pressing financial institutions, dams”, p.43).60 such as banks and pension funds, to withdraw support from industrial sectors that are destructive of the environment, or to place pressure on individual Changing company companies to move into other, more sustainable, areas. practices In such campaigns, two arguments feature prominently: Objective: Changing the behaviour “Business-as-usual” is likely to yield of a company. diminishing financial returns; and Approach: Most typically, attempts to Increasing public concern is already win change through active puncturing the market for existing engagement with the company and product lines. shareholders, possibly through the Perhaps the most spectacular example of use of shareholder resolutions. such a campaign in recent years has been Analytical approaches may also be that against the genetically modified effective. Occasionally, more (GM) food industry. As growing health confrontational campaigning may be and environmental fears led to necessary. Emphasis on the need to widespread consumer boycotts of GM adopt “best practice”. foods – and activists took legal and direct action to prevent the planting of Individual companies can also be GM crops – so the markets began to targeted, with the objective of getting sense that the industry was in deep them to withdraw from a particular trouble. Critical to the campaign was a enterprise, to change their strategy or report by Deutsche Bank, entitled GMOs to adopt certain policies.

59 The Campaigners’ Guide to Financial Markets

Genetic slump

n the mid-1990s, Meanwhile, in India and other may very well decide that agricultural biotechnology developing countries – the main biotechnology derived foods looked to many investors – beneficiaries of the are not as appealing as all- andI governments – like the biotechnology, according to its organic or current offerings – industry of the future. promoters – small farmers ‘Thanks, but no thanks’.” Aggressively promoted by burned GM crops, outraged at the patenting of seeds by the GMOs are “becoming a leading companies like liability to farmers”. biotech companies. Accusing liability to farmers”. Monsanto, the industry touted Non-GMO grains were already its new technologies as the the companies of “bio-piracy”, they demanded that seeds selling at a premium price response not only to world which, if the trend continued, hunger but also to disease and remain (as they have always been) part of humanity’s would far outweigh any fears over farm pollution. economic benefit in growing Seeking to capitalise on the common property – developed by farmers over centuries and GMOs. Farmers were thus coming “genetics revolution”, likely to turn their backs on companies in the chemicals belonging to no one. Far from relieving hunger, they argued, agricultural biotech – creating and pharmaceutical sectors “an earnings nightmare” for sought out partners with a biotechnology would exacerbate it by forcing farmers companies such as Pioneer view to creating new “Life Hybrid and Monsanto. Science” companies with the to pay for what was previously cash and research skills to free – and by further The report is widely exploit the synergies that concentrating food production acknowledged to have played genetics was predicted to in the hands of richer farmers. a major role in denting bring when traditionally The net result would be to investor confidence in separate industries were increase landlessness and agricultural biotech, with many brought together. poverty, further excluding the companies (such as Monsanto) many from access to food. seeing millions wiped off their share value. Protests worldwide “GMOs are Dead” Since the report’s publication, several US banks have refused Within months of the first to finance GM seed purchases genetically modified foods The body blow to the industry – and others have voiced their hitting the supermarket at least in the short-term – reservations. The influential shelves of Europe, consumer came with the release of a American Corn Growers fears over food safety had report by Deutsche Bank Association Farmers has also driven the new industry to the analysts Frank Mitsch and warned its members: “With wall. Environmental groups Jennifer Mitchell, advising prices hitting historic lows, the launched a boycott; investors to steer clear of last thing a farmer needs to supermarkets which had agricultural biotech shares – and occur is that both foreign initially voiced confidence in to sell those they had. At pains consumers and domestic grain GM products withdrew them to point out that they were not buyers refuse to purchase from their own brand opposed to biotech – and certain products. In this event, products; and activists further strenuously distancing farmers need to think long publicised the environmental themselves from “anti- and hard before planting GMO dangers by uprooting capitalist” opposition to the seeds.” experimental crops. industry – Mitsch and Mitchell warned investors: “We predict Many of the companies that Friends of the Earth, one of that GMOs, once perceived as a merged with agriculture the groups at the forefront of bull case for this sector, will biotech firms are also having the campaign in Britain, wrote now be perceived as a pariah.” second thoughts. Pharmacia & to the directors of the leading Upjohn in the US, Novartis in supermarkets warning them Two arguments in particular Switzerland and AstraZeneca in that they could be personally dominated the report: Britain have all sold or spun liable for any adverse health off their agricultural impacts of GM foods bought The market for GMOs was businesses – often at prices from their companies. In the crumbling and would not be well below what the parent US, where consumer concerns easily restored. companies had hoped to get. over GM foods were slower to “The perception wars are being Aventis, which was widely take off, environmentalists lost by industry. Food predicted to be the company launched a series of class companies, retailers, grain that would hold out against action lawsuits against the processors and governments the tide, announced in late major biotech companies for are sending a signal to seed 2000 that it, too, would be alleged “anti-competitive producers that ‘we are not selling its $2.7 billion crop- behaviour”. ready for GMOs’.’” “Consumers sciences operations.

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There are several different ways in possible, target the companies and which financial markets can be used to investors involved. Strees the exert pressure on companies to change potential adverse impact of their policies and practices. Perhaps the involvement on their reputation. most common approach involves persuading major institutional Campaigning through the financial shareholders to press for change. markets may be one of the few ways to Generally, shareholders prefer to exert stop damaging infrastructure projects, pressure discretely, arranging for a particularly when repression renders “quiet chat” with senior management. If other avenues less open to citizens. this fails, however, they may choose to take a more public stand, for example, The most powerful campaigns are those by backing a special resolution at the that use analysis to demonstrate that the company’s Annual General Meeting. project is not viable or a sound investment. The complex framework of One limitation of such shareholder contracts, the tension between the “engagement” is that it can be relatively various parties involved (see p.56), and slow. It is best suited to raising broad the desire to reduce risks to a minimum issues of management or policy – many create fertile ground for critical investors believe that it is the job of financial analysis. In addition, financial management to manage and are thus markets may be less familiar with the reluctant to criticise a company for a environmental and social factors that specific action. They may, however, be campaigners know well; an analysis of prepared to support a resolution calling the financial risks that these pose to the for the introduction of policy or a project may help undermine investor review of strategy. confidence. If specific action is required, it is more For instance, campaigners supporting likely to be successful if it can be Malaysian groups opposed to the backed up with good analytical proposed Bakun Hydroelectric dam arguments, and if the management is successfully exposed gaping holes in the given some specific, challenging financial viability of the project. questions to answer. If the analysis In a letter to potential investors, Friends convinces financial analysts and fund of the Earth (UK) warned that project managers, the company may find that its delays had dogged other dam projects share price comes under pressure. and were highly likely in the Bakun Publishing a critical analysis of a case; that the predicted power output company can be a very powerful means was unlikely to materialise; and that the of influencing potential investors when a power purchasing agreement was company first offers its shares on the overpriced and would probably end in market (see p.71). renegotiation. The letter concluded: “Investment in Bakun is unlikely to offer the return you require.” The Infrastructure projects project failed to raise the necessary finance and was eventually cancelled in Objectives: Encourage financial the wake of the Asian financial crisis. institutions to withdraw support from (See Box, “The Bakun campaign – a controversial infrastructure project. Lobbying the analysts”, p.81) Approaches: Develop a financial If analytical campaigns are not analysis of the project. Highlight risks applicable or fail to be effective, and uncertainties. If this is not markets can be used to exert pressure in

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other ways. In many controversial Campaigners have also begun to direct projects, major listed companies are their attention to the general rules and involved as lead contractors, equipment practices that govern investments. If suppliers or purchasers of the project’s financial institutions can be encouraged services (for example, utilities buying to invest ethically as a matter of course electricity). Although other competitors and to act “on their responsibility to may be plentiful, the involvement of contribute to the protection and well-known companies may be vital for promotion of human rights and the the credibility of the project. If this is environment”,61 then the need for the case, then these companies can be individual campaigns is reduced and lobbied through bad practice may be prevented from the various forms of outset. shareholder Few financial institutions or companies Few financial engagement. institutions or currently require that due diligence be exercised as a matter of course with companies currently If the project involves the violation of human regards to environmental and social require that due rights or gross sustainability in the same way that due diligence be exercised environmental diligence is performed to ensure as a matter of course degradation, it may be projects are financially, economically possible to launch a and technically sound. Campaigners are with regards to direct campaign on thus demanding that companies and environmental and moral grounds against financial institutions adopt policies – social sustainability. any institution and the staff and career incentives to becoming involved in ensure that they are applied – which the project. This may would require the screening of projects prove a successful approach if the for their environmental and human rights profitability of investment in a impacts. The Australian-based Mineral particular project is fairly modest. In Policy Institute (MPI), for example, has such circumstances, banks and other called for companies to ensure, amongst investors may feel that it is easier to get other measures, that : out of the project than it is to remain in Environmental and social due and face hostile publicity. diligence is applied to each project throughout the lifetime of the project; Environmental and social issues are addressed early enough in the project Financial market cycle to consider all relevant alternatives, mitigation measures and efficiency practice improvements and to allow the option of finance to be withheld if appropriate; and Objectives: Encourage financial Meaningful public participation in institutions to invest ethically, as a project planning on the basis of timely matter of course. public disclosure of environmental and social information. 62 Approaches: Highlight long-term financial risks of current “business- Using a “carrot and stick” approach, as-usual” approaches. Develop MPI is exerting pressure on financial contacts with socially responsible institutions, ranging from banks to investor (SRI) community – with the pension funds, to screen out egregious aim of strengthening its influence projects and investments from their within the wider market. portfolios and to adopt new rules that would institutionalise such screening

62 The Campaigners’ Guide to Financial Markets within the financial sector as a whole. lay the foundations on which sympathetic insiders can build a The carrot comes in the form of the platform for internal reforms. No potential profits to be made from institution is homogenous and within any adopting an ethical approach to financial body there will be those who investment decisions. In the UK, ethical disapprove of the investment policies funds have been the fastest-growing that are made. But individuals who sector in the investment market for more challenge the decision making of others than ten years, in terms of funds under may find themselves excluded or co- management. According to Frank Blighe opted. Codes of Conduct and Statements of the UK’s Friends Provident, the of Environmental Responsibility company’s annual investment survey in provide such “dissenters” with a tool 1997 indicated a huge potential demand for challenging controversial decisions for ethical funds, and showed that most and making investment decisions that go people care very much about where their against the tide. money is invested. Blighe also notes that there are huge opportunities for growth in Europe and that ethical funds in the US are already high.63 The main options Such evidence, combined with the fff or intervention increasing opprobrium that companies receive where they become involved in Once you have decided what you want destructive projects, has persuaded to get out of your campaign, the next several sectors to draw up ethical stage is to decide the type of financial guidelines or Codes of Practice. Under campaign that seems most likely to be the auspices of the UN Environment effective. Again, there are a number of Programme (UNEP), for example, different possible options. The strength leading insurance firms agreed in 1995 of the financial arguments which you can to a “Statement of Environmental develop to make your case will have a Commitment”, which commits huge bearing on which option is most signatories to “reinforcing the attention likely to yield results. given to environmental risks in our core activities”, “managing internal Option 1: analysis and operations and physical assets . . . in a re-evaluation manner that reflects environmental considerations”, and supporting Summary: Encourage a financial “insurance products and services that reassessment of a project or company. promote sound environmental practice”.64 UNEP has now broadened Target audience: Analysts, Fund the initiative to include the banking managers sector and other financial institutions.65 Tools: Financial analysis Although such statements often in practice commit companies or industries Encouraging a financial reassessment of to little, and even then are frequently the project or company should be your more honoured in their breach than their first option. If you can convince observation, they can still provide useful financiers that the project is not worth benchmarks against which campaigners investing in – it is too risky, won’t make can hold financial institutions the money they expect and is generally accountable. not worth pursuing – then you are half way there. This is the argument most In addition, sector-wide statements help likely to persuade investors. If you

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succeed, then the project or company support change rather than siding with will need to be restructured or even the management automatically. abandoned. However, it is not always Note that this option is largely limited to easy to make a strong financial case publicly-listed companies whose shares against a project that will convince are owned by financial institutions. investors. Furthermore, when Furthermore, it is essentially an indirect presenting your argument, you should strategy: the hope is that by establishing bear in mind that you are dealing with specific policies and reporting professionals who believe in their own procedures, the objectionable activities analysis and judgment, and who are will be avoided. This means that it will generally well-informed. Expect an often be better as a long-term strategy, uphill struggle to get your message changing practice over time and across – your credibility will be preventing recurrence of the problem limited to start with. If you have access rather than stopping a particular project to information that the financial markets or activity immediately. (That said, are not aware of or a greater however, it may help create political understanding of certain key issues, then space for campaigning – for example, it your chances of success will be greatly may give greater credence to enhanced. The clearer your case, the discussions with government if the more likely that you will get a hearing. financial markets agree that a company is not following best practice). Option 2: engagement and reducing There are three main ways of pursuing this option: “bad practice” Informal engagement with company Summary: Expose weaknesses in management through financial institutions management practice. (see specimen letter below); Voting against the company on an Target audience: Fund managers ordinary motion at the AGM (such as the (corporate governance people), some re-election of the CEO or the approval of investment institutions. the report and accounts); or Tabling a resolution on the issue at Tools: Engagement, shareholder the AGM. resolutions Which of these options is the most If you do not have the information appropriate depends very much on needed to win the argument on financial where the company is based. In the ground alone, you may be able to make USA, special resolutions are seen as a a broad case that the management is prime means of getting an issue on the failing to act in a sufficient accountable agenda and forcing a company to and open manner. respond. This is for two reasons. First, In Europe, the financial markets are shareholder resolutions are relatively now generally supportive of the idea easy to launch. Second, and more that companies should have clear importantly, the US fund management policies on key issues such as the market is very diverse, and even the environment and human rights and largest fund mangers control relatively should report on their activities in these small amounts of stock and may have spheres. If a company does not have difficulty in getting the attention of these elements in place, financial companies via other means. institutions may be more sympathetic to In the UK, it is somewhat harder to your arguments and be prepared to launch resolutions. Moreover, because

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Campaign option 1: Specimen Letter

Dear Chair of the Investment Committee, The ABC Dam and XYZ Corporation. As you may be aware, XYZ is due to be listed on the [country] stock The initial listing of a exchange. The company is to own and operate the ABC hydroelectric company on the stock dam, a major new independent power project, due to be built in exchange is a prime [country] moment to intervene. We are writing to you to urge you not to invest in companies Keep the details short – involved in the highly controversial ABC hydroelectric dam project in append an annex with [country]: specifically, we request that you do not invest in XYZ, the more information on project developer. your concerns. Mention any legal problems that ABC is opposed by a wide range of groups in [country] and might deter investors. internationally on human rights, environmental and economic grounds. The project would require the forcible resettlement of X Cite your own number of people and the destruction of Z hectares of forest. Local assessment of the courts have ruled that the environmental impact assessment for the financial viability of the project was conducted illegally. project – or better still, an independent You may feel financial issues have to take precedence over these assessment. concerns when making your investment decisions. But you should be Unflattering aware that doubts have been raised about the financial viability of comparisons with the project and whether it can offer adequate returns to investors. A alternatives will be report by HIJ, an independent financial consultancy, has concluded persuasive – but ensure that the project carries far greater risks than other private sector that the alternatives are projects in the region. These risks include “probable” cost overruns; acceptable to your a “substantial risk” that the project will produce less power that partner groups, forecast; and possible long term technical problems with reservoir particularly within the sedimentation and power transmission links. local community. Under the most optimistic assumptions, the HIJ report finds that Give details of any returns will only be around 11% (a figure confirmed by the project figures which cast developers). Quite feasibly, they could be much lower. Yet, even at doubts on the returns 11%, the project would still compare unfavourably with other power from the investment. projects in the region, which currently yield 16% or more, or indeed with the long-term return on European equities. Investing in ABC would appear to conflict directly with your financial objectives. Investing in ABC is unlikely to offer the returns you require, and could bring your organisation into disrepute. Ensure that the NGOs and other groups opposed to ABC will be monitoring closely investors know you are the shareholders in XYZ, and seeking to press them to withdraw their watching them. Let investments on social and environmental grounds. them know a campaign against them is We would urge you to: possible. 1. Ensure that these issues are brought to the attention of your Seek to ensure your regional fund manager and other senior staff covering [country]; concerns reach other key decision makers, 2. Ensure that these issues are raised at the next meeting of your stimulating critical investment committee. internal debate. We hope that after due consideration, you will be persuaded not to Restate the bottom line buy shares in XYZ. If you would like further information on the issues arguments. Offer a surround the ABC project, we would be happy to arrange a briefing. meeting. Your best chance of getting the Yours Faithfully investors on your side is to brief them personally.

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Campaign option 2: Specimen Letter

Dear Fund Manager Serious Governance Failures in XYZ plc We are writing to express our concerns about your holdings in Issues discussed only XYZ plc and to ask you to press for change at the AGM next briefly month. Two recent incidents have exposed major failures of management Focus on financial control within XYZ. The first relates to their involvement in the consequences and failure proposed ABC Dam in Developing Country, which involves major of management control adverse environmental and social impacts, as well as exposing the These measures are company to serious financial risks. The second arises from the increasingly recognised Mega Water Project, where the company is being charged (as part as good practice. of the managing consortium) with corruption, This could have disastrous impacts on future business should a conviction result in the company being debarred from World Bank contracts, and raises particularly serious questions about the internal control and competence. Details of both projects and their financial implications for the company are attached. We note that XYZ does not have a * group level environmental policy, * does not report adequately on its environmental and social impacts * does not have a director responsible for environment. In view of the seriousness of the concerns raised, we are writing Voting against chair is a to urge you to vote against the reappointment of the Chair and to major step, but we are ask the company to withdraw from the ABC project unless it can going for it. satisfy shareholders that the environmental and human rights concerns can realistically be addressed. We would very much welcome the opportunity to meet and Always invite further discuss our concerns in more detail. discussion. Yours Faithfully,

leading investment institutions are and accounts. Furthermore, for increasingly willing to engage on campaigners, the key advantage of a corporate governance issues, fund shareholder resolution – namely that it managers generally have no difficulty in places an issue clearly on the company’s gaining access to companies at a senior agenda and requires fund managers to level – and have no need of resolutions think about the issue – remains valid. to draw attention to an issue. For that Indeed, most financial commentators reason, there is a general preference expect the practice of submitting special amongst fund managers for engagement resolutions to become more widespread and informal dialogue with companies, in the future. rather than placing pressure through In much of continental Europe, and special resolutions. Japan, formal voting can be surprisingly Nonetheless, many fund managers are difficult – even the basics of getting increasingly prepared to use their adequate advance information on when shares to exert other forms of pressure AGMs are to be held can be difficult. at AGMs, for example when it comes to While the situation is improving, the the vote on the company’s annual report bottom line is that engagement is likely

66 The Campaigners’ Guide to Financial Markets to be effective – particularly if some of 2. Contact sympathetic investors (for the key institutions that hold large example, ethical numbers of shares can be contacted. (In investors) and Germany, for example, banks are major initiate a shareholders in many companies.) preliminary No institution is dialogue with homogenous, and within them; Whether or not engagement or special any financial institution resolutions are used, it is important to 3. Broaden remember that the key to making approach to other there will be those who progress is to work with the financial socially- disapprove of the institutions – they are the ones with the responsible investment policies that votes and the influence over investors (for management. Thus it is important to try example, all those are made. actively involved and open a dialogue with them at an in corporate early stage in the campaign – for governance instance, to explore how your concerns issues); might fit in with theirs. Generally, it is 4. Possibly form working group, not worth rushing into a decision to opt prepare engagement strategy, set for a special resolution, although this objectives; option can be explored at any stage. 5. Involve all investors. Publicise Timing may also play a role here – the concerns. date for a company’s AGM is fixed, as is the date by which resolutions have to A decision to go for a special resolution be submitted. If the AGM is a long way could be taken at any of the steps above. off, it is probably sensible to start with While sometimes, companies will an engagement approach, with the sometimes respond quickly to pressure support of fund managers, to see how it from develops. A decision to launch a special institutional resolution can be made later, and from a investors, in Encouraging a financial many cases more informed position. If time is short, reassessment of the project it may be worth going straight for a campaigners shareholder resolution – although this should be or company should be your risks being less successful. prepared for the first option. If you can long haul. In convince financiers that the A key issue with shareholder resolutions particular, is the need for care in structuring the campaigners project is not worth resolution in a way that makes it most should be aware investing in – it is too risky supportable by shareholders (see Box, of the need for and won’t make the money “Wording your resolution”, p.68). This “second round” is another reason to work with action – after expected – then you are sympathetic fund managers at an early either a round of halfway home. stage, as they will be able to say directly engagement or a what they can support. Furthermore, special resolution, there will be a need involving them early will mean they feel to maintain the pressure. When some “ownership” of any resolution, and companies have responded positively, will provide it with far more credibility. there will be a need to monitor their The ideal approach to engaging with actions and ensure they do what they fund managers is as follows: promise. Where companies are less 1. Undertake your initial research into positive, then consideration will have to the company and identify key be given to ways in which further weaknesses of concern to shareholders; pressure can be brought to bear. This

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may mean preparing a new resolution for the following year, and particularly Wording your resolution gathering support for it, or otherwise looking at ways to increase pressure on

hareholder resolutions have become an the company. It is also worth noting that, increasingly common form of shareholder in many cases, the result may be a activism in recent years. Although the partial success – a response by the Slikelihood of a hostile resolution being voted through is slim, resolutions can be powerful tools company to do something, but which is for initiating a debate amongst investors and rather less than campaigners might wish, gathering support for your campaign. If they fail to attract a significant percentage of the shareholders’ although enough to keep fund managers votes, however, the company can use this to argue quiet for the time being. Campaigners that you have failed to make your case. should be prepared for such outcomes. Winning active institutional support will depend critically on giving investors plenty of time to raise the issues with the company – in the UK, though less so in the US, most investors will not even consider supporting your resolution unless they Option three: direct campaigning and have exhausted other avenues for persuading the moral persuasion company to change. You will also need to devote considerable time to visiting investors personally, Summary: Demanding change at answering their queries and providing them with background information on your concerns. institutional level. The wording of your resolution will also be key to its success or failure. In the financial markets, it is Targets: All generally considered legitimate for shareholders to make proposals about the company’s overall policy Tools: Consumer write-ins, or business strategy. Conversely, it is widely held management meetings, Consumer that shareholders should not attempt to “micro- manage” the company – this is viewed as boycotts, negative publicity management’s job. Consequently, resolutions that are very specific – for example, calling on a This is the option to pursue when you do company to withdraw from a given project or to not have a financial argument to support cease a particular activity – are unlikely to gather support from institutional investors, whose votes your case. It is the most difficult – don’t are crucial to the resolution’s success. Indeed, in be tempted to consider it just because it the USA, narrow shareholder resolutions can be is familiar for many campaigners. ruled invalid under the rules of the Securities and Exchange Commission – creating a legal precedent Financial markets will generally react that can undermine other campaigns. It is thus badly to being told what to do. important that campaigners who are new to shareholder activism link up with more experienced Nonetheless, such campaigns can work, colleagues who can advise them on wording. particularly where the particular activity Where the management of a company has clearly breached its own policies, or has misled you are objecting to, while it may be shareholders (for example by withholding attractive financially, is marginal to the important information), it may be possible to go for the jugular – to ask fund managers to vote core activities of a company or against the re-election of the company’s board, in institutional investor. If defending this effect a vote of no confidence in the management. activity starts to become a hassle, This is a controversial tactic, for which it will be generally difficult to gain support. Your case will particular for senior management, or be greatly strengthened if the company’s financial involves damage to the company’s performance has been weak – or if other actions have annoyed shareholders, for example the reputation, then the company may decide awarding of excessive salary increases for directors. to disinvest – time is money in financial For campaigners, the limitations on the wording of institutions. resolutions has important implications, which need to be thoroughly discussed with colleagues before One drawback of such a campaign is embarking on a shareholder resolution. Will a resolution that does not name the project you are that it is usually focused on one campaigning against deliver any political gains? Or institution or organisation at a time. In will a call for the company to adopt a new policy some cases, this may be sufficient – for on, say, the environment, further your work – even if there is no call to withdraw from the project? example, when one financial institution has a key role. In other cases, it may not

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Potential and limitations of shareholder resolutions Insights from the US

s a shareholder resolution of company’s product or line of commun-ities, shareholders, right for the causes and business etc. campaigns you’re Iconcerned about? What can Achieves only voluntary Complexity of having to realistically be achieved change (versus legal or set objectives and strategy through shareholder activism? regulatory means) jointly, or ensuring that co- Sometimes is lengthy and filers agree with lead filer’s legalistic objectives Potential of shareholder Potential of shareholder Content strictly limited by Negotiating different activism – what it offff ers SEC rules/history. Incremental thresholds for acceptable change. results (For example, at what point would the coalition be 1. Access to corporations: 2. Tactical Limitations: willing to withdraw a resolution?) Direct access to top In some cases, may require management adjustment of confrontational 4. Demands on your strategies Constructive dialogue with organization: management Invalidated by simultaneous Requires ability to translate Possibility of affecting litigation (one can’t file a demands into concrete yet resolution if one is suing a corporate culture significant annual steps for company) companies Voluntary changes by corporations Need to think through Can require defending implications of publicity resolutions on short notice, Potential to change strategies. For example, participating in meetings with company policies and practices company conversations may companies, and evaluating need to be confidential. So, in copious amounts of corporate 2. Access to shareholders: order to get a better result material. from shareholder negotiations, Media attention for May incur legal costs to resolutions publicity efforts may need to be scaled down or up defend resolutions Investor education Need to think through Possible costly (if a Partnership with implications of resolution. professional is hired) or shareholders Although uncommon, some complex solicitation effort to companies have stopped talking increase votes to shareholder activists after a Limitations of resolution has been filed. Time-intensive Michelle Chan-Fishel Shareholder Activism 3. Restrictions resulting Reproduced from Friends of the from collaborations: Earth-US, Guide to Shareholder 1. Limited Objectives: Activism. The Guide can be Necessity of communication Cannot address the validity downloaded from www.foe.org/ between campaigners, international/shareholderinternational/shareholder.

be. In particular, there is a danger that company (see p.70) and organising another financial institution picks up the meetings with institutional investors (for business rejected by the targeted example, banks and pension funds) in company. This may make it even harder order to make them aware of your to exert pressure: the new company may objections to their involvement in the be from a country in which it is far company. Ideally, appointments should harder to campaign, or may take a form be obtained with the senior management which is less visible (for example, an of these financial institutions as it is offshore company). their appointed role to consider the “big picture”. Stress any relevant social or Typically, a campaign of this type will environment commitments or policies involve writing a formal letter to the that have been adopted by the investors.

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Campaign option 3: Specimen Letter

Dear CEO We are writing to you to express our concern over your organisations Keep the letter involvement in XYZ project. brief; and polite but firm We object to this hydroelectric project on both environmental and social grounds, involving as it does the flooding of an important area of natural Don’t spend too habitat and the displacement of 50,000 native people. Environmental impact long on why the assessments that have been carried out are generally acknowledged as project is bad – flawed. Local consultation has been negligible. The attached sheets provide use attachments. more information. Your have apparently agreed to be lead financier of this Provide contact project, out of your ZZZ office. details within the organisation if Your involvement in the project is in direct contrast with your own possible. environmental policy, where you state that sound business management should take account of the effects that business has on the environment, Refer to the with a view to minimising detrimental impact. Your involvement also organisation’s appears in conflict with you commitments as a member of the UNEP Banking own policies if Initiative. Here you state that you regard sustainable development as a your can. fundamental aspect of sound business management – yet this project is widely condemned as unsustainable. Mention the risks for the company’s Your involvement in this project is likely to do serious damage your reputation, but reputation. It is already attracting media interest. Many of our 450,000 don’t overdo it. members are likely to find banking at an organisation involved in such projects unacceptable, and many other organisations may react negatively Ask for a meeting to your involvement. We hope therefore that you will reconsider your – getting to know position before serious harm is done to your business. the people is the best way forward We would very much welcome the opportunity to meet with you, and to explain our concerns to you in more detail. We hope this matter can be Don’t involve the resolved speedily and quickly. media yet – they can be brought in Yours sincerely later.

cc: Chairman/ President (if not CEO)

Senior non-executive / independent director

Director responsible for environmental policy,

Head of Environmental unit

Possibly head of retail banking (whose business you can threaten)

Possibly relevant divisional / countries heads

If this does not yield results, then the achieve your main objectives because campaign can be geared up by pension you have not moved quickly enough at or account holders to write protest the right moment. letters. Ultimately, if the financial institution has a household presence, The importance of timing can vary. In consumer boycotts could be considered. some areas (for example, when making arguments about a company’s strategic direction), it is not critical. But if one wishes to stop a major capital raising exercise (such as a new share offering Timing or a project financing), timing becomes all important: once the money has been Timing can be key in the financial raised, the project will have the funds it markets. It is possible to run a needs to go ahead. It is also possible to campaign that is reasonably successful be lulled into a false sense of security: in engaging with investors, but still not sometimes raising the money for a

70 The Campaigners’ Guide to Financial Markets project appears to be moving very This provides campaigners with several slowly but, very suddenly, everything opportunities. Prior to the IPO being seems to be in place. Partly this is launched on the market, for example, it because much of the preparatory work in is common for the company and project financing is not particularly representatives of the investment bank to visible; partly it reflects the intense hold a series of seminars (known as work that participants put in immediately “roadshows”) in which the deal is prior to closing a deal. explained to potential investors, including corporate clients, private For campaigners, a key lesson is to start clients, investment houses and pension early, be prepared and keep badgering funds. away. The initial stages are often the most time consuming as one gathers Such roadshows (which also take place information, conducts analysis and when companies are making other new identifies contacts. But once this is done, share issues) offer a major opportunity it is relatively easy to accelerate the for intervention. In 1994, for example, campaign if the need arises. campaigners obtained the list of guests being invited to a “roadshow” hosted by the Indonesian logging company, Barito, which was seeking $200 million on the Key intervention points international financial markets to expand There are a number of key moments in its logging and plywood operations. the life of a company or project that Barito’s record on environmental and present campaigners with major social issues is appalling. Forests opportunities to intervene in order to Monitor, a UK advocacy group, sent press for change. These include the information on Barito’s environmental Initial Public Offering (IPO) of the and social track record to all those company’s shares on the market, the invited to the roadshow: as a result, issuing of quarterly annual reports, many investors declined to buy the annual credit reviews by rating agencies, shares being offered.66 and the Annual General Meeting (AGM) that every company is required by law to hold for its shareholders. IPOs and 2. AGMs and shareholder resolutions AGMs are considered in more detail The Annual General Meeting (AGM) of below: a company also presents campaigners with a range of opportunities to draw 1. Initial Public Offerings (IPOs) attention to their particular issue and to A key time for a company is when it is press for change. At their simplest, listed on the stock exchange for the first shareholder actions may involve a time. This involves the company getting demonstration either outside the AGM approval from the stock exchange to list or, if campaigners have bought shares, its shares. To do so, it must publish a inside the meeting itself. (For prospectus – a full description of the information on how to buy shares, see company and its activities. The Initial Box: “Organising a shareholder Public Offering (IPO) is usually handled resolution”, p.91) Such actions bring by an investment bank on behalf of the campaigns both publicity and the chance company. It is a statutory requirement to put company directors on the spot in that the prospectus gives as full a picture front of those who nominally control the as possible of the company’s activities company – the shareholders. and liabilities, including environmental Individual shareholders who do not liabilities. want to take part in more active protests

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Pull out of Burma Protests,,, boycotts and shareholder actions bring results

pponents of the like New York and San In the US, student groups have military dictatorship in Francisco, have enacted laws been at the forefront of such Burma have been banning any public contracts consumer activism. At Ocalling on US and European with companies doing business Pennsylvania State University, companies and financial in Burma. US and non-US students pressed the institutions for nearly a companies wanting to gain university administration to decade to disinvest from the contracts with US authorities adopt a Selective Purchasing country, where the military that have enacted Burma laws Policy “in which Penn State will dictatorship has been must thus pull out of Burma or neither renew nor sign new consistently condemned by risk losing business. contracts with companies the UN for systematic human doing business in Burma”. One rights’ abuses. Burma’s pro- Following the introduction of contract threatened was a 10- democracy leader and Nobel the California ban, for example, year, $14.5 million monopoly Peace Prize laureate, Aung San the Swedish telecommunications contract with PepsiCo to Suu Kyi, states: “I’d like to giant, Ericsson, lost contracts supply the university campus make it clear that the people worth up to $90 million with the with Pepsi. of Burma are not suffering as City of San Francisco because of a result of sanctions – the real its dealings with Burma. Ericsson Pepsi, which was then making profits do not go to the later announced it was around $8 million a year in people of Burma, it is all disinvesting. Burma, was also targeted at other campuses. At Harvard, concentrated in the hands of “Forced to chose between (foreign) investors or student pressure resulted in lucrative local government the University cancelling plans privileged people. An contracts and often mediocre international boycott would to switch its dining hall cola business opportunities in supplies from Coca-Cola to be the best instrument to Burma, a host of American firms exercise pressure on the Pepsi – a contract that would have chosen the former”, note have been worth $1 million a military regime and get the Tiffany Danitz and Warren situation moved out of the year for five years. In Stroebel of the US Institute for California, students stalemate that Burma is Peace. “The Massachusetts law currently facing.” successfully banned sales of alone was cited by Motorola, Pepsi at the University of Operating in support of these Hewlett-Packard and Apple California’s campuses at calls, public interest groups in Corp. and other major Berkeley and Stanford. the West have successfully companies as the reason they Students across the US also used protests, boycotts, pulled up stakes in Burma.” initiated boycotts of products “selective purchasing” laws Indeed, Burma laws have “bitten marketed by PepsiCo’s (whereby public bodies refuse hard enough that both the subsidiaries, including Pizza to buy from companies European Union and Japan have Hut, Taco Bell and KFC involved in Burma) and complained to the US State restaurants and Doritos and investor campaigns to Department and intend to Lay chips. persuade a range of challenge the law in the World companies to pull out of the Trade Organisation.” Pepsi eventually withdrew from Burma in January 1997. country. Pepsi, Texaco, British In 1997, pressure on US Home Stores, Levi-Strauss, companies was further River Island, The Burton increased after the Clinton Group, Amoco and Disney Administration announced a ban Investor campaigns have all now disinvested. on all new US investment in Burma. Students have also mobilised – Selective Purchasing largely via the Internet – to Selective Purchasing Boycotts place pressure on their Agreements university administrations to Boycotts have also played a use their shareholdings in any central role in forcing corporation investing in Burma A key tactic has been to companies to pull out of Burma. to vote in favour of diminish their markets via Companies selling consumer resolutions calling of on those Selective Purchasing goods have been particularly companies to disinvest from Agreements. Several US states vulnerable to such pressure, Burma. Washington, Wisconsin such as Massachusetts and particularly when combined with and Stanford are just three of California, in addition to cities investor campaigns. a number of universities which

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responded to the call. In 1995, to households in the Midlands, and widespread.” the University of Washington’s and Guardian Royal Exchange, Board of Regents decided to the life insurance company. vote for, and sponsor, However, neither Premier nor shareholder resolutions aimed its shareholders have shown Limits of the market at limiting corporate signs of responding to public involvement in Burma. concerns over the company’s approach Responding to student involvement in Burma. In the autumn of 2000, some pressure, the University of Public interest groups have also private, roundtable discussions Wisconsin went further, were held between groups announcing that they would pressed the UK government to live up to its “ethical foreign campaigning on Burma and sell the University’s shares in some large institutional Texaco because of the policy”. In April 2000, this resulted in Foreign Minister John investors. While the investors company’s involvement in a expressed some sympathies natural gas project in Burma. Battle asking Premier to withdraw from Burma: “I really for the campaign, they also Days later, Texaco announced identified two major that the company was looking expect Premier to do the decent thing without having to difficulties. The first was that for way to withdraw from Premier is controlled by two Burma. resort to legal pressure.” But Premier’s Chief Executive, major shareholders – Amerada Other groups mobilised by Charles Jamieson, maintains that Hess and Petronas International public interest groups include the company’s continuing Corp., a Malaysian oil representatives from the presence enables it to use its prospecting company – which Interfaith Center on Corporate influence on the Burmese means that the influence of Responsibility and socially military regime for the good. external shareholders is low responsible investors such as “Constructive engagement . . . (and, ultimately, forcing Trilium Asset Management. is more likely to bring about change would be difficult). The results”, says Jamieson. second was that Burma represents a major proportion This claim is rejected by of Premier’s assets and cash The Premier Oil campaigners, who call flow. For Premier to write off constructive engagement “naive the assets would be campaign at best”, pointing out that it is unacceptable to the company opposed by opponents of the and to institutional investors regime in Burma. “Apart from which have a legal One of the companies the actual revenues that Premier responsibility to maximise remaining in Burma is Premier Oil brings to the government,” returns to their investors. Oil, which together with says Aung San Suu Kyi, “it also Moreover, for the company to Unocal, is investing in an oil constitutes a psychological sell its assets would not really pipeline in the Tenasserim boost because it makes the solve the problem as Burma region of Burma, where government feel that, however would still have the oil thousands of people have repressive they may be, they revenues and the investment. already been driven from their still have the support of big companies or at least one or These problems are homes. Forced labour – compounded by the fact that including men, women, two big companies. And if these companies are from Western Premier stock is neither children and even sick and particularly widely held nor elderly people – has been democracies, it’s even more serious because it gives the well regarded in investment used to build military roads circles. Even if many and barracks. Refugees fleeing military regime the chance to say: ‘Look, even companies shareholders did boycott the the area say that human rights stock, it would be unlikely to abuses have increased as a from Western democracies support us, so what we’re doing have a major impact on the result of security operations company’s share price. by the Burmese army can’t be that wrong. Why are democratic forces making such Currently, campaign groups in protecting the pipeline. the UK are trying to find a way Premier has a 27% interest in a fuss when companies from Western democracies are in to overcome these problems. the pipeline and is also The key will be finding a manager of the project. favour of what we are doing?’ So, Premier Oil, by coming into stronger business case for UK and continental European Burma at this time, does a great Premier to disinvest in Burma. campaigners have been active disservice to the cause of The Premier case indicates in pushing for Premier to democracy.” some of the problems that can disinvest. In effect, the foreign currency arise with a financial markets Protests have been held supplied by companies like campaign, particularly once the regularly at the company’s Premier is what is keeping the initial investment has occurred. Annual General Meeting: major regime alive. As the World Sources UK shareholders in Premier (as Development Movement puts it: Sources Burma Campaign UK, of 24 January 2000) include “Their project is fuelling www.burmacampaign.org.uk Amerada Hess, parent oppression in a country where Students for a Democratic company of Amerada Gas, torture, forced labour and Burma,www.enviroweb.org/fcg/ which supplies domestic gas human rights abuses are routine sdb/

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against the company, or who cannot attend the AGM, can also make their Creating political space feelings known. As shareholders, the As an outsider, getting your arguments company is obliged to send them proxy across to the financial markets will voting forms, never be easy, particularly since indicating how they Using a carrot and financiers often do not view NGOs as want their vote to be credible. To strengthen your position, stick approach, used at the AGM. If you will need to develop some shareholders are campaigners are “political space” so that you have an unhappy with the exerting pressure on audience for your concerns. NGOs have company’s activities, become good at reaching out to the financial institutions, they can use the form public and consumers and even to from banks to pension to vote against the politicians. In contrast, there is a reappointment of funds, to screen out tendency to regard financial markets as members of the egregious projects and part of the enemy rather than as another company’s board or constituency (with very considerable investments from their the adoption of the influence) which can be targeted and company’s annual portfolios where political space can be developed. report (two votes that the company is How campaigners seek to build such a obliged to put to its AGM). If enough constituency will depend to a large individual shareholders take this action, extent on whether the need is to cultivate it sends a significant message to the one or two specific institutions (a company, particularly if the proxy form “narrow” strategy) or to influence the is accompanied by a letter explaining market as a whole (a “broad” strategy). why the shareholder is voting against the company.67 A narrow strategy will be appropriate if you are dealing with the If a decision has financing of a project, or the earlll y days As an outsider, getting been taken to launch of a proposed flotation, when one your arguments across a shareholder financial institution typically takes the resolution, then the lead, perhaps with the assistance of one to the financial markets AGM will obviously or two others... will never be easy. To be the culmination of Usually, the best place to start is at the top strengthen your that action. But much with senior management – if you can get of the hard work their attention. In addition, there may be position, you will need should have been lower level staff who are already open to to develop some done in the months your concerns and willing to take them up, “political space” so that before the AGM – such as an environmental management unit, for example, by public relations officers or those responsible you have an audience for accounts with charities and NGOs. lobbying pension for your concerns. fund managers (see A broad strategy is more suited to “Option 2” and campaigns in which you need to convince section on fund managers, pp.97-106). the market as a whole to change,,, or at least a large part of it. For an account of how one campaign in the UK (on Balfour Beatty) set about Where you are trying to change the culture launching a shareholder resolution – or sentiments of a whole particular market (for example, the UK equity market), the the steps it went through to submit the senior management of individual companies resolution, to buy shares and to lobby are likely to have little influence. The key shareholders – see Box, “Organising a constituency consists of analysts, fund shareholder resolution”, p.91. managers and others who help create and

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BP – Mobilising investors for change

ushing a major global reinvest the money in solar informed. The development of conglomerate to move power. Northstar, the world’s the Northstar field, argued out of fossil fuels is no first offshore Arctic oil field, is Greenpeace, was evidence of Psmall task. But increasing currently being developed by confusion at the board level climate instability, linked by BP at an estimated cost of over the company’s the burning of fossil fuels, between $0.5-1.5 billion. investment strategy. makes the transformation of Greenpeace pointed out that companies like British As well as increasing oil industry BP’s 1997 annual report had Petroleum (BP), Shell and access to currently inaccessible acknowledged that “if [the other oil companies a major reserves of oil in Arctic areas, Kyoto climate change treaty international priority. argues Greenpeace, the targets] are to be met, a major development would “increase reduction in the use of fossil Greenpeace is one the rate and magnitude of fuel would be required, and environmental group that has impacts to Arctic wildlife from this is likely to have an effect taken up the challenge, the anthropogenic greenhouse on BP’s main business.” The highlighting the issue through effect.” Retreating sea ice, the development of the Northstar direct action, high profile group pointed out in its field suggested, however, that press campaigns, lobbying of shareholder resolution, “is BP’s business strategy was insurance companies and, already threatening the based on a contrary most recently, shareholder existence of several Arctic assumption – namely that resolutions. species, including walrus and greater quantities of oil and polar bears.” gas would be sold in the Aiming high future. Greenpeace concluded: Arguments for change “BP Amoco has not informed BP is one company that has its shareholders of how been targeted by the group. climate protection is affecting With the value of BP’s shares Greenpeace’s resolution played the company’s investment accounting for approximately to a number of leverage points. strategy in relation to 7% of the total value of the These included: BP’s reputation; exploring and developing new London stock market, and its past statements on climate oil and gas reserves.” change; confusion over the with almost every institutional company’s investment strategy; Technical problems with investor a shareholder, the the Northstar field company presented a technical problems with the Northstar field; and the long- Greenpeace stressed that particularly difficult target for Northstar is behind schedule a shareholder-focused term financial profitability of moving of oil and into solar. and running over cost. This campaign. To gain significant delay offered BP Amoco “the shareholder support for any Reputation opportunity to rethink its resolution demanding more In a covering letter to BP, sent investment strategy and than small changes in the with the shareholder resolution, initiate a planned company’s energy strategy Greenpeace pointed out that, diversification out of fossil was, many sympathetic since 1997, “BP has sought to fuels.” financial analysts thought, an position itself as distinct from impossibility – the more so other oil companies on the Long-term profitability since BP has gained a issue of climate change.” As a of solar reputation in the financial result, the company enjoyed a Increasing acceptance by community as an reputation in many quarters as governments of the need for environmental leader in the oil “a responsible and pragmatic precautionary action on and gas sector, having company, concerned about the climate change could mean recognised the reality of environment and willing to that BP Amoco’s long-term climate change, pulled out of listen.” If the company failed to investment in new oil the climate-skeptic Global back up its public statements production “will result in the Climate Coalition and on the environment with company having to choose introduced a range of changes in investment strategy, between undermining climate environmental initiatives. “both the reputation and the change protection by trying to increase future markets for its Undeterred, Greenpeace put long-term value of the company will be eroded.” products or being left with forward a resolution to the ‘stranded’ assets from which April 2000 Annual General Confusion over there is no return on Meeting (AGM) of BP calling investment strategy investment.” By contrast, on the company not only to Good corporate governance stated Greenpeace, solar abandon its half-completed implies a clear investment energy offered a cost- development of the Northstar strategy about which competitive energy source oil field in Alaska but also to shareholders should be properly with a future.

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The views of the City “compensatory gains” for targeted company may revert The views of the City shareholders, principally in BP to a “bunker mentality” and The resolution met with a being able to reposition itself in abandon its tentative efforts mixed reaction from the City. order to take advantage of a to embrace reform. And other Many were, of course, huge future market in solar. companies may see no dismissive. Others thought incentive to change if the there was an important point Outcome leaders in the field are to answer, although they were targeted. not sure of the wording of the No one ever expected the A second lesson was that the resolution. Support for Greenpeace resolution to be resolution might have Greenpeace was boosted when carried, but it was hoped that it garnered more votes if the the resolution won the support would gain the support of at wording had not been so of Pensions Investment least 5% of shareholders. In the specific. In laying down what Research Consultants (PIRC), event, it won 13% support. The the company should do in one the corporate governance success of the resolution is particular area, it was seen by watchdog. Prior to the AGM, widely acknowledged to have many shareholders as usurping PIRC sent a report to fund sent BP a major signal that the role of management – and managers, urging its client change was necessary – and had was thus close to a vote of no funds to vote for the institutional support. As a result, confidence. This was a step resolution. The report BP has been consulting widely too far for many shareholders. countered many of the with its major shareholders. In addition, it was felt that a arguments that BP Amoco had greater degree of consultation put up in response to the Campaigners have also learnt with leading shareholders Greenpeace resolution. from the resolution. One lesson has been that having a before finalising the wording PIRC criticised BP for taking reputation as an environmental of the resolution would have too passive an approach to the leader does not put a company generated wider support at need to shift away from fossil off-limits to shareholder the AGM. fuels, arguing that “it would be actions. On the contrary, the Some City commentators more appropriate for [the fact that BP was viewed as argue that the resolution company] to show stronger environmentally forward might have succeeded if it had leadership.” The group’s looking, yet was still acting in called on the management to report also countered BP’s an environmentally damaging develop a policy on claim that there is insufficient way, meant that its own words biodiversity and against the demand to justify more could be used against it – in opening up of wilderness areas investment in solar energy: “A essence, the company could be rather than a pull-out from company with the resources accused of hypocrisy. In that Northstar. Similarly, a call on and scale of BP Amoco can respect, the company made a the company to develop a play an important role in more suitable target than a complete carbon transition creating the conditions for completely unreconstructed strategy might have fared increased demand.” company which could more better than one calling for easily deny the relevance of the investment in specific areas. PIRC acknowledged that there issues raised. would be a short-term cost in Sources moving away from oil but While this strategy is valid, it Greenpeace, Shareholder Resolution insisted that there would be carries a number of risks. The to BP Amoco, April 2000

form opinions about a relevant industry. and help you refine your language, (Some campaigns have mistakenly arguments and demands. assumed that pronouncements from senior managers will carry weight with traders and Broaden out to convincing more fund managers.) Cultivating this mainstream financial organisations. constituency will take time and a degree of Identifying individuals in mainstream perseverance. It is best to divide the work financial institutions who are likely to be into a number of stages: sympathetic can be difficult, and this may be one of the hardest steps in the campaign. Develop a bridgehead The key here is to be persistent, not to Work with some financial institutions that waste time on those who are obviously are prepared to listen to you and support hostile, and to develop personal contact you. The “green” financial institutions through meetings as this will be the most (such as ethical funds and some local effective way of convincing individuals. authority pension funds) can play a key Once you have the support of a number of role here. Having even a few names mainstream organisations, a momentum supporting you will boost your credibility begins to build up, bringing new allies.

76 The Campaigners’ Guide to Financial Markets Part Four PlaPlayyererss inin thethe marmarkketet

77 The Campaigners’ Guide to Financial Markets UNDERSTUNDERSTANDINGANDING YYOUROUR AAUDIENCEUDIENCE

he key to a financial market campaign is T understanding the psychology and culture of the financial markets. Financiers are a very different audience to that with which most campaigners are familiar – civil servants, politicians or the general public, for example.

Unlike government institutions, financiers have no obligation to listen to or consider what you say. Thus, when engaging with financiers, it is often useful to regard yourself as a “salesperson” trying to sell a difficult product to a reluctant customer.

A golden rule when selling such products is to put yourself in the other party’s shoes, to understand their desires and motivations.

Never forget that the prime motivation of financiers is to make money. Some organisations (for instance, investment

78 The Campaigners’ Guide to Financial Markets banks) do this directly through trading, mainstream arranging deals or lending money. Others colleagues. Finally, Persuading financiers (such as fund managers and investment financiers have to sift analysts) make money by managing other through huge amounts requires overcoming peoples’ funds or providing analysis and of information every a hostility to criticism research. In both instances, employees day – from company by outsiders and are under tremendous pressure to “close and analysts’ reports tailoring your deals”, achieve the best returns on to the latest market capital and bring in new business. figures. The pressures approach accordingly. This pressure to succeed encourages a on them are macho institutional culture. Those who tremendous, and time survive in the high-pressure world of is short. Their willingness to engage financial markets do so largely because with critics – let alone ideas that seem they are successful at making money – new or radical to them – is limited. and many develop a confidence in their financial judgement that borders on Overcoming hostility arrogance. Persuading financiers that your Whilst sensitive to the opinions of their campaign has merit requires more than peers, financiers are generally hostile to good arguments. It also requires outsiders who question their views. overcoming the cultural and Once they have pronounced on a psychological hostility of many company’s worth or the viability of a financiers to criticism and tailoring your project, they are often reluctant to back manner and approach accordingly. down. Moreover, despite the aggressive Appear professional and knowledgeable competition of the financial markets, about your case, but don’t try to give the financiers tend to be conservative, impression that you understand the fearing the ridicule of their colleagues if markets better than they do. One- they support views that appear “radical” upmanship won’t get you anywhere. You or “flaky”. will only succeed in causing irritation. This institutional culture has important Instead, try to enlist their help to implications for campaigning. Many strengthen your case. Keep letters brief financiers view campaigns as a (a one-page rule is sensible), use challenge to their personal judgement: summaries and bullet points, and make it hectoring them about a project’s easyfor them to understand and agree to financial vulnerability or lecturing them your argument. on “sustainability” is likely to trigger a Don’t forget that financiers are human defensive reaction. Many will simply beings, too! Many may well be dig in their heels, unwilling to concede concerned about the issues you’re that the investment is flawed. raising and may even be members of Although some of the ideas behind campaigning groups themselves. So try socially responsible investment (SRI) not to give the impression that you are have become much more accepted in criticising them as individuals. Try to many circles over recent years, for most appeal to any common ground you may financiers they remain controversial. share. Even when SRI is accepted, there may be differences between what you want These points are covered in the and what financiers consider following sections on each of the key appropriate. Many will shy away from players: analysts, institutional investors, sticking their necks out too far for fear of fund managers, ethical fund managers, denting their reputation with more bankers and project financiers.

79 The Campaigners’ Guide to Financial Markets ANANALALYYSTSSTS

Analysts provide a vital service in the team. Like stockbroker analysts, they may financial markets. Their job is to be expected to help in marketing their fund, understand businesses and projects, to in which case they will be keen to see their value them using various models and views quoted in the press. They will have thus to provide fund managers and access to the research produced by traders with recommendations as to stockbroker analysts. which shares to buy and which to sell. Bank analysts Without analysts, the financial markets Bank analysts assess credit risks for a would be guessing about the value of bank’s lending and their area of expertise is companies much of the time. therefore rather different to that of stockbroker or fund manager analysts. In addition to valuing companies, they will look at a variety of other investments, such Types of analysts as project lending. Their focus is more on debt than equity, and on downside risks. Analysts are employed by a range of Economic and strategic analysts financial institutions. They include: Besides analysts who follow individual Stockbroker and investment bank companies, a number of specialists take analysts (“sell side” analysts) more of an overview of the market, looking The most influential and high profile at how funds should be allocated between analysts are those who work for different sectors and markets – a field stockbrokers and investment banks. One of known as “asset allocation”. If the issue that their main activities is researching and campaigners are addressing is broader than publishing reports on companies, which are a single company (for example, climate then distributed to their employer’s clients change and the oil sector), it may be and to the press. These analysts are very necessary to engage with these analysts. If competitive and keen to be well-regarded so, bear in mind that they are most likely to by their peers. They are very well-informed be persuaded by an analysis of the financially but tend to be arrogant and to macroeconomic factors affecting a think they know everything. Unlike many particular sector (for example, future oil in the City, stockbroker and investment prices). bank analysts are often keen to see their views publicised in the press – indeed, in Technical and quantitative analysts many instances, marketing their institution In contrast to the analysts above who assess is viewed as part of their job. In the UK, the “fundamentals” of a company or sector, Extel conducts an annual survey in which it technical analysts use only the price history invites fund managers to rate analysts and of a company’s shares as a guide to value. to identify the most highly-regarded in each (Essentially, they assume that the market sector. trends follow a fixed pattern which tends to remain within certain trading ranges.) Fund manager analysts (“buy side Quantitative analysts use computers and analysts”) mathematical models to combine both Many of the larger fund managers have fundamental and technical data so as to their own in-house analysts. These tend to produce recommendations on whether to be less competitive and publicity-seeking buy or sell particular shares. Because they than stockbroker analysts since they deliberately do not look at broader issues, primarily provide an internal service to the influencing these analysts is virtually fund manager. They also tend to work as a impossible.

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The Bakun campaign – Lobbying analysts to stop a dam

ampaigns by cables to transmit the power Ekran’s chair, that the project international generated to Peninsular would not have to rely on environment and Malaysia. The Swiss engineering government money. Cdevelopment groups company, ABB, and the Brazilian against investment in the construction company, Doubts over the project’s proposed 2,400MW Bakun Companhia Brasileira de financial viability continued to Hydroelectric Project on the Projectos e Obras (CBPO), were grow, however, particularly Balui river in Sarawak, awarded the main construction following publication of a Malaysia, played a key role in package, including supplying damning financial analysis of halting the project – at least the generators. Competing the project by London-based in its then-intended form. consortia included THT financial analysts Delphi Although the dam was International, consisting of International. The report abandoned in 1997, however, Tabung Haji Technologies, highlighted a number of those in the proposed Siemens, Voith, Zublin, financial risks associated with reservoir area were still Impregilo, Dragados and Pirelli. the project, including: moved – and are currently In early September 1997, ABB likely cost overruns; living in appalling conditions and Ekran fell into dispute over possible long-term in resettlement camps. The who would pay for cost technical problems with the project has since been overruns, and ABB was dam structure; revived. unceremoniously sacked from reservoir sedimentation the project. Subsequently, and possible shortening of Malaysian Energy Minister Leo the life of the dam; The project Moggie announced negotiations between Ekran and a new limited insurance cover Originally planned by the construction consortium in the event of a dam Malaysian government in the including Siemens and Alcatel failure; early 1980s, Bakun was (France). Negotiations came to outstanding legal issues abandoned in 1990 after a nothing, however, as the relating to the lack of campaign by local indigenous project soon collapsed in consultation with affected communities and a downturn financial ruin, leaving the communities; in the Malaysian economy. The government to pick up the unresolved issues decision to shelve the project pieces. relating to was described by Malaysian decommissioning; and Prime Minister Mahathir a “substantial risk” that Mohammed as “proof that Finance – The dam’s the dam would produce Malaysia cares about the Achilles’ heel less power than forecast, environment”. In 1993, partly because of however, he revived the uncertainties in future project, announcing that the Finance proved the Achilles’ rainfall as a result of global $6 billion dam would be heel of the dam. To implement warming. privatised to Ekran Bhd, a the project, Ekran set up Bakun Sarawak-based company with Management Sdn Bhd (a wholly- Delphi calculated that the strong political connections to owned subsidiary responsible likely returns to investors the ruling party. The contract for project management) and would be substantially lower was awarded without tender the Bakun Hydroelectric than the 11.5% claimed by and apparently without proper Corporation Sdn Bhd (BHC), Ekran. It warned bankers and costing. which would own and operate other financiers that “the dam the dam. Ekran retained a 35% carries an abnormal level of The job of clearing the share in BHC, with external risk, much of it reservoir area of forest, in investors and partners providing uncontrollable”. addition to much of the the remainder of the equity and ancillary construction work, debt capital. From the outset, was subcontracted to Ekran was unable to raise the NGO investor campaign companies controlled by Ting necessary finance on the Pek Khiing, Ekran’s chair. A international markets. Initially, number of international this was overcome by tapping Even before the release of the construction companies bid Malaysian state-controlled Delphi report, NGOs in Europe for the main contract or for companies for support, with and the US had begun to parts of the project which, in agencies like Tenega National, lobby investors to reject the addition to building the 205 Malaysian Mining Corporation project. Initially, the NGOs metre-high dam, also and the Employees Provident concentrated on shareholders involved laying 1,500 Fund, as well as the Sarawak in Ekran, alerting them to the kilometres of overland cable state government, taking major concerns of environmental and and three or four 650 shares in the project. This was human rights groups in kilometre-long undersea despite assurances from Ting, Malaysia over Bakun. Letters

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were sent to 120 major different letters from pension been Deputy Prime Minister at European pension funds, funds which were managed the time, testified to a banks and insurance under contract – the letters Malaysian court that Mahathir companies urging them not to again being directed to the had instructed him “to use back the project. Each letter appropriate investment board in Treasury funds to compensate was tailored to the specific each institution. the company without going financial institution: banks who though proper audit and were signatories to the UNEP Initially, the campaign stressed account.” Leaving no room for Statement on Environment and the risks that investment in doubt, Anwar went on to say: Sustainable Development, for Bakun posed to the reputation “I’m referring specifically to example, received letters of investors. With the Tan Sri Ting and Ekran.” drawing their attention to how publication of the Delphi the project conflicted with the report, greater stress was laid In 1999, the Malaysian UNEP statement. Each new on the financial risks of the government announced that it development in the project – project to investors. The would go ahead with a for example, a court ruling campaign circulated the report scaled-down version of the that the Environmental Impact to the press and, as with dam, with the undersea cable Assessment had been previous new developments in omitted. All those in the conducted illegally – was the project, wrote to major reservoir area of the original relayed to potential investors, financial institutions, bringing dam have already been in this instance with a warning the report’s conclusions to the relocated or are in the that the ruling could carry attention of key financial process of being moved to a legal implications for analysts and potential investors. resettlement site 300 miles investors. Fund managers were away. According to a 1999 also urged to “consider Outcome report by the Malaysian putting in place a process to Outcome Coalition of Concerned NGOs form a policy decision on a on Bakun, the resettlement company code of socially In June 1997, investor doubts site is grossly inadequate. The responsible investment.” led Ekran to cancel a rights new houses are poorly built issue to help pay for its 35% in and culturally inappropriate Care was also taken to ensure BHC, which was due to be and none of those relocated that the letters were floated on the Kuala Lumpur have been compensated for addressed to the right person, stock exchange. The floatation the loss of their old homes. A or group of people, in each never took place. In September, recent report by the Coalition financial institution – and to let just hours after Ekran dismissed says: “It is difficult to each of those addressed know ABB from the project, Mahathir adequately capture in words that others in their announced the “indefinite the utter desperation and organisation had also been postponement” of the project. dislocation being experienced contacted. Pension fund The subsequent government by the indigenous managers, for example, were bail-out of the project cost communities forcibly resettled specifically asked to bring the Malaysia an estimated M$950 because of the Bakun concerns over Bakun to senior million, including M$390 million project.” management covering Malaysia to Ekran, M$436 million to and to the Head of Assets, financial backers, M$24 million who also received letters to Dong Ah (a construction firm) Sources asking them to alert their fund and M$100 million to the Bakun Mansley, M. (1996) Bakun: High managers. Self managed Hydroelectric Corporation. In Dam, High Risk, Delphi pension funds received 1999, Ibrahim Anwar, who had International, London, 1996.

What sort of people intimate knowledge of those sectors and What sort of people a few companies within it. Often they have some technical knowledge and may are analysts? have worked in the sector itself for Some analysts are among the most some years. highly-regarded and well-paid employees in financial institutions. Many, however, are fairly low ranking What are their success – many firms see analysis as providing a good introduction to new employees fff actors? who then move on to other areas, such as sales or trading. Most analysts focus The reputation of stockbroker analysts on one or two sectors and develop an rests on how much their colleagues (for

82 The Campaigners’ Guide to Financial Markets example, traders) and clients (for forecasts and recommendations: example, fund managers) value their Analysis – assessing the strengths advice. Clearly, much depends on and weaknesses of a company’s whether their recommendations as to management, its business strategy and its which shares to buy or to sell have made finances; or lost money. But this is not the only Forecasts – predicting a company’s factor: indeed, research shows that results for the next financial year and the analysts are notoriously unreliable when year after; it comes to advising on future share Recommendations – advising fund prices. Analysts are also judged on the managers and others as to what to do quality of their research – for example, with stock: for example, “Buy”, “Hold” whether it provides thought-provoking or “Sell”. Some analysts have insights on the company – and to a lesser intermediate recommendations: “weak extent on the quantity of their hold”, “buy on weakness” are just two. publications and reports. They will also They may also make separate long- and be assessed on the extent to which they short-term recommendations or give target prices or price ranges for the help with marketing – for example, by stock. getting their company mentioned in the press or making presentations to prospective new clients (the quality of research is often an important factor What information do when clients decide to award business). Thus campaigners trying to get analysts analysts value? to listen to them and to take on board Analysts work in an information-rich, if their arguments and concerns should aim not information-saturated, environment. to: In addition to the data available to them Improve analysts’ forecasts and from on-line information sources, they recommendations; receive umpteen reports from Provide analysts with additional companies, journals, magazines and insights for their assessments; briefings. Give analysts a story that will get them press publicity which they can use They tend to rely first and foremost on to attract new clients. company-based sources of information, such as the annual report, meetings with management and site visits. They are less well-serviced with information on What are their outputs? background issues and on the views of other parties – for example, they may not The most visible output of analysts is the know about overseas politics or the reports they produce on companies or views of other stakeholders such as sectors. Their influence goes beyond employees and the local community. their written reports, however: analysts also make substantial oral contributions Environmental matters are rarely at the meetings held by most financial covered and certainly not systematically. institutions every morning in order to Note that analysts will often rely on brief department heads. They also make specialists for views on technical comments directly to colleagues and issues. Rarely do they conduct their own clients. independent research (even if it is as basic as visiting a retailer’s shops or In terms of content, their output can be looking at a company’s products divided into three areas – analysis, directly).

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generally preoccupied with the next set When do they do their of company results, and possibly the ones after that. A longer-term research? perspective only comes into play when the analyst is considering a company’s There is a clear periodic cycle to business strategy, or when analysing the analysis, particularly analysis of disclosed balance sheet and the companies. Most analysts focus on the intangible assets of a business (for annual results of a company: they example, its brand identity or the value usually produce one or more forecasts of its research and development). This before the results are announced by the is one area where there is real scope for company and a more detailed analysis outsiders to provide additional insights afterwards. They also comment on and value, as long as their critiques are interim results. Additional analysis may carefully prepared and presented. be conducted on an occasional basis – for example, in response to regulatory changes or to takeover rumours. Engaging analysts Occasionally, analysts take it upon themselves to carry out a detailed Possibly the first step in any campaign analysis of a company or sector. focused on trying to influence analysts is to set out your own arguments as to why But when it comes to analysis of major investors should be concerned about a new share issues or to the floatation of particular company or project. Given a company or the closure of project that analysts are likely to be distrustful finance deal, analysts have to respond of reports from campaign organisers, to events as they happen. For major which they view as biased, it is often share issues, most analysts covering the better to commission an independent sector will carry out a substantial analysis rather than to write it amount of research, which is then used yourselves as this will have more to advise clients on the value of the credibility within the investment flotation and whether or not investors community. You can then refer to the should buy the new shares. If the share report’s findings in a covering letter. issue is small, the analysts of the banks involved in managing the issue are The next step is to circulate the report. likely to have undertaken similar Here you will need to spend time research in order to advise the bank finding out the names of the analysts itself whether or not to become who specialise in your given company involved in the share issue. or project (see p.143). Remember that they receive a huge postbag of material every day, much of which goes straight into the dustbin, so you will need to What sort of time think of ways to maximise the chances that they will read your report. It is frame do analysts worth ringing up in advance to ask them if they would like a copy (send it have? anyway) and to outline the key arguments. If you can get their attention Most financial analysts have a at this stage, it is more likely that they reputation for having a rather short-term will at least skim through the report focus – a reputation that is generally when it arrives on their desk and, if justified. One reason is that analysts are sufficiently interested, read it in full.

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Follow this up with calls to a few management of a company is already specific analysts. Ask for a meeting. If facing criticism, accentuate this in your you can get one or two individuals on report, if it is connected your side, the institutional pressure on with the issues of concern. analysts to retain the respect of their Conversely, if the Some pension funds peers will work in your favour. Those management is highly now recognise that who are persuaded by your arguments respected, your line of projects which won’t want to lose credibility with their criticism must be carefully colleagues – and will be anxious to worded, if it is not to seem damage the persuade others of the merits of your naïve. environment or case. Let them do your work for you – You should also cause social unrest having an analyst put your arguments to familiarise yourself with can affect the other analysts will have more impact how the company’s share than if you do it yourself. performance of an price has performed over investment and the previous year or so as this will tell you how the hence its returns. market views the stock. Presenting your Knowing the ups and downs of the share price will also give you an idea of how research to angle your comments about the company (for example, don’t say a The information-rich environment in company’s shares are overpriced if the which analysts work has consequences share price has fallen in value by some for attempts to communicate with them, 50% over the previous months). whether in writing or orally: Make sure your facts are right. Any errors will rapidly lose you credibility Timing and severely undermine your case. Make your reports clear and to the The pattern of corporate reporting and point. the analysts’ research timetable has While excessive exaggeration is implications for any attempt to engage counterproductive, a clear, blunt view is appreciated, as is a concise summary analysts. It is probably not a good idea, with the main points in the argument. for example, to ask for a meeting in the Tabloid-style journalism is often popular run-up to a company announcing its in the financial markets. annual results or just afterwards. (Of Don’t tell analysts things they course, if your campaign has identified already know. an immediate “scoop” which will affect Focus on angles that are new and the results, then contacting analysts at different. this period could be very effective.) Picking a time that is relatively quiet for analysts makes it more likely that your Do your preparation research will be read. But for new share issues and projects, it is vital to get in Find out as much as possible about early. Once a share issue has been analysts’ current views of the target formally announced, it will be much company. This can be done via a press harder to influence the outcome – search or by contacting analysts directly particularly if the lead bank managing and will help you pitch your approach to the issue has guaranteed the success of them. For example, stress any existing the issue by agreeing to buy any unsold concerns analysts may have: if the shares.

85 The Campaigners’ Guide to Financial Markets INSTITUTIONINSTITUTIONALAL INVESTINVESTORSORS

The bulk of the world’s investments and institutional investors are investing: companies are held by individuals, consequently, those who may have although most people are not even concerns have not demanded a say in aware of their holdings in a company. how that money is invested. Second, One reason is that the bulk of shares are even when they are aware of the role of not bought by the individuals institutional investors, many individuals themselves but by various institutional have not been too concerned about how investors acting on their behalf. Anyone their investments are managed, provided with a pension scheme, for example, they yield results. And, finally, as will make (or their employer will professionals, institutional investors make) monthly payments to an insurance have traditionally been very resistant to company or pension fund: the monthly any interference in their investment payments are then invested in the decisions, assuming that they know best financial markets by professional fund and disliking any questioning of their managers in order to generate sufficient judgement. capital to pay out a pension at some point in the future. Institutional investors have huge sums Types of institutional of money to invest and consequently wield enormous power in the financial investors markets. How they respond to any particular issue largely decides its There is a wide range of organisations outcome. If they like the look of a new involved in institutional investment, and company, it will get the backing it the interactions between them can be needs: if not, it won’t. If they decide to complex. One useful distinction is sell an existing holding in a company, between investment institutions and fund others are likely to follow. If they managers (in some countries, fund support a controversial take-over, it managers are also referred to as “asset will go through. managers” or “investment managers”): As these institutions own shares on Investment institutions behalf of millions of ordinary citizens These typically gather funds for (most probably including you, if you investment, hold them on behalf of live in a Northern industrial country), it investors, organise payments back to would seem reasonable to expect them investors, and generally deal with to be accountable to their investors, to administration and marketing. Examples include pension funds and life insurance report on how they are investing their companies. money, and to discuss their concerns with them. In practice, however, this is Fund managers far from the case. These are the organisations and people that actually decide which companies to There are a number of reasons for this. buy and sell. In some cases, fund First, most individuals are simply managers are employed directly by the unaware that it is their money which investment institution whose funds they

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are investing – this is typically the case billion) or more in the UK. The UK with life insurance companies. In other pension market had total assets of cases, they may manage funds on behalf around $1,450 billion at the end 1999; of an investment institution on a contract in the rest of Europe, pension funds total basis (usually called a “mandate”). around $2,200 (about one-third of which This distinction between investment is in Dutch pension funds). institutions and fund managers is In the US and the UK, important because the two organisations pension funds are have different goals and motivations and controlled by “trust thus different pressure points. We shall law” – this means that In temperament, the deal with fund managers in the following they are supervised by directors of a life Part; here we focus on the main trustees who have a investment institutions. insurance company tend legal duty to ensure that to be more willing to the pension fund is properly run, although take risks than ordinary What are the main they themselves are not business people. involved in its day-to- types of investment day management. Trustees have traditionally been institutions? appointed by the sponsor, although new legislation in the UK means that some There are three main investment are appointed by the beneficiaries. institutions: occupational pension funds, life insurance companies and retail A key feature of trust law is that the investment organisations. money has to be invested in the best interests of the beneficiaries – and this Employer-based pension funds is usually taken to mean in their best Pension funds collect and invest financial interests. The principal duty of employees’ retirement savings. Most trustees dates back to Victorian times: large companies have pension funds, as namely, to invest as a “prudent man” do other major employers such as (sic) would if investing on behalf of governments, municipalities, others. (Women were not considered partnerships (such as accountancy firms) “prudent” in Victorian times, even and unions. Sometimes pension funds are though they were held responsible for organised on an industry-wide basis by a household management. Today, there are number of employers. The pension fund still few women pension fund trustees, is legally separate from the employer (or although many women work on the “sponsor”), but the employer has operational side.) Trustees can be held substantial responsibilities regarding its personally liable if they take actions management. These include an which are not in the best interests of obligation to make regular payments into beneficiaries or if they act in an the fund and to underwrite any shortfalls. imprudent manner and a financial loss results. Not surprisingly, trustees are Most large pension funds are in the US, very cautious, often seeking to leave the UK and The Netherlands. Pension decisions to their advisors (for example, funds are much rarer in the rest of their fund managers) or simply going Europe (although Sweden, Switzerland along with what they deem to be the and Denmark have fairly large pension market “consensus”. fund assets). The biggest pension funds have assets worth up to $100 billion or Many pension funds have argued that the more in the US, and £10 billion ($14 “fiduciary responsibilities” laid down

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under trust law prevent them from have a membership largely made up of taking account of the social, ethical or existing pensioners, whilst others have environment implications of their members who are fairly young) and in investments. But recent changes to the how well funded they are relative to law are likely to make pension funds their liabilities. While most pension more open to considering social, funds use external managers, some of the environmental and ethical issues. In the large funds have their own in-house UK, pension funds now managers. have to disclose their Fund managers are investment policy in a One key distinction between the under great pressure “statement of investment different pension funds is in sponsor type. Some funds are public sector to maximise returns, principles” and a recent regulation requires this funds, backed by local authorities, not only because this statement to disclose “the municipalities or states, whereas others benefits profits but extent to which (if any) are backed by companies. In addition, because high social, environmental there are some funds which do not fall and ethical issues are into either category – being backed by performing funds win taken into account.” partnerships, industry bodies, trade new business. unions or charities. The public sector The new regulation has funds include some of the largest encouraged pension funds pension funds in the world, such as to reconsider their past CalPERS (the Californian Public approach. Most commentators now Employee Retirement System) and the agree that there are no significant legal large Dutch funds ABP and PGGM (for obstacles to the adoption of SRI local authority workers and health policies. However, major cultural workers respectively). More barriers remain. That said, there is now importantly, the large public sector a growing recognition that the funds tend to be the most active on shareholder-voting rights enjoyed by social and environmental issues, and pension funds are valuable assets of will probably be the most likely to pension funds and that they should be respond sympathetically to a campaign. used actively and responsibly. Individual pension fund holders are In the UK, the Local Government also becoming increasingly critical Pension Fund Forum has been active in about how their money is being organising local authority pension funds invested, adding to the pressure on to take an active approach on pension funds to consider the broader governance issues. The Forum has implications of their investments. worked closely with Pensions Finally, some pension funds now Investment Research Consultants recognise that projects which damage (PIRC), a specialist adviser on the environment or cause social unrest corporate governance, and is often can affect the performance of an prepared to take a stand on social and investment and hence its returns. Taking environmental issues. account of the environmental and social consequences of an investment would Life insurance companies thus appear to fall within even a limited interpretation of the fiduciary Life insurance companies offer a range responsibilities of trustees. of financial products such as pensions, life insurance and savings products. For Pension funds are not particularly life and pensions products, they homogenous – they vary in size, in typically expect regular payments or investment approach, in maturity (some “premiums” which they invest in the

88 The Campaigners’ Guide to Financial Markets stock market, hoping to make a good positive changes return. Some products are managed “on underway. Some life Many financiers view balance sheet” – that is, the life insurance companies have insurance company itself undertakes to been involved in the campaigns as a pay its customer and invests on its own ethical investment challenge to their balance sheet to meet this obligation. industry for many years judgement: hectoring Other products are managed by an (although this has them about insurance company on behalf of normally involved only a customers (and thus are effectively off small proportion of their “sustainability” is balance sheet). Further complications total assets under likely to trigger a arise with some of the on-balance-sheet management). defensive reaction. products. In some cases, a guaranteed Increasingly, these life fixed pay-out is provided (with the life insurers are now applying insurance company taking all the risks an activist shareholder approach across and rewards); in other cases, the all their funds, dramatically increasing company shares some of the rewards the potential for shareholder activism. A above a certain level (“with profits”) number of other fund managers, new to with customers. SRI, are following suit. Some have signed up to the United Nations As well as pure life insurance Environment Programme’s (UNEP) companies, there are a number of “Financial Institutions Initiative”, which “composite” insurance companies that has an asset management sub-group. provide both life insurance and general insurance (for example, motor insurance For campaigners seeking deeper reform and home insurance). Note that even of the industry’s investments, a key general insurance companies are fairly pressure point lies in the need for life major investors in the stock market, insurance companies to maintain a high since they invest their premiums before consumer profile in order to sell their paying out on claims. policies. Most life insurance companies Most large UK life insurance companies are very brand-conscious, spending are listed on the UK stock exchange, but large sums of money to promote a some are owned by their members as positive corporate image. As a mutual societies. All have a board of consequence, they are sensitive to directors. The majority of life insurance adverse publicity. companies employ in-house fund In the UK, for managers, who will often form a example, several Many pension funds have separate department of the company. The insurance companies argued that the “fiduciary life insurance industry is consolidating have improved their responsibilities” laid down rapidly worldwide. The biggest life ethical investment under trust law prevent insurance companies have assets performance upwards of $100 billion. The UK life following poor them from taking account market may be worth around £1,000 ratings in Business in of the social, ethical or billion (£1,400 billion). the Environment’s environment implications While insurance companies are not as annual Index of constrained by the law as pension funds, Environmental of their investments. they are under a general obligation to Engagement, which invest prudently in the interests of reviews the investment portfolios of customers and shareholders. major UK companies, publishing Historically, they have been rather comparative tables that rate ethical and cautious when it comes to social and environmental performance. Those life environmental issues. But there are some insurance companies listed on the UK

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stock exchange are also likely to be sensitive to any evidence that they have Who’s Who in the failed to comply with the Exchange’s various codes of conduct on reporting institutions and accountability. Pension funds Ultimately, all Retail investment Pension fund trustees are not financial investment professionals; they are generally leading companies gauge organisations members of the businesses whose funds their performance In the UK, the most are managed by the trust or, in some common form of retail cases, independent “wise heads” with by bottom-line investment organisation is backgrounds in industry or local profit. the Unit Trust (or, government. Pension fund trustees are, increasingly, the “OEIC” in an almost legendary sense, older, – that’s an “open ended experienced and usually very investment company” ). conservative. They typically have only a limited amount of time to spend on the Known as “mutual funds” in the US, pension fund, and so will look to others unit trusts are effectively collective for help and guidance. investment funds: rather than buying shares for themselves, members of the A key figure in a pension fund is the public purchase “units” in a pooled “pensions manager”, who handles the fund, which is managed by the unit trust administration of the fund. The pension company. manager’s responsibilities generally include acting as secretary to the When purchasing their “units”, trustees and bringing issues of concern members of the public have to their attention, in addition to considerable choice as to the markets in organising the panels which appoint which they would like to see their fund managers and consultants. The savings invested, influence of the pension manager is thus although the detailed considerable: indeed, in most pension Given the liabilities choice of which funds, progress on social and company’s shares to that pension fund environmental issues has generally been buy is left to fund driven by a proactive pension manager. trustees risk, their managers. primary measure of Pension managers tend to be drawn from Most retail investment senior management and are typically “success” is to organisations have a based in the finance or personnel manage assets range of funds on department, although they are not offer, ranging from the generally involved in the “front line” of prudently and to relatively general avoid being sued. business. They usually have a reputation (“domestic equities” for being “a safe pair of hands” and will or “balanced”) to the be methodical and conservative. In some specific (for instance cases, they may be a senior manager “technology” or “US equities”). Indeed, who has been moved sideways into the the total number of retail funds runs into job; in others, they are people who have thousands worldwide. (It is probably made a career in pensions (note that larger than the total number of listed there are professional qualifications and companies.) professional bodies for those working in The UK unit trust market is worth the industry). Often, pension managers several hundred billion pounds, the US may have several staff working with some two trillion dollars. them, usually in administrative roles but

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Organising a shareholder resolution The Balfour Beatty campaign in the UK by Kate Geary,,, Ilisu Dam Campaign, and Hannah Griffiths,,, Friends of the Earth

n 1997, the UK firm Balfour Commission on Dams, an In the UK, approximately a Beatty became lead civil internationally credible body set third of institutional investors engineer for the consortium up with the support of industry, now have some form of planningI to build the Ilisu dam NGOs, government and socially responsible in the Kurdish region of development bank investment. This made it Southeast Turkey. The representatives. The WCD’s easier for us to draw up a list company has applied to the seminal report was published in of key investors to approach, UK and US export credit November 2000. The guidelines, as several of those with agencies to back its if implemented, would rule out “Socially Responsible participation in the proposed the Ilisu project, prevent Investment” (SRI) teams also dam. company participation in other had holdings in Balfour Beatty “Ilisus” in the future, and – ranging from below 1% to Ilisu has recently become one improve wider corporate 7%. These we called the “A” of the most controversial practice. list – investors whom we planned dam projects in the would meet in person; the “B” world: it would affect up to Friends of the Earth had written list were those investors 78,000 people, the majority of to Balfour Beatty earlier in the without SRI policies, but with them Kurds, in an area which year, asking the company to major holdings in the is under State of Emergency adopt the WCD guidelines as company, whom we would rule; flood an area of over 200 company policy. The response either meet or inform through square miles, inundating a from the company was a personal letters and briefing number of internationally resounding “No” which was why documents. important archaeological sites, FOE and other Ilisu campaigners including Hasankeyf, a city decided to submit a resolution. We made appointments with dating back 10,000 years; and the “A” list investors, taking threaten relations between From the start, we never along a draft of our resolution Turkey and its downstream expected to win the resolution: – both so that they could feel neighbours Iraq and Syria over this would have meant that over some ownership of the the water resources of the 50% of shareholders agreed process and to solicit advice river Tigris. An international with us about the problem and on its wording. We also campaign is targeting both the about the exact nature of the provided documents to back export credit agencies – from solution. In fact a report by up every argument we made – eight countries including the Friends of the Earth rather than expecting the SRI US, UK, Switzerland, Italy and International points out that no teams to do their own Germany – and the companies social/environmental resolution research – to convince them involved. has ever gained majority of the merit of our resolution. support. The objective was Our main arguments centered rather to send a clear message around the risks to Balfour Planning for Balfour to the company that it must Beatty’s reputation posed by change its ways, that some the many controversial Beatty’s 2001 AGM investors were concerned about projects, including Ilisu, in the company’s activities, and which the company was that change was both possible involved and our opinion that In the UK, the Ilisu Dam and made good business sense. Campaign has organised the company had insufficient numerous protests against structures and policies in place Balfour Beatty’s involvement in Talking to institutional to manage those risks. Ilisu: writing letters, holding This emphasis on reputational demonstrations at its offices, investors and therefore financial risk, and attending the company’s rather than moral arguments, 2000 annual general meeting was crucial for communicating (AGM). For Balfour Beatty’s The first task was to identify an up to date list of major our message to investors for 2001 AGM, the Ilisu Dam two reasons. First, it enabled Campaign and Friends of the institutional investors in Balfour Beatty. We did this through a SRI teams to put the issues to Earth undertook a wider their respective fund strategy of shareholder search on a financial database – although institutional investors managers and analysts in activism, centering on a language which made sense to shareholder resolution. could have been identified through web searches of sites them. Second, the argument The resolution called on the which give details of the largest that the current operating company to adopt the shareholders in profiled policy is financially risky guidelines of the World companies (see p.137). enabled us to show investors

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that, unless it changed, Balfour Beatty was over £1) but disadvantage of more paper Balfour Beatty could be constitutes the set value of the work in the form of setting up jeopardising its future profits company’s shares. an account with the broker, – and important consideration but has the advantages of by- given that companies are We now had two tasks: finding passing the bank and of being required by UK law to 100 shareholders and finding able to sell the shares back maximise returns for their 20,000 shares. through the broker when they shareholders. are no longer required. Buying shares A temporary glitch How to transfer shares Friends of the Earth bought 20,000 shares in its name. In We thought that our resolution addition, 500 shares were If you have a block of shares, would be eminently bought in the name of Kate you should aim to transfer reasonable in the eyes of Geary, the Ilisu Dam Campaign’s them to individual supporters investors, as it certainly was co-ordinator – to be well in advance of the AGM – very reasonable in our eyes. transferred to individuals later at least three months Given this “reasonableness”, on. This works out much beforehand. Contact the we had expected that one cheaper than buying shares company’s registrar, who will institutional investor would individually as you only have to be listed on the company’s propose it – a formal proposal pay the commission once. web-site or annual report, and being a prerequisite of having ask for the required number the resolution tabled for the Many banks, such as Lloyds TSB of “stock transfer forms”. You AGM. and HSBC, have branches with will need the full name, title “share shops”, where you can and home address of each We very quickly learned that go in and purchase shares in a this was too much too soon – transferee. Fill in the forms company. It is worth checking according to the instructions, that for an investor to with the local branch first. propose a resolution, without writing “L” in section 14 which Others have “share lines”, which denotes that you are “gifting” first having a long and allow you to buy shares over involved dialogue with the the share for free (if you the telephone. All banks charge charge for shares, you may be company, was the equivalent a commission on the sale, which of, as one investor put it, liable for a £5 stamp duty per varies according to the number share). Each share must be “pressing the nuclear button”. of shares bought. A shareholder resolution, from individually transferred. Send the perspective of institutional To buy 500 shares in Balfour the forms, together with the investors, is a tool to be used Beatty, we rang Lloyds share original share certificate to when all other forms of line (0870 6088600). We wanted the registrar. The transfer communication and liaison to buy shares on behalf of the process will take around two with the company have failed Ilisu Dam Campaign – but it was weeks. to produce a satisfactory only possible for a private result. individual to buy shares so Kate Geary completed the process in Proposing the resolution Undeterred, we decided to her name. propose the resolution ourselves, which meant buying There are two stages: We identified over 100 would- a substantial number of shares registering, then purchasing. To be proposers of the in the company. Under the register, the bank takes bank resolution. The format that Companies’ Act (sections 376 and personal details then gives the proposal takes is dictated and 377), the rules for a client reference number and either by the company’s proposing a resolution state quotes the cost of the shares, th articles of association or by that one needs either 1/20 their commission (in this case the requirements of the of the votes (in Balfour £25) and the stamp duty company’s secretary. In our Beatty’s case representing 20 (£2.50). We approved the case, each proposer had to million shares) or 100 charges and were then passed submit their proposal on shareholders with an average to a broker to complete the paper in the same format. shareholding of £100 each. We deal. The price of the shares chose the latter option, which and of the deal is set from that We wrote to every individual meant that we could have the moment – although the form- proposer, enclosing a copy of resolution endorsed by 99 filling and payment has not yet the resolution with a section single-share shareholders and been done. Within the week, for them to sign, date and fill one 20,000-share shareholder. we’d received forms to fill in in their share certificate and an invoice for the shares number, to be returned by A word of caution here: this and charges, which we paid by ready-stamped, self- “average shareholding of cheque. It took about six weeks addressed envelope. Luckily, £100” means £100 of ordinary for the share certificate to 114 people returned their shares (in Balfour Beatty’s case arrive. signed forms in time! valued at 50 pence each). This value does not necessarily To buy 20,000 shares, Friends We now had enough shares correspond to the market of the Earth went directly and endorsements to be able price of the shares (which for through a broker. This has the to propose the resolution.

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The Companies Act states that document to the resolution text unions – UCATT (construction resolutions must be submitted and our own statement in order workers) and RMT (railway at least 6 weeks in advance of to save postage and printing workers) – the Campaign the company’s AGM. However, costs. against Tube Privatisation and it was important to liaise with protesters against the UK’s the company secretary well in Whether or not you must meet first toll motorway in advance of this deadline to printing and distribution costs Birmingham, in which Balfour ensure that everything ran for your resolution appears to Beatty is involved. In order to smoothly. There were two be at the particular company’s ensure that these groups were main considerations. The first whim – for example, BP covered able to present their concerns was to make sure that the all costs of a resolution by the at the AGM, we transferred wording of the resolution Free Tibet campaign itself. shares to representatives from contained no facts which the the different campaigns. company could contest. In this case, Balfour Beatty were Targeting investors concerned about our The AGM resolution’s mention of In the final weeks leading up to corruption allegations in the AGM, we wrote again to all Immediately prior to the AGM, Lesotho against a consortium investors – “A” and “B” list – over 100 protesters unfurled of which Balfour Beatty was a enclosing our final resolution banners and showed spoof part and wanted us to remove and a detailed briefing arguing share certificates (reading this reference. Following our position. We had honed the “Balfour Beatty – One Share in contact with lawyers in content of the briefing over the 78,000 forced evictions, Lesotho we clarified the past couple of months, oppression of the Kurds, situation and were able to choosing the arguments and environmental destruction and include a slightly amended facts which had seemed of most construction worker deaths”) reference to the case. interest and concern to outside the hotel where the investors. The second consideration was AGM was held. This photo to make sure the resolution We also specifically targeted a shoot was covered by major was submitted in time to be group of major investors we national media. circulated with the company’s had not dealt with before: local Shareholders then entered the annual report and other authority pension funds. These AGM. The first hour was information for the AGM. funds are often invested in a dominated by questions on a Under the Companies Act, the range of FTSE 100 companies, wide range of issues – from proposer can be obliged to so it is likely that many will have bribery and corruption charges pay for all the costs of holdings in the company you in Lesotho and the United submitting a resolution (which are campaigning against. We States, to the company’s would include printing and used a two-pronged approach: human rights and postage costs). However, we wrote directly to every local environmental policies, to the Balfour Beatty agreed to authority pension fund in the Birmingham Northern Relief include the resolution country (almost 100), enclosing Road and the company’s document with the annual a briefing and the resolution, responsibility for the Hatfield report which meant that there and to our own supporters, train crash in the UK, which were no extra mailing costs. asking them to send letters to saw four passengers killed. We paid for the printing of the their local authority, asking the The chair finally brought this entire document (including latter to support our resolution. Balfour Beatty’s counter session to a halt after an hour statements) and this came to We also produced a “spoof” and a half with many £2,500 for 23,000 copies. annual report – Balfour Beatty shareholders still wanting to counter-report 2000, Balfour question the board over a Under the Companies Act, as Beatty’s annus horribilis – copy- range of issues. well as the text of the catting the company’s own The second session of the resolution itself, proposers are annual report. The report meeting was devoted to a allowed to provide a highlighted key controversial debate on the resolution and “supporting statement” to projects – including the Ilisu to concerns over Ilisu. Charles explain to shareholders the dam – in which the company Secrett, director of Friends of argument for supporting it. was involved and argued that the Earth, opened the The resolution and statement Balfour Beatty lacked a coherent questioning. He warned the must total under 1000 words. strategy to manage reputational board that corporate It is worth having a lawyer risks. We used the report to responsibility was an issue that check this text, as we did, to brief the media, institutional would not go away, indeed ensure no fact or argument investors and shareholders. could be considered libelous. that it could only become ever Balfour Beatty also submitted a One of the arguments we had more prominent. The only way statement against the made in our briefing for for Balfour Beatty to protect resolution and this was investors was that Balfour Beatty its reputation and its included in our document, was involved in a whole range profitability in future would be making it an 8-page booklet. of controversial projects – not for the company to take real If necessary, we could have simply Ilisu. Indeed, the action over such controversial limited the contents of this campaign was supported by issues and to support

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Resolution 15 by adopting the company’s directors that all was moving in the right direction, WCD’s guidelines. not well. “Abstentions should might ultimately result in them usually be read as shareholders feeling able to support or Apparently startled by the who sympathise with the even propose a resolution. To strength of the campaign resolution but don’t want to go have had the resolution against the Ilisu dam, Lord the whole hog,” commented brought by an institutional Weir, the company chair, told Pensions Investment Research investor would have increased the AGM, “If we had known Consultants, which advised the likelihood of others how controversial this project clients to support the backing it, or at least would be we could have saved resolution. This fits well with abstaining. ourselves a lot of trouble by our earlier realisation that not taking part in it . . .” supporting a resolution is a Our planning succeeded in last-ditch method of setting a tight but achievable engagement for institutional timetable: to transfer shares, The vote investors. build support, propose the resolution on time and plan Although the resolution was for a successful AGM. Anyone When the vote on Resolution defeated, a strong warning was embarking on a shareholder 15 was announced, it emerged delivered to Balfour Beatty’s action would be well advised that 14 million votes had been board of directors – over 40% to draw up such a timeline, cast in favour of the resolution of their shareholders were marking major deadlines to and 75 million votes cast unhappy with their current meet. against. policies on dam-building. But A further lesson lay in the But the story of the vote did this warning was delivered at least as strongly during the content of the resolution not end there. Later on during itself. We tried to keep our the day of the AGM, Balfour weeks and months leading up to the AGM as Balfour Beatty resolution neither too broad Beatty announced that there nor too narrow. Too broad had been a mistake in the had to justify itself to its key investors, all of whom met or and there would have been voting. The abstentions stood, plenty of room for but three institutional corresponded with the company before the AGM. misrepresentation; too narrow investors who had supported and investors would not have our resolution had made a One the day of the AGM, been interested – focusing on mistake, having accidentally Balfour Beatty put out a press one project, such as Ilisu, ticked the wrong box on the release, stating that the would have been interpreted polling form. The errors, said company “has committed itself as attempting to “micro- the company, had emerged to taking the WCD principles, manage” the company. (For following telephone calls from criteria and guidelines into further advice on wording Balfour Beatty’s company account in determining whether resolutions, see p.68). secretary to the fund and how it should be involved managers in question. The in any future hydro-electric Finally, bear in mind that the votes of the three institutional projects”. This is a long way more you can prepare the investors were therefore from the company’s response ground for investors the changed. to FOE’s original letter urging better: by engaging with the company and preparing The final results were that the company adopt the WCD guidelines. How the new financial arguments to back up 3,416,218 votes for the your case – with the facts to resolution and 102,211,464 commitment manifests itself in practice remains to be seen. support them – the more votes against, with an likely it is that you will secure estimated 73,096,424 investor support for your abstentions. The result resolution. Prior engagement compares with one of the Lessons learned with the company is also most successful shareholder critically important for actions ever in the UK, reassuring investors that your brought by Greenpeace The most important lesson we learned involved timing: we campaign is sincere in trying against BP in 2000, which saw to persuade the company to 45% abstentions. only began our shareholder strategy in January for an AGM change. For the Board to “fail to win in May; ideally we would have Kate Geary and Hannah Griffiths the support of more than 40% prepared for a year. This would of institutional shareholders”, have had the advantage of Copies of the Ilisu Dam Campaign’s in the words of the Financial giving institutional investors the Balfour Beatty counter-report 2000: Balfour Beatty’s annus horribilis can Times, was a major blow to time to talk to the company, to be downloaded in pdf format from Balfour Beatty. Institutional work through their own www.ilisu.org.uk . Or write to Ilisu investors who abstained sent a processes of engagement Dam Campaign, Box 210, 266 clear message to the which, if the company was not Banbury Road, Oxford OX2 7DL.

94 The Campaigners’ Guide to Financial Markets sometimes with specific responsibilities for investments. These staff can be worth What are their contacting. In some organisations, pension managers are very senior success factors? officials – within local authorities in the UK, for example, the director of finance Pension funds or county treasurer takes responsibility Given the liabilities that pension fund for pensions. trustees risk, their primary measure of “success” is to manage assets prudently and to avoid being sued. This tends to Life insurance companies make pension funds more conservative Life insurance companies are governed than other financial institutions. by a board of directors, with a chair and Prudence apart, there is a desire to chief executive. The directors are likely ensure enhanced returns so that to have extensive business experience, improved benefits can be provided, or and, in most cases, to have spent much of the cost to the sponsor reduced. Such their working life in finance. Individual increased returns, however, need to be directors will have responsibility for achieved without incurring excessive areas such as investments (the Chief risk. Other considerations, specifically Investment Officer) and marketing (Head “doing good”, will be very much a of Marketing). tertiary objective. In temperament, the directors of a life Efforts to encourage pension funds to insurance company tend to be less invest more ethically are thus likely to aggressive than many financiers but come to little unless campaigners can more willing to take risks than ordinary reassure trustees and fund managers that business people. They are typically less “doing good” would not be at the egotistic than, for example, analysts, and expense of increased risk or lower more open to new ideas than middle financial returns. management. Ultimately, however, they know their own minds and have confidence in their own judgements. It Life companies and goes without saying that they will be retail investment organisations very busy. Life insurance companies and retail fund management institutions are businesses; Retail investment organisations their ultimate measure of success is profits and increased shareholder value. The heads of retail fund investment Fund managers are under great pressure organisations are likely to have a similar to maximise returns, not only because profile to the heads of life insurance this benefits profits but because high companies. If there is a difference, it performing funds win new business. will be that retail fund managers tend to High returns, however, are only part of be more aggressive, possibly younger the picture. and generally closer to investment banks and analysts. Similarly, but with more Success is also measured by the positive implications for campaigners, increased volume of sales, which in turn their business is more volatile than that places a high value on the ability of life of insurance companies, placing them insurance and investment companies to under greater pressure to maintain their market themselves effectively. This reputation for financial competence. leads to a concern with image that

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campaigners can use to their advantage. that they take up large amounts of management’s time, in addition to Reducing costs is also an important creating insecurity amongst staff. For consideration for life insurance and campaigners, this can mean fewer retail investment organisations. One opportunities to engage with result has been a substantial numbers of management over the impacts of a mergers and acquisitions, as companies company’s investment policy. Not only attempt to capitalise on available are staff too busy to discuss such economies-of-scale. concerns, but the prospect of losing their A major drawback of such mergers is jobs makes them disinclined to do so.

Questions to fund managers

ngagement can be rather · What research is conducted · engagement? intangible. How can in house? What is bought in? · How substantial are these external stakeholders changes? knowE that fund managers really are making good on Outputs: · What other signs of change in the corporate sector are their commitments to engage What engagement work is with the companies they What engagement work is · linked to engagement invest in? How do they do carried out? activity? performance measurement for · How well substantiated are engagement? · Which issues does the fund claims of engagement There are four different manager cover under its SRI success? categories within which to · policy? Does it cover · What is the fund manager’s measure engagement success: international development most significant SRI inputs, outputs, outcomes, issues as well · achievement over the last transparency. NGO’s may wish · as environment and year? to consider the following corporate governance? kinds of questions to fund managers to test their · How many companies are Transparency: commitment to engagement: contacted? · How intensive are contacts? How clear is the · How many specific requests communication of Inputs: are made for change? · Are any substantial projects engagement activity? What resources and undertaken? thinking go into the · Are investors included in major debates and initiatives · How detailed is the fund manager’s reporting of engagement process? · undertaken by government, NGOs, trade associations etc? · engagement activity? · How much money is spent? · Are any exceptional · How frequent? · How many staff are strategies employed, such as · How well substantiated is it? involved in the process? AGM · What levels of qualification · attendance or shareholder This list of questions is reproduced and experience do they resolutions? with permission from Just Pensions: have? Socially responsible investment and · Are SRI issues dealt with by international development – a guide a separate unit or Outcomes: for trustees and fund managers. integrated Just Pensions is a joint project of How successful is the War on Want and Traidcraft · into each analyst’s/ Exchange. The guide can be manager’s brief? engagement process at downloaded from · If there is a separate unit, achieving its objectives? www.justpensions.org . For how are its further information contact: Just Pensions, 37 Great Guildford Street, recommendations and London SE1 OES. Email: findings used by the rest · How many companies have [email protected] . Tel: 0207 of the house? changed following 620 1111.

96 The Campaigners’ Guide to Financial Markets FUNDFUND MANMANAAGERSGERS

Fund managers are the investment Most independent fund managers are “experts” whose job it is to manage parts of banks (whether investment money for institutional investors and banks or commercial banks), although their clients. As stated earlier, most life they normally operate as separate insurance companies and retail divisions. This can create conflicts of investment groups, together with some interest (for example, if the bank is large pension funds, employ their own advising on a deal concerning a “internal” fund managers to invest their company the fund manager invests in), money. Pension funds and foundations, although various laws and rules aim to by contrast, generally prefer to use minimise problems. For campaigners, “external” or “independent” fund such conflicts of interest present both managers. To complicate the picture, obstacles and opportunities. On the one some “internal” fund managers may also hand, the investment arm of the bank manage money from other institutional may be reluctant to support your actions investors – acting as both internal and if doing so would create internal strife. external fund managers. On the other, it may be particularly sensitive to accusations of conflict of Some fund managers specialise in a interest, enhancing the opportunities for particular market – for example, highlighting potential damage to the emerging markets or technology stocks – company’s reputation. although most cover all stocks. They may also have particular target markets In investment terms, the kingpin in the – some primarily focus on individual fund manager hierarchy is the Chief retail investors, for example, while Investment Officer (CIO), who is others focus on institutional markets. The responsible for the overall investment amount of money managed by a fund strategy of the fund managers within a manager can vary considerably: particular company. For instance, it is specialists may be responsible for less the CIO who decides what markets and than one billion dollars, while the fund what sectors are invested in, with what manager of large funds like Barclays type of investment, as well as the Global Investment, Fidelity and Credit process and investment style of the fund Suisse may have several hundred billion management organisation. These dollars at their disposal. decisions make a huge difference to the fund’s performance. External fund managers are nearly always seeking to win new business – The CIO usually reports to a Chief for example, by tendering for Executive Officer (CEO), although the “mandates” from pension funds and CIO is often a member of the board of others. This is a formal process in which the fund management organisation as the pension fund says what it wants, the well, and nearly as powerful as the fund managers say why they think they CEO. Reporting to the CIO are the would be good at doing it, and the section heads responsible for particular pension fund then selects the fund types of investment, such as head of US manager it thinks would best handle its equities, head of bonds, head of investments. emerging markets, and so on. In

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addition, an investment former analysts or investment bankers. Life and pension strategist or chief Some fund management organisations economist advises on encourage “star personalities” – the companies often investment strategy and Nicola Horlicks of the City or the respond to hints that economics. Individual Warren Buffetts in the US – but most negative publicity may fund managers in turn prefer a less flashy, team approach in arise if they ignore report to the section order to reduce risks and ensure a heads. Supporting the degree of oversight and control. your issue. They are individual fund driven by their managers will be a reputation. number of analysts (see p.80), although in some What are their organisations fund managers conduct some of the analysis success factors? themselves. Finally, “risk management Fund managers and their organisations specialists” are responsible for are judged by their market analysing the risks of the various “performance” – how much money portfolios and for ensuring that there they’ve made for their clients, and how are adequate controls on the fund. much profit and business they’ve generated. Usually, fund managers are given a brief by their companies to Who are they? manage their clients’ money against a particular index, like the FTSE All Share, the Morgan Stanley Capital Fund managers, particularly senior International World Index, the Standard ones, are typically older and more & Poor 500 or some other specialist established in their company than benchmark. If the funds they manage do analysts or investment bankers. They better than these indexes, then the fund are not as ego-driven or as entrenched manager’s star rises. If not, it falls. in their views as analysts tend to be, but Companies may also measure the nonetheless are very self-assured and performance of fund managers against confident – you couldn’t invest millions that of their peers; given the on behalf of others if you didn’t believe competitiveness of fund managers – and in your decision-making ability. Fund their desire to maintain their standing managers tend to move from company amongst their colleagues – this measure to company less frequently than of their performance is perhaps the most investment bankers; it is not unusual for important for fund managers themselves. the same people to manage the same fund for five years or longer (clients Other considerations also have a often like to see a solid track record bearing on the extent to which an and stability from their fund managers). individual fund manager is judged a “success”. Of these, the most important Fund managers are paid well – not as is the level of risk that fund managers much as investment bankers or analysts incur when managing their portfolio. but nonetheless well – and the top Fund managers are not necessarily people earn millions. Their work load praised for having taken big risks to is less than that of investment bankers – make big investment returns for their fund managers can usually get home at a clients because there’s always the reasonable hour – but in many respects chance the investments could have done their responsibilities are more onerous. very badly. Investment portfolios are By background, fund managers are often therefore carefully planned and

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“spread” across companies and markets on external factors, to reduce risk. they are quick and It is highly unlikely that Fund managers report directly to their happy enough to do so. fund managers will be large institutional clients about what they persuaded to surrender have done with their money. An investor Large institutional holdings of blue-chip will want to meet the person in charge of portfolios are usually managing his or her money at the reviewed quarterly, stocks. quarterly meetings held to discuss their although investments investments, not some “schmoozer” from are seldom switched the marketing department. Furthermore, from an under-performing fund as fund managers invariably have some management organisation after a single bad periods, they will be expected to quarter. But if the under-performance explain clearly why things have gone continues for, say, three years, investors wrong and to reassure clients that they are almost certain to place the portfolio have been following the strategy they elsewhere. outlined when taking on the mandate. Fund manager organisations buy and sell Ultimately, all investment companies – securities in their portfolio – usually fund managers, life companies and unit equities, but also bonds or other assets – trusts – gauge their performance by and measure their results internally bottom-line profit. Good results generate every day. They also constantly monitor more clients, bringing more money to stocks and assess the performance of invest, and consequently more fees. But individual companies. Because most this pursuit of bottom-line profit is stocks are typically held for two to three tempered by other considerations. years or more, however, fund managers Companies will ask: What is the cost of rarely make more than one major generating new business? Are the fund investment decision in any given day. managers being paid too much? Is the company losing out to competitors who may be cheaper or working smarter? Are fund managers taking unjustified risks? Information overload Is the company’s investment portfolio Fund managers receive even more secure? Occasionally, they may even information than analysts. In addition to allow themselves a thought as to their keeping abreast of the financial press, reputation. they are also expected to read and digest a constant stream of market reports from brokers, analysts, strategists and firms Competition such as Reuters and Bloomberg whioch supply financial market information. While analysts work in an ego-based One of the first tasks of their day is to environment and compete for reputation, work out what they can safely throw into fund managers compete for business. the bin and what they need to scrutinise The investment decisions made by fund more carefully. managers are highly individual, reflecting the fund mangers’ own The information received is used to personal assessment of the balance of make “buy”, “sell” and “switch” risks and rewards: inevitably, fund decisions, often after daily in-house managers get blamed for below-par discussions of the performances of performances as much as they get markets and companies. Most fund praised for achieving pre-set managers – certainly those working for benchmarks. Unsurprisingly, if fund the bigger investment institutions – enjoy managers are able to blame poor results high-level (and relatively immediate

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The ‘Ethics for USS’ campaign

late 1999, the £22 comprehensive ethical and USS has then collected and billion Universities environmental investment sent to the USS Superannuation Scheme policy; to monitor the activities Management Committee. I(USS) – the UK’s third largest of the companies in which it In the three years since its occupational pension fund – invests; and actively to launch, Ethics for USS has announced that it would be encourage socially responsible generated the written support adopting a socially corporate behaviour. Pressure of over 4,000 lecturers, the responsible investment (SRI) would be brought to bear on AUT, four Vice-Chancellors policy, following a three-year companies through a range of and two government campaign by student groups tactics: from dialogue and and university staff around liaising with other investors to departments. the country. USS is the voting shares or proposing pension fund of 80% of shareholder resolutions. USS’s objections academic staff in the UK, Disinvestment, the ultimate USS’s objections including lecturers, option, would follow where technicians and researchers. companies failed to respond to Initially, USS was resistant to The fund has 158,000 USS’s shareholder pressure. The change, constantly throwing individual members and 290 campaign also insisted on the up objections even to the idea institutional members, need for USS to adopt of an ethical policy, stating including the UK’s 60 oldest institutional reforms that would that it would be illegal, universities. Despite its huge ensure transparency and unprofitable and unworkable. funds and the responsibilities accountability to its members, It was therefore important these entail, USS previously on whose values any USS policy before the campaign was had no substantive ethical should be based. Ethics for USS launched to have established policy guiding its investments. argue that such reforms are USS’s position and arguments Now USS has a formal necessary if any real change is via correspondence in order commitment to socially to occur. to challenge them effectively. responsible investment (SRI). To do this, the campaign drew on expert legal advice and the Tactics experiences of other groups, Demands including Pensions Investment Research Consultants (PIRC), The campaign has adopted four fund managers NPI and the UK main tactics to target key USS Social Investment Forum. Legal In August 1997, the student stakeholders: campaign group People & issues affecting pension funds Planet, concerned at USS’s Supporters have engaged in are uniform – there was no lack of ethical investment direct lobbying of the USS need for the campaign to standards, launched ‘Ethics Management Committee (its reinvent the wheel, repeating for USS’, supported by a Chair and 12 Directors), via research which others had Steering Committee of correspondence; already undertaken. leading academics. At the The campaign has targeted time, USS’s top holdings the bodies from which the USS also showed itself included British Petroleum, USS Directors are recruited, unsophisticated in dealing Shell, Nestle, AstraZeneca, Rio principally the academics’ with pressure, the media and Tinto, British Aerospace and union – the Association of Ethics for USS supporters. The British American Tobacco. The University Teachers (AUT); tone of USS’s responses was often patronising; as the campaign, which is still The campaign also directly ongoing, chose not to call for number of letters from USS approached individual Vice- members increased, its USS to disinvest immediately Chancellors, who, as from such companies; rather, customer services department employers, have far more resorted to sending out it adopted a gradualist influence than individual approach, pressing for USS to standard replies, refusing to members; and address specific concerns. adopt an active investment policy, based on the values of Student activists, who make From this, Ethics for USS its members, with USS using up the membership of correctly surmised that USS its shares “to exert pressure People & Planet, have individual members were on companies to clean up reached out to lecturers and considered less important than their act”. other USS members, its institutional members. informing them of the Whilst building grassroots Ethics for USS produced a issues, building their support support remained a vital focus proposal setting out what for the campaign and of the campaign, Ethics for such a policy would mean in mobilising them to sign USS quickly responded by practice. It called on USS to Supporters’ Statements and targeting USS institutional develop and implement a petitions which Ethics for members.

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Communicating the famous professors and leading focus on facilitating academics. Their support grassroots’ participation. message proved key in attracting more supporters, gaining government support and forcing USS to take USS responds The campaign’s success was the campaign seriously. grounded in its ability to reach Initially, USS made two The campaign also successfully concessions: to publish its top out to and mobilise lecturers. made a business case for SRI, Members of People & Planet’s 100 investments (out of 2,000) arguing that SRI need not entail and to “encourage” companies student network (which covers negative impacts on financial 90% of UK universities) played to produce annual audits in the returns; rather, it would reduce fields of equal opportunities a key role in communicating risk and therefore ensure the directly with lecturers; and environmental impacts. long-term sustainability of USS’ USS neglected to define, lecturers themselves informed investments. their peers in their faculties however, what form this and common rooms; and local Press interest, including “encouragement” would take branches of the AUT reached coverage in key relevant and what monitoring, out to their members (at one publications such as higher benchmarks and evaluation university, 80 lecturers education supplements to the would be put in place – in attending a branch meeting national dailies, also placed USS short, the concession bordered signed Supporter Statements in the public eye, further on meaningless. in one week). The campaign building expectations for Ethics for USS therefore message – that as a £22 billion change. continued to press for change. fund, USS should acknowledge The campaign was also greatly In late 1999, USS finally its ethical responsibilities – helped by a political context announced a formal proved enormously effective. conducive to SRI. Shortly after commitment to socially Nearly 100% of lecturers USS announced their change of responsible investment. In a approached agreed that this policy, new legislation was significant step, it appointed central campaign message introduced requiring pension an in-house SRI specialist, who made sense. funds to disclose their SRI policy has been working both on Another key lesson was that (see p.29). The campaign played developing an SRI strategy and the vast majority of USS a significant role in ensuring – a more subtle art – members knew nothing about that USS responded positively persuading the fund managers how their pension money was to the regulation, and in fact that SRI is worth pursuing and being invested – and that they ensured that USS’ commitments presents no threat. Substantial were outraged when they went a great deal further than progress has been made in heard the names and records the legislation required. this: a new strategy was of companies involved. adopted in late 2000 which Moreover, they appreciated commits USS to an “integrated” being informed, regarding the Obstacles approach to SRI rather than a campaign as “friendly” for this “token” or “add-on” approach. reason and USS as secretive in USS has initially decided to comparison. Lecturers The campaign initially found USS focus on one sector – the oil responded particularly well executive management to be and gas industry. This reflects when the campaign linked most resistant to change. It was a desire “to do a few things issues directly with their area therefore more effective to well”, rather than to do many of expertise – for example, target USS Directors, using the indifferently – a position that academics engaged in cancer Management Committee as the Ethics for USS shares. USS has research felt their work was main vehicle for change. also indicated that it intends to undermined by their pension recruit two further SRI USS is not legally accountable to fund’s investment in tobacco researchers to give it the companies. This helped to its members on issues of ethical capacity to implement its SRI policy. This lack of structure for stimulate USS’s own members policy, another sign of accountability meant that to take action and act as commitment. “multipliers” engaging others individual USS members did not in the campaign. have the right to force change, but could merely persuade The campaign gained through pressure. Ethics for USS respectability and regard by supporters still clearly feel that attracting “names” to the they should have a say in what supporters’ lists, including their money is supporting and heads of Oxbridge colleges, the campaign will continue to Jess Worth and Kate Geary

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contact) with the companies in which tracks the shares of the leading they invest, although this varies, companies’ in the UK. Passive fund depending on the size of the fund mangers operate on economies-of-scale management organisation and its and attract clients because the fees they location. charge are less than those of more Consequently, much “active” fund managers (1 to 20 basis Fund managers can be of the information points, compared to 15 to 150 basis lobbied to sell their used by fund points charged by “active” fund managers to make mangers. 1 basis point is one-hundredth investments, although it of one per cent). is highly unlikely that they their investment decisions comes first “Active” fund managers operate very will be persuaded to hand from the differently. They may have a particular surrender holdings of companies (within investment strategy or style. One blue-chip stocks. the laws of insider common strategy (known as “value” trading). Such investing) is to invest in companies that personalised contact look undervalued (typically because the is a major marketing point in the market value is low when compared investment industry. Fidelity with the company’s assets or where the Investments Ltd. – which calls itself the cash flow and dividend yield are high biggest independent fund manager in the compared with others in the market). world with nearly $700 billion under Value investors tend to focus on “old management – says it has “one of the economy” industries, such as extractive largest in-house research teams . . . that industries (mining), chemicals and scrutinise over 6400 companies and engineering – sectors which also tend to make over 46,000 company contacts be of concern to NGOs and activists. each year”. A second investment strategy (the Because fund managers are inundated “growth” approach) is to invest in with information, campaigners need to companies which are growing rapidly. be concise and clear when trying to Often these are highly valued but pay gain their attention. Aim to put your key low dividends. Information technology points across in one minute or on one and pharmaceutical companies are page of A4. typical “growth” favourites. If possible, it is worth getting an idea of how a fund manager approaches his or Style of fund her investment brief. If you can convince a “growth” investor that a company is managers not going to grow, then the fund manager Fund managers tend to approach the is more likely to reassess their investment market from different angles. investment. If you can persuade a Traditionally, fund managers simply “value” investor that a company is going chose the stocks they thought would do to have to cut its dividends or write-off best. The bulk of the institutional half its net assets, it may help sway the investment business still operates this fund manager from buying its shares. But way, although in recent years, there has in most cases, it won’t be possible to been growth in the “passive” or “index- use such arguments to sway a passive linked” funds. Passive fund managers manager. It is virtually impossible, for do not try to compete with the market: instance, to persuade passive fund instead, they try to match it by managers that a top company is not a identifying and investing in the same good investment, because their shares as the FTSE100, the index which investment decisions are linked solely to

102 The Campaigners’ Guide to Financial Markets the share market index. However, company in an effort to bring about passive fund managers, as well as active change. Fund managers essentially own fund managers, may be prepared to the company – or at least a chunk of it – engage with companies and support and can therefore influence the way a shareholder resolutions. company manages its business. It is worth noting that fund managers If there is a strong and purely financial won’t always invest in equity stocks, but reason why a company is “wobbly”, will also invest in cash, money markets, campaigners are in a good position to instruments, property and, very persuade fund managers to sell out. occasionally, directly in projects. Even where the company is in good Finding out who has invested in a financial health, however, campaigners controversial project is useful but may be able to persuade fund managers difficult. to engage directly with companies on an issue of concern, especially if the Mergers and change company is in breach of Many executives may clearly-defined shrug at being called The global fund management industry is standards that, if consolidating through mergers and take- complied with, would “unethical” but will overs in order to take advantage of not undermine the value respond and open economies of scale: it is generally of the company. A fund themselves up to manager will not, for assumed within the industry that several debate if they are billion dollars can be managed as easily instance, tell a as several million. That said, there are pharmaceutical called “worse” than concerns that the mammoth fund company to stop testing their main rivals. management organisations which have its products on animals emerged may lack flexibility, making it but he or she may difficult to move large amounts of money advise it to adopt “best around the marketplace. In addition, practice”. Generally mergers often increase the number of speaking, institutional fund managers, Chief Investment investors are more sympathetic to the Officers and brand names, resulting (at idea of engaging with companies than least initially) in an organisation of they are in selling their shares in them. bewildering complexity. Eventually, Engagement between fund managers and restructuring should lead to leaner and the companies in which they invest can cheaper operations, but, in the interim, take a number of forms. Most commonly, chaos can reign. It can be difficult as a fund managers will opt for an informal, consequence for campaigners to identify off-the-record talk with the company’s who they should target. senior executives, discussing the issues in a non-confrontational manner. This can be effective; but the off-the-record Engaging fund nature of the conversations and the lack of any independent record of the managers and meetings can also sometimes render such engagement of limited use or, investors worse, counter-productive. For example, if the fund manager is If the shares in a company are unfamiliar with the details of an issue, it performing poorly, fund managers have is relatively easy for the company to two options: sell up or talk to the pull the wool over their eyes.

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A rarer form of realistic targets for campaigners since Some ethical investment engagement fund managers will be more willing to involves let these go. Fund managers may also organisations, or institutional consider “switching” smaller company groups involved in investors using their stocks – which may be easier to justify monitoring corporate shareholder voting than an aggressive “sell” – provided governance issues, may rights to effect they can be given alternatives. change within a be willing to act as company. A notable intermediaries in your example is the Approaching fund dealings with fund shareholder campaign launched managers. against Shell as a managers result of concerns Fund managers can usually be over its human rights and environmental approached in four ways: record. It is difficult to gauge the Produce a report or letter outlining effectiveness of such actions, however. your concerns. Distribute it to fund Shell, for example, was under sustained managers in the hope that action will public pressure from many directions at follow; the same time and it is difficult to Lobby fund managers personally; assess the relative influence of the shareholder campaign in pushing Use an intermediary to present your through operational changes. case; Launch a media campaign – the last The most radical form of engagement is resort. for a fund management organisation to take a strong stance on, say, social or If you choose to write a report, ethical grounds, by calling a remember that it runs the risk of being shareholder meeting and voting out a lost in the six inches of paper that is company’s management. To date, no dumped on a fund manager’s desk each fund managers have morning. If the covering letter is to the employed this point, relevant and concise, it stands a Fund managers don’t like “nuclear” option. better chance of prompting a reply, after seeing their investments which a dialogue can be established. Fund managers can Focus on the perceived financial risks of criticised. Campaigners can be lobbied to sell an investment company and highlight the turn this to their their investments, company’s bad business practices. Make although it is highly advantage: fund managers the report concise and clear. And choose unlikely that they your timing carefully: fund managers are like to think they’re ahead will be persuaded to busiest in the fortnight before and after of the game and may surrender holdings the end of the calendar quarter and the appreciate prior knowledge of blue-chip stocks. calendar year. Your mail-out will go Almost every fund of adverse publicity that is straight into the bin if it lands on a fund manager in Britain manager’s desk on, say the first of going to harm their has invested in January or April. investment. Shell, BT and Glaxo Wellcome, for Fund managers take their investment example, and it is decisions personally. They don’t want to difficult to conceive a purely financial hear that their decisions are bad. That argument that would tempt them to sell. said, if a lead fund management organisation can be convinced of your Smaller companies are thus the most issue, it may be prepared to host a

104 The Campaigners’ Guide to Financial Markets seminar in which other fund managers highlight the are invited to hear your concerns. Such risks, demand Choose your timing seminars add credibility to a campaign that they discuss and help publicise your concerns. the investment carefully: fund managers with their fund are busiest in the fortnight Getting fund managers to take up your managers and before and after the end of issue is key to a successful campaign – seek assurances the calendar quarter and once on board, they will be your that it is an strongest asset in convincing other fund appropriate the calendar year. managers. The first convert is always the investment. Unit hardest. Once the most appropriate fund trusts and pension management organisation has been and life companies can also be identified, and a decision taken as to pressured to ask their fund managers to how and when to approach it, often the engage with a company in which they most sensible option is to address the have a holding. It is much more Chief Investment Officer (CIO). The powerful weapon to have a fund CIO is in charge of general investment manager’s client – say, an insurance or strategy and will be aware of the pension company – stand up and say business implications of the issue you they’re worried about a particular are raising: if interested, the CIO will investment than it is for you to do so. brief the right people in the organisation to act, such as a corporate governance team. That said, CIOs are busy people with little time on their hands. Campaigns targeting Some ethical investment organisations, or groups involved in monitoring fund managers corporate governance issues, may be In many cases, it is not possible to make willing to act as intermediaries in your a financial case against a project or a dealings with fund managers. Pension company. But if a strong moral case can Investment Research Consultancy be made, then a (PIRC), for example, led the Shell media campaign campaign. If such groups can be against the company persuaded that an issue is important, they and its institutional Ultimately, all investment will know who to talk to and which fund investors may be companies – fund management organisation is most likely productive. to champion your concerns within the managers, life industry. They can be useful allies. If the issue is less companies and unit clear-cut, Pension funds, unit trusts, life insurance engagement is likely trusts – gauge their companies and other retail investment to prove a more performance by bottom- organisations can be approached fruitful course of line profit. Good results directly, and, again, the best approach is action. If a company generate more clients, a businesslike one. Life and pension is involved in companies often respond to hints that practices that are bringing more money to negative publicity may arise if they attracting – or could invest, and consequently ignore your issue. They are driven by attract – negative more fees. their reputation. Pension funds, with publicity, investing their fiduciary responsibility, may want fund managers are to leave all investment decisions up to going to know about it more quickly than their fund managers. But there are ways most. They don’t like seeing their around this. For example, you can investments criticised. Campaigners can

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turn this to their Initiative of the United Nations’ What hurts and advantage: fund Environment Programme (UNEP). Proof managers like to that they have invested in companies embarrasses companies think they’re ahead whose practices breach the UNEP – be they investees or of the game and may initiative can provide grounds for a investors – is a well- appreciate prior media or shareholder campaign. thought-out campaign knowledge of adverse publicity against their marketing that is going to harm divisions where their investment. Practicalities of institutional reputations If fund managers are running a fund are constructed and to act on the controlled. information, management campaign however, you will need to convince them that the adverse publicity will There are a number of sources that have financial consequences. A minor publish information about who owns a division of company X, involved in particular company or who has invested operations that are proving disastrous heavily in it (see p.135 and p.137). You to some local overseas community, will need to check these out if you are to won’t be an issue on which to build a find which fund managers to lobby. campaign aimed at getting fund You can obtain a full list of shareholders managers to disinvest: but it could be from the authority that regulates ground from which to build a media or companies in your country (see p.165) . a shareholder activism campaign. Often, information can also be gleaned Where campaigners opt for a media from the same sources the fund managers campaign, it is usually fruitless to target use: company annual reports and the an individual fund manager, who may financial pages of the major broadsheet often see him- or herself as part of the newspapers. solution rather than the problem. What All companies have to reveal their hurts and embarrasses companies – be major shareholders in their annual they investees or investors – is a well- report, and most unit trusts and other thought-out campaign against their collective public investors have to marketing divisions where institutional publish their holdings. The financial reputations are constructed and pages of newspapers also carry results controlled. of the biggest unit trust deals: these can It’s worth remembering that companies be a useful source of the most up-to-date can withstand all kinds of criticism – information on whether or not a but adverse comparison with their particular fund management organisation competitors bites. Many executives, for has shares in a company. As a rule of instance, may shrug at being called thumb, you can assume that the larger “unethical” but will respond and open blue-chip stocks – for example, British themselves up to debate if they’re Petroleum, British Telecom and Glaxo called “worse” than their main rivals. Wellcome – will figure in most fund management investment portfolios. Institutional investors have other Achilles’ heels; for instance, some life For further details on how to research insurers have signed and published researching companies and their environmental commitments, for shareholders, see Parts Five (p.119- instance under the Financial Institutions 148) and Six (p.149-174).

106 The Campaigners’ Guide to Financial Markets THETHE ETHICALETHICAL INVESTMENTINVESTMENT SECTSECTOROR

Ethical investment, also known as But there are signs that this is changing. “socially responsible investment” (SRI), Awareness of, and demand for, ethical “environmental investment” or “green investment is growing rapidly – at a rate investment”, is investment that takes of some 20-30% a year. Furthermore, social, environmental and ethical ethical investments offer good quality considerations into account. There are business, not least because the investors many ways ethical investors seek to do tend to be settled and are not overly this: excluding companies that fail to concerned about financial performance meet certain criteria; engaging with – the best sort of customer from the companies on aspects of their social and point of view of a financial institution. environmental performance; and publicising analysis of how As a result, many financial institutions environmental and social factors can are starting to become involved in contribute to shareholder value. ethical investment. Pension funds, charities and other organisations are The importance of ethical investment, or also starting to consider socially rather ethical investment organisations, responsible investment, as they prefer to to campaigners is that they can form a call it. Some fund managers are even bridgehead for engaging the financial recognising that social and markets as a whole. They are likely to environmental issues may impact on be relatively sympathetic and interested, shareholder value. although their support cannot be guaranteed. They will probably Despite these encouraging trends, understand the points you are trying to however, many mainstream investors make more readily than many other remain dismissive of or hostile to organisations. While their influence is ethical investment. For example, the limited, it is growing. They are thus the head of corporate communications at logical starting place for many Fidelity – the world’s largest campaigners. independent investor – gave the following answer to a query about the company’s attitude towards ethical The ethical niche investment: “This is not worth discussing. Thank you. We don’t do Ethical investment has long been a small ethical investment.” niche sector, largely irrelevant to mainstream fund management. Ethical investors manage a relatively small amount of assets compared with Ethical investment mainstream investors – 1-2% of retail investment in the UK, for example. Only organisations a minority of mainstream fund managers have ethical funds. Ethical investment organisations come

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in a range of shapes and sizes, with as the institutional market, typically “in- much variety and potential for house” managers for an institutional confusion as with mainstream financial investor with an ethical purpose – for institutions. The main types of ethical example, the Methodist church in the investors are outlined below. UK. Although few in number, these fund managers will be particularly good at Fund managers understanding how your case might apply to mainstream investors. Ethical fund managers perform the same Other types of ethical fund managers role as mainstream fund managers but include independent ethical investment take account of social and ethical managers, who can be particularly criteria when deciding on their dedicated and are often very helpful, investments. A growing number of although they may be somewhat isolated mainstream fund managers now offer from mainstream investors. Finally, ethical products. These are generally there are some private client fund handled by an ethical investment team managers working with ethical teams which forms part of a unit within a fund who focus on investment services for manager division. This team will deal relatively wealthy individuals (“private in a wide range of ethical investment clients”, “private banking”). These also products (such as mutual funds, unit can be relatively helpful and friendly, trusts and life insurance funds), with a although they may not be as influential focus on servicing retail – that is, as some of the larger ethical fund individual – investors. There are also managers. ethical fund managers who deal with A key distinction is between ethical fund managers who do their own ethical research and those who rely on outside organisations. For campaigners, the Ethical investment organisations most useful and helpful are likely to be outside North America and Europe those with their own in-house research. These tend to be the larger, longer- established, ethical investment teams. They generally have several researchers ocially Responsible Investment (SRI) has grown rapidly in both Europe and North America in and considerable in-house expertise. recent years but represents a tiny fraction of They are worth contacting directly. theS market in the South. In Asia, less than US$2.5 billion is currently under SRI management. But most ethical fund managers (in terms But the sector is predicted to grow substantially in of numbers rather than amounts the near future: in Singapore, an ethical fund devoted to supporting fair employment practices invested) use outside researchers to for women was launched in 2000, whilst, in Japan, undertake basic research into the social five “eco-funds” and two SRI funds have been set and environmental performance of up since 1999. The last decade has also seen the emergence of an active SRI industry in Australia. companies. Generally, the researchers In 2001, the Hong-based Association for are drawn from one of the information Sustainable and Responsible Investment in Asia service providers discussed below. (ASrIA) launched a web site devoted to SRI in the Many ethical fund managers, however, region. ASrIA aims “to help financial institutions develop sustainable investment products for the will have some in-house specialists who region, provide SRI training and education, and check on the external research and foster the provision of high quality information on the environmental and social activities of conduct some dialogue with companies. corporates in Asia.” These in-house specialists are worth ASrIA’s website – www.asria.org – includes a contacting, but may not be as helpful as database of SRI activities, searchable by country. the fund managers who have access to their own in-house research services.

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Research organisations Ethical / green venture capital funds, investment banks and These conduct research on social and stockbrokers environmental issues for fund managers These specialise in investing in green and others. This research can take the business or projects and structuring green form of a simple list of acceptable or ethical investment opportunities. companies, ratings of companies’ Because they generally focus on the performance on certain issues, or positive side of ethical investment, they detailed analysis and description of their may be of limited help to a campaign criticising a company’s activities. Where activities. Research organisations should they can be useful is in obtaining positive be prepared to listen to your points and examples of green investment can be very useful in relaying your opportunities. If you want to suggest concerns to the ethical fund managers. alternatives to a project or to a But note that sometimes your concerns company’s activities, these organisations may not fit into their research agenda. may be able to help you with information For example, whilst ethical research and suggestions, including data on institutions may look in detail at a performance (see Table 19, p.175). company’s environmental performance, they may not study social justice issues. Or, if they have already given a company Who works in ethical a bad mark on a certain issue, they may not be interested in receiving further investment evidence of the company’s wrongdoing. investment In the UK, the Ethical Investment Research Service (EIRIS) is the best organisations? known research organisation but there are many others (see p.110). Probably a much wider variety of people than those who work with other financial organisations. Some have Other organisations financial backgrounds, having become disillusioned with the mainstream: they There are a variety of other can be particularly useful for organisations which work in the ethical campaigners as they not only understand investment sphere. These include: financial markets “from the inside”, but Ethical investment networks also have the knowledge and contacts These act as a meeting place for ethical that can make a real difference to a investment organisations, advisers and campaign. Others may have specific others. They can be a useful source of expertise in the environmental or social contacts. The best known are listed in spheres. Some have previously worked Table 1, p. 110. with charities or campaigning organisations or in business. Generally, Ethical financial advisers they have a strong social conscience and These advise individuals on ethical are committed: indeed, the majority of investment options – for example, on the shareholder resolutions in the UK to choice of ethical fund managers. If you date have been initiated from within the or someone on your campaign knows ethical investment community. somebody in this area, they can provide some useful introductions. If not, Campaigners should be aware, however, searching out individual financial advisers that those who work in ethical is a time consuming task: you would be investment are constrained by the nature better advised to go direct to the ethical of their organisations. Furthermore, the investment networks listed above. SRI community is not homogenous.

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Table 1 Socially Responsible Investment (SRI) networks and research organisations

The following organisations work to promote socially responsible investment (SRI). They are invaluable sources of research and potential advice on financial market campaigns.

Business Ethics Research Centre,,, Australia UK Social Investment Forum www.berc.com.au www.uksif.org P.O.Box 5583, West End, QLD 4101, Australia Holywell Centre, 1 Phipp Street, London EC2 Tel: +61 7 3846 1025. Email: [email protected] 4PS. Independent research group based in Brisbane, Tel: 020 7749 4880. Email: [email protected] Australia. Provides information on issues related The main UK-based network on socially to SRI and company profiles. responsible investment. The web site offers profiles of its members, which include a Ethical Investment Association, Australia number of major banks and research providers. www.eia.org.au Level 8, 1 Castlereagh Street, Sydney, NSW 2000, Australia Innovest, USA Tel: +61 2 9214 8411. Email: [email protected] www.innovestgroup.com Network of advisors, fund managers, 4 Times Square, 3rd Floot, New York, NY consultants, community groups and companies. 10036, USA Primary objective is to “promote the concept, Tel: +1 212 421 2000 practice and growth of ethically, socially and Investment research firm specialising in environmentally responsible investing in environmental finance and investment Australia.” opportunities.

Social Investment Organization, Canada Investor Responsibility Research Centre, USA www.socialinvestment.ca www.irrc.org 658 Danforth Avenue, Suite 409, Toronto, ON 1350 Connecticut Ave. NW, Suite 700, M4J 5B9, Canada Washington DC 20036-1702, USA Tel: +1 416 461 6042. Email: [email protected] Tel: +1 202 833 0700 SIO is Canada’s only national non-profit Conducts research on corporate governance organisation dedicated to the advancement and social responsibility issues. The site’s of SRI, with more than 350 members. “On-line Analyst” page allows registered Membership is open to individuals and NGOs. clients to view over 12,000 company Many Canadian funds are profiled on its web reports, including environment and SRI site, which also includes an on-line directory profiles. of financial institutions, research organisations and others in Canada interested in SRI. Sustainable Investment Research International, USA Ethical Investment Research Service,,, UK www.sirigroup.com www.eiris.org c/o KLD and Co. Inc., 530 Atlantic Avenue, 80-84 Bondway, London SW8 1SF. Boston MA 02210, USA Tel: 020 7840 5700 Tel: +1 617 426 5270. Email: Set up with the help of UK church groups and [email protected] charities, EIRIS “provides the independent A coalition of eleven research organisations. research into corporate behaviour needed by SiRi group members provide coverage of ethical investors.” It concentrates purely on more than 1,500 companies in the major research into the ethical credentials (or lack markets worldwide, including all of the of them) of companies. companies listed on the French and Iralian Stock Exchange. Pensions Investment Research Consultants,,, UK www.pirc.co.uk US Social Investment Forum 4th Floor, Cityside, 40 Alder Street, London www.socialinvest.org E1 1EE. 1612 K Street NW, Suite 650, Washington DC Tel: 020 7247 2323. Email: 20006, USA [email protected] Tel: +1 202 872 5319. Email: Invaluable source of advice and research on [email protected] SRI. Website has useful archive of PIRC US membership association consisting of reports on corporate governance. over 600 professionals and institutions.

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There are differences in views and priorities within it. Some SRI specialists How can ethical will be more supportive of your campaign than others. investors help?

Ethical investors can help campaigners in several ways. Most obviously, they What are their success look at companies from social and environmental perspectives and will fff actors? thus be far more interested in what you have to say than other fund managers. Ethical investment specialists combine a They are likely to understand your desire to succeed in the business sense concerns and be prepared to discuss with a real desire to change things for them more openly. In particularly, they the better. You will work best with them may be prepared to: if you can help them achieve both these Conduct further research on their ends: if they can gain some sort of own or to talk to the company and open advantage out of your campaign, such as a channel for discussion; positive publicity or marketing Help you frame your arguments in advantages, they will be much more ways that are likely to influence the inclined to help you. Conversely, if they financial markets. This might include are not investors in the company whose providing access to fee-paying financial activities you are campaigning against market databases (which are expensive and see your campaign as relatively for campaigners to obtain); marginal for them, they may feel that Assist you on technical issues, such their business priorities lie elsewhere as preparing a shareholder resolution; and they cannot take the time to help you, Introduce you to others in the even if personally they are supportive. financial markets; Make some public statements Be aware, too, that there is intense expressing their concern or even competition in the ethical investment supporting your campaign. But for many industry, as in the mainstream industry. ethical investment organisations, making One feature of this is a reluctance by public statements can be problematic, not some SRI specialists to share least because of their potential to damage information and ideas, both of which are relationships with possible future clients. seen as sources of competitive Ethical investors are thus very useful as advantage – although cooperation is initial contact points in a campaign and increasing. Generally, you will be better can help get it underway. On their own, off working with a range of different they are unlikely to be able to change a ethical investment teams, giving equal company’s practices or to stop a project, treatment to each. Sometimes, however, but they can help you build up it may be worth developing a close momentum. relationship with a specific ethical investment organisation. This might be because you need more detailed help – for example, on research, or on drafting Some drawbacks . . . a shareholder proposal. If so, it is well worth considering how you can help the Despite the advantages of working with organisation in areas such as marketing – ethical investors, there are some for example, through a willingness to caveats: share media space and publicity. They may regard a company that

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you are concerned players. But as most campaigning Ethical investors are a about as better organisations are likely to be regarded useful, if not essential, than others in its as even more marginal than ethical sector. If they investors, this is rarely a major concern. stepping stone in building disagree with your up a financial markets research, it is campaign. worth considering any counter Working with ethical arguments they produce: they may well have a point. If investors you can’t convince them, you are unlikely to convince mainstream fund A fruitful way of drawing ethical management organisations. investors into a campaign is to send them a draft letter outlining your If you don’t manage to persuade at least concerns at a fairly early stage – before some ethical investors of the merits of you have completed your research and your arguments (which would be finalised your strategy, but after you relatively unusual), it is probably better have a fairly good idea of the arguments to move on rather than to make them a and points you want to make. Once the focus for attack – next time they may be letter has been sent, you should actively your allies. An exception to this general follow it up: try and arrange a meeting rule might be when an ethical investment to get feedback on the points you made organisation has given your target in the letter and on any further action you company a good ethical rating and, are planning. Take account of any despite the evidence you have provided information or suggestions they may them, continues to promote it as a leader have. Although much of this can be in its field – although, in this case, the achieved by ‘phone or email, such ethical investment organisation is likely indirect contact is likely to lead to a to want to discuss the problem with you. more limited discussion than a face-to- They just may not have the time face meeting. If you are new to financial and resources to engage with your markets, the experience of going to the concerns - or they may not be permitted financial district for a meeting may also to undertake advocacy work on provide a revealing insight into the companies they do not own. Ethical fund culture you will have to contend with as managers are also trying to do twice as the campaign develops. much as ordinary fund managers (combining both ethical and financial research) and so are pressed for time Conclusion and resources. If the company you are Conclusion targeting is one that they are unlikely to invest in anyway, they may not be Ethical investors are a useful, if not prepared to spend time discussing how essential, stepping stone in building up a bad the company is. (Conversely, they financial markets campaign. They can are much more likely to be interested if help you understand the best way to it is a current investment, or on their approach the financial markets, provide approved list.) you with an initial test bed for ideas, and lend you some support. They are the There is some danger that closest you will come to finding involving ethical investors could lead “friends” in the financial markets, but as mainstream investors to view a with all friends; don’t presume too campaign as coming from marginal much.

112 The Campaigners’ Guide to Financial Markets BANKSBANKS ANDAND PRPROJECTOJECT FINFINANCEANCE

Banks are huge organisations which the bank may be able to charge for, but have a wide variety of operations and others which it has to fund from its activities, of which the most important margins. This means that profits in (from the perspective of campaigners) is banking depend on the size of the bank’s project finance. Within the banks, the margin, the efficiency of the services it main actors involved in project finance provides, and the number of borrowers are: who default. This last factor is the most The board and senior management; important from the point of view of Those who organise debt finance profitability: the interest rate margins on for projects; borrowing are low, hence it does not Those who organise and develop take many defaults for the margins to be projects. lost. This section looks at banks in general, As a result, banks are fundamentally and their board and senior management very “risk-averse” and do not want to in particular. The next section looks at lose money through risky lending. project financiers in more detail. Note Emphasising that a proposed project is that where banks are involved in other far riskier than generally assumed is thus controversial activities apart from likely to be highly effective in project finance, their board is likely to persuading a bank to reconsider its be involved at a senior level, so the involvement in a project. Where remarks in this section will be relevant campaigners have a good case on risk, to other types of campaign. they should therefore take it directly to the project finance people (see p.115). Most banks also have large retail Banking: risk and operations – taking deposits from consumers, and lending money to them, reputation are both core activities of most banks. Banking (or at least commercial The need to attract retail customers banking) is fundamentally a boring makes banks protective of their business. You get money in from reputation and aware of the potential for depositors and pay them interest on their bad publicity, thereby creating a second deposit; you lend the money out to opportunity for campaigners. Even large borrowers at a higher interest rate; and projects are likely to be relatively minor you live comfortably off the “margins” sources of business for large banks – so (that is, the difference between the two if the project generates negative interest rates). publicity, the bank may reconsider its involvement. The sooner the bank can be Life is made more difficult by the fact convinced of this, the less likely it is to that depositors and others require their become or stay involved. If the strongest bank to provide services, some of which argument against the proposed

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investment centres retail banking or commercial banking – Those arranging project on the potential risk but will all report to a CEO. At least to the bank’s one director has specific responsibility deals are preoccupied reputation or on for financial control. with persuading the poor practice, then Unlike many individuals in the financial the bank’s senior different parties to reach markets, the senior management of a management should an agreement – one bank is less “deal driven” and more be targeted. banker describes this as likely to see the broader picture, being harder than These comments including all the different factors that refer to “commercial could affect the bank’s profitability. In “herding cats”. banks”. In addition, contrast to financiers in other sectors, there are they are judged less on their own “investment banks” – often subsidiaries financial dealings and more on the of commercial banks, although in the overall performance of the bank. US, investment banks are usually Specifically, their rewards may be separate from commercial banks (a linked to the share price and earnings division that is beginning to break growth of the bank as a whole. down). Investment banks are responsible for arranging deals and Senior bank management are often more advising on transactions rather than open than junior staff to considering the lending their own money long-term wider ramifications of a project, the (they may occasionally invest in the criticisms of it, and the consequences short-term by underwriting a transaction for the bank of becoming involved. One which they later sell on). In the context reason is that junior management tend to of project finance, they are likely to be have a “rule based” attitude to their job: involved in arranging the financing another, that they are often directly proposals and structuring the deal, but involved in the project and committed to may not be the ultimate long-term seeing it through. It is also worth lender. Investment banks will be less recognising that a bank will consist of a sensitive to their reputation than wide range of individuals with differing commercial banks, as views on your campaign – some may be they have a weaker hostile, others may be sympathetic. Take retail focus. That said, the time to identify potential allies: Those responsible for don’t assume that the first member of providing the debt for a investment banks are very dynamic senior management you meet expresses project are generally organisations and have the views of all the group. Much of the professional bankers responded vigorously time, bankers will be happy to let their project finance departments generate and thus tend to focus to defend their reputations in certain money without interference. But if other on the need to minimise key areas. parts of the bank start to suffer fallout risk in the deal. from a controversial project (for The senior management example, if customers withdraw their of banks, both accounts), then an internal debate will commercial and rapidly develop. investment, is likely to consist of highly experienced and competent people. They are very busy and difficult to get Getting access to hold of. Like the senior executives of other large companies, they will cover senior management a number of different functions and have different responsibilities – for example, A key issue for campaigners is gaining

114 The Campaigners’ Guide to Financial Markets access to the bank’s senior management. your case is strong, this may not be a Possible avenues include: major consideration.

Third parties,,, such as a charity or environmental organisation The senior managers of banks often sit Understanding project on the board of such groups, or act as their sponsor or backer, or have contacts financiers through consultancy work. (For example, in the UK, the government-sponsored Project financiers include a wide range Advisory Committee on Business and the of different people with different skills. Environment was for a long time chaired They can be divided into the following by a banker.) two categories: Specialist units of the bank Those responsible for structuring the Most banks have Environmental deal (and often responsible for providing Management and Internal Risk Control the equity); and units. While these are often fairly low Those responsible for providing the down the bank’s institutional hierarchy debt for a project. (because they do not earn money for the bank directly) they usually have good The latter are usually part of a large access to the board and senior commercial bank, working in its management. business or commercial lending division. The former may be part of an Institutional investors investment bank, a special team within a If you’re working with a major large commercial bank or an investment institution, it may be able to independent “boutique” specialising in raise issues with the board directly (don’t project finance. forget banks have shareholders, too) and may facilitate access for you. Those who structure the deal share many Brass! of the characteristics of investment If all the above fail to produce results, bankers working in corporate finance, you can always try the front door, except that their work is less high- although expect to be deflected by profile. They are hard-working and secretaries and PR people. highly-paid. They will be keen to close a deal but are generally less arrogant When meeting with senior management, and aggressive than many in investment make sure you have prepared your case banks – project finance involves well and can present it succinctly and working with many different parties, so clearly. Generally, it is preferable to it is important that the deal negotiators contact senior management before you have good social skills. go public and start to criticise the bank openly: it gives them a chance to address A constant preoccupation for those the issues, and means you still have your trying to arrange project deals is the major card – adverse publicity – to play. need to persuade the different parties to It also means that you avoid creating a reach an agreement – one banker “siege mentality”: this encourages the describes this as being harder than management to line up against you and “herding cats”. Often the resulting deal robs you of the opportunity to identify is tenuous at best: it can easily unravel if allies and sympathisers within the bank. one party starts to dig their heels in. Such gains need to be weighed against When this happens, the deal arrangers the downside of delaying confrontation – are likely to react with considerable namely, that the bank’s management has hostility – they have put a lot of work more time to prepare its response. But if into the project and do not want to see it

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collapse. For that reason, it is worth finance has a far lower public profile trying to get in early. If you can than most other forms of investment convince them that the project is likely activity. There are some directories of to prove controversial, they may decide project finance; otherwise it is worth to abandon it rather than investing time searching the press, particularly the in trying to make it work – particularly specialist press, for names. Brochures since other less problematic deals are for project finance conferences can sure to come along. provide useful contact lists, as can the publications of organisations such as Those responsible for providing the development banks (which are often debt for a project are generally involved in the planning and financing of professional bankers and thus tend to projects). focus on the need to minimise risk in the deal. They are less well-paid, less hard-working (although still well-paid and hard-working by most standards) Stages of project and typically less aggressive than their deal structuring colleagues. Their finance performance is judged in part (at least The financing of a project typically goes for the purposes of year-end bonuses) through a number of stages, each of on the revenues they bring into the bank. which offer scope for intervention: Since the banks receive an up-front arrangement fee for creating lending Initial assessment facilities to a project, debt financiers As a first step in assessing projects, the are under pressure to lend money to project financiers will meet with the good deals. These fees may make a project developer to see whether the particular line of business appear project makes sense, whether they want profitable, even if long-term risks to be involved and whether they are the undermine the project. This creates an right people for the deal. This can be the incentive to ignore less obvious risks most effective time to intervene since the financier has yet to spend much time on and close the deal. the project and may be prepared to put it To counter this, much project lending, in the “too difficult” category. Whilst this particularly if it is large, has to be may result in the developer taking the project to another financier, persuading referred to an in-house credit one major project financier to walk away committee, which will be required to at this stage may be enough to kill the give final approval for a deal. In certain project, since financiers are generally cases, referral may even be made to the sceptical of other people’s rejects. bank’s board. Identifying and accessing the credit committee may be difficult, Preliminary structuring but if dialogue with the individual The lead financier now starts to analyse project officer is not going well, it can the deal and work out the financial be worthwhile escalating the argument structure, talking to prospective lenders and other investors. This is the time to within the organisation. You may well focus on the possible investors (project have been able to identify key lenders) as they are not yet committed to individuals during your dialogue with the deal and may be persuaded not to the company. If not, you can always go become involved A brief analysis which straight to the board. highlights the risks may be enough to deter investors. If banks and other Identifying the individuals involved in investors start to express serious interest project finance for a specific project in the project, it may be worth starting to can be a major challenge – project contact the senior management of the

116 The Campaigners’ Guide to Financial Markets institutions concerned. If the bank far as stopping the financing is concerned decides to go ahead, a “heads of (other avenues for campaigning, agreement” or summary terms will be however, will still be open). If there is a prepared for use in the next stage of the clear evidence that one of the parties has project finance process. misled the others, there may still be scope to stop the project – but it will be Due diligence very difficult. The deal is now subject to intense Campaigners and others often assume scrutiny by lawyers and others, who that a deal is more advanced than it is – focus on the detail. They will look at all only when final closure has been the specific questions which need to be reached is the project actually financed. answered. On social and environmental issues, a specialist (for example, an Don’t be taken in by an announcement engineer) will be called in. Financiers will from a project developer that the project be reluctant to question his or her has backing from X, Y or Z bank: often, analysis. There is still some scope to all that has been agreed is a intervene if you have some detailed “memorandum of understanding” or analysis, particularly if you can “heads of agreement” initiating work on undermine assumptions used by the financing a project, not an absolute project financiers in their assessment of agreement to provide finance. If in the project. (A major component of due doubt, ask whether the deal has been diligence is checking in detail the various “closed”. Bear in mind, too, that whilst assumptions made.) But at this stage, the the due diligence phase of the project project may have acquired substantial cycle is a relatively quiet phase – the momentum which may be difficult to work is going on in the back room – stop. If your financial arguments are not making headway, it is the last opportunity things speed up once closure nears, so a you may have to raise the matter with the deal that appears bogged down can senior management of the bank and quickly become one that is signed, perhaps to organise a media campaign. sealed and delivered. Overall, it can take anything from a couple of months to Final closure several years (in the worst cases) to put The various agreements are signed and together a project finance deal. A the finance is released to the developer. typical timeframe is likely to be several At this stage, it’s largely over, at least as months.

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118 The Campaigners’ Guide to Financial Markets Part Five GettingGetting thethe infinforormamationtion fforor aa financialfinancial loblobbbyingying campaigncampaign –– AA guideguide withinwithin aa GuideGuide

119 The Campaigners’ Guide to Financial Markets STRUCTURINGSTRUCTURING YYOUROUR RESEARRESEARCHCH

rs Beaton, the Victorian cookery Mwriter, famously began her recipe for jugged hare with the admonition: “First catch your hare.” Such down-to-earth practicality is as important for successful lobbying of companies and markets as it is to successful cooking. Using markets to exert pressure for social change requires a clear strategy – which in turn requires a knowledge of the company you are seeking to influence, the market in which it operates, its institutional culture, its weaknesses (and its strengths) and its most vulnerable pressure points.

This Part often refers to resources available on the worldwide web, in libraries (for example, business directories), in the media and elsewhere. For advice on how to use and access these, refer to Part Six, pp.149-176.

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Before working through the steps from turn-over to sales figures and so below, it is critical that you think on. What you are looking for is a through the reasons why you are thumbnail sketch of the company that targeting a particular company or will provide a framework on which to sector. This will help you in focusing hang further information and give a your research. For the purposes of preliminary idea of lobbying strategies illustration, we have assumed that you (see Part Three, p.57-76). are interested in a campaign directed If your target is a major construction against a single company: other targets company involved in a dam project, for would need different approaches, but example, the sort of thumbnail sketch the research steps outlined below you might aim for could look like this: would still apply. “Concrete plc – a construction firm If you are researching a company, it is interested in major civil engineering worth checking whether it is a projects. Important areas of business, subsidiary of another company or part in order of earnings, are rail (40%); of a larger commercial group before roads (30%); hospitals, airports and going any further. In many cases, other civil engineering (25%); and information will only be available via hydro (5%). Its most important listings for, and resources on, the parent countries of operation are the UK and company. The best way to check this out the USA, but it has growing interests in is with the directory Who Owns Whom, the Middle East, Africa and Asia. It has see p.137. historically been in two businesses – construction and cables – but has sold off cables to concentrate on One step at a time construction. It is a publicly limited company or plc, which means that it is Step One listed on the UK Stock Exchange, so its What does the company do? shareholders will be private individuals and large financial Aim: To put together a basic picture institutions. It is the Nth largest of the company construction firm in Britain and Mth in Sources: Annual Reports, company the world and employs X thousand web pages people.” Where to find: Annual reports, see This will give you a feel for the p.126; websites, see p.128 company You’ll know, for example, that hydro is only a minor part of its business Step one is to build up a basic picture – but you will need to check that the of the company or sector you are company intends to keep it that way. seeking to influence. It is not necessary This detail, however, can wait until at this stage to find out every detail later. about the firm, but you will need to get a picture of: Step Two What the company does and where; What’s the company’s record? Its major sources of income; How big it is (number of employees Aim: To find out more about the or ranking in the FTSE). company’s record – construction failures, controversial projects, At this stage, don’t try and plunge into labour relations, environmental the company’s key “financials” – City impact, reputation. To gather jargon for basic financial information,

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company statements on the been involved in numerous worker environment and its social disputes. The environmental impacts of responsibilities. the projects in which it has been involved include: the destruction of Sources: Campaign web sites, NGO tropical forests; the flooding of reports, union sources, press reports, wetlands; the building of climate- talking to other campaigners. damaging fossil fuel plants; and the Where to find: Campaign websites building of major road schemes. The and reports, see p.135; press reports company’s environmental policy and other media sources, see Part stipulates that it aims to be as open as Six, especially p.157 (Media). possible: but it has failed to release the Environmental Impact Assessment The next step – particularly given the (EIA) for the project and has never possible opening of a campaign based undertaken any consultation with those on the company’s reputation – is to affected by the dam.” gather information on the firm’s record and its stated environmental and development policies: Step Three Has it been involved in other Who owns the company and what controversial projects? What were their does the company own? social and environmental impacts? Was there any evidence of Aim: To find out who owns the corruption? company and what subsidiaries the Is the company being sued by company owns. To find out the names anyone? If so, for what? of shareholders and any retail outlets Does the company have an owned by the company. environmental policy? Or a community Sources: Directories and web sites development policy? If so, how do its past activities Where to find: Ownership pattern, match up to it? see p.135; shareholders, see p.137 Does the project comply with the The next area to research is the company’s stated policies? If not, in what ways does it violate them? company’s ownership structure (who owns it and what does it own): Do the company’s annual reports give an accurate picture of its activities – Is it a subsidiary of any company? particularly with regard to its impact on Does it own subsidiaries that might the environment? be amenable to boycott campaigns? Is it connected, for example, to retail outlets Such information should enable you to or any other High Street presence; add to your initial thumbnail sketch: Who are its shareholders? Are any of “Concrete plc has been involved in a them well-known High Street names? Do number of dam projects that have any of them have socially responsible involved human rights abuses, notably investment policies? the XYZ Dam. In at least one case, Are any ethical funds investors? corruption has been alleged. The court This may reveal some interesting case is currently being heard: if the campaign possibilities. For example: prosecution is successful, the company could face a ban on bidding for future “Concrete plc’s shareholders include World Bank projects, since the dam in Earth Funds, a green investment trust, question was funded by the Bank. It and the Goodlife insurance company, a has an appalling safety record and has well-known life insurance firm. The

122 The Campaigners’ Guide to Financial Markets company also owns Brand Y, a chain of currently in the doldrums as a sector, well-known Do-It-Yourself retailers.” as a green technology which will have a major future as climate change You now know that the company has a begins to bite – and possible poor record, environmentally and legislation is brought in to curb fossil socially; that it owns retail outlets that fuel emissions. It also sees could be amenable to boycotts; and that opportunities for major subsidies and some of its major institutional investors for taking up business abandoned by have ethical screening policies in place. its rivals in the sector which are All of this presents the possibility of increasingly getting out of dams exerting pressure on the company via because of adverse publicity and boycott campaigns or letter writing to its increasing conflict.” “greener” investors. You now have a fairly rounded view of the company and its business weak Step Four spots. Given the uncertainties over the What’s the company’s strategy? future of dams, for instance, its business strategy looks flimsy at best. This Aim: To research the company’s suggests that an analysis based on business strategy: what are its questioning the company’s business environmental implications? Does it judgement – combined with a stack up financially? reputational campaign, directed against both the company and its better-known Sources: Directories, interviews and investors – might be the best way web sites forward. Where to find: Financial Times, trade magazines, interviews , analyst reports, see p.141. Step Five Finding out who to lobby Further research is now needed to start pulling together business strategy and Aim: To find out the names of relevant financial arguments that might be used, if fund managers, analysts, store appropriate, to persuade investors to managers, ethical fund managers – withdraw from the company or to those, in effect, whom you intend to pressure for change. For example: lobby. Where does it intend to go with Sources: Various directories hydro? Does it see its hydro division expanding? If so, why? Where to find: Fund managers, see What financial problems is the sector p.144; analysts, see p.143; local experiencing? How is the company retail outlets, try your ‘phone book; responding to these? outlets across the UK, use the website Who are its main rivals and www.192enquiries.com, or look in the competitors? How do their records red postal address directories in your compare with the company’s? local library.

All this will add a further layer of Finally, you need to pull the research intelligence to your company profile: together, angling your arguments to the “Concrete plc’s annual report suggests various pressure points you have that it sees hydro as a growing sector. identified. When you have done that, you This is confirmed by interviews with need to ensure that the arguments you divisional personnel. One reason is want to make get to the right people (see that the company views hydro, which is p.54).

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Table 2 Corporate research – Key directories

here are numerous business directories now available: most can be obtained through a good public library (see p.151). We have found the following directories particularly useful when puttingT together a basic picture of a company. Many of the directories and specialist publications start with a guide to using them – reading this Guide can save a lot of time.

Briton’’’ s Index: Financial Institutions to Britain’s Top Foreign Owned Companies PR Newswire Europe Ltd, Communications House, (see above). 210 Old Street, London, EC1V 9UN. Tel: 020 7490 8111 Kompass – Volume 2: Company Information Reed Business Information, Windsor Court, East Part 1 Banking & Finance; Part 2 Pensions; Part 3 Grinstead House, East Grinstead, West Sussex Investment Trusts; Part 4 Unit Trusts, Common RH19 1XD. Tel: 01342 326972 Investment Funds and Open Ended Investment Companies; Part 5 Insurance/Assurance Corporate information on 45,000 leading Companies; Part 6 Charities; Part 7 Business, companies in British industry, including Information, Government and Regulatory financial information taken from the last three Organisations; Part 8 Personnel Index. years filed accounts, on over 21,000 companies. Entries include : basic company Dun & Bradstreet Business Register details; names of directors and senior Homers Farm way, High Wycombe, Bucks HP12 executives; names of holding companies 4UL. Tel: 01494 422000 where applicable; annual turnover; product range; nature of business; principle customers/ Credit references on companies. Very brief markets; trade names of branded goods; information: company name, type of business, principle factories; membership of trade address, telephone, fax, managing director, associations; and details on turnover, pre-tax directors (partners if relevant), company profits, fixed assets, current assets, current secretary, sales, profit or loss, net worth, number liabilities, share capital. Product codes of employees, risk indicator. Volumes by region. included in each entry refer to listings in vol. I, Products & Services. These enable you to gain precise information on the products and Britain’’’ s Top Foreign Owned Companies services which the company supplies. Vol. III Jordans Limited, 21 St Thomas Street, Bristol BS1 gives financial information. Vol. IV lists brand 6JS. Tel: 0117 923 0600 names. Gives financial profiles of 1,500 companies Key British Enterprises ranked in order of turnover. Data on each company includes: sales, net tangible assets, Dun & Bradstreet Ltd, 5th Floor, Westminster pre-tax profits, interest paid, post-tax profits, House, Portland Street, Manchester M1 3HU. profitability, profit margins, shareholders’ funds, Tel: 0161 455 5119 total borrowing and total borrowings as a percentage of shareholders funds. The directory This has similar information to Kompass, also lists the registered office of each company, sometimes with more detail and sometimes its telephone number, a named executive, its with less. Usually gives summary financial principle business activity and its ownership. information, including turnover, profit and Twelve tables rank the top 50 companies by key number of employees, also directors, broad performance measures, including : profitability; area of business, sometimes brand names. sales growth; wage rates; indebtedness; liquidity; changes in turnover; pre-tax profits; and net FT Business Directories tangible assets. These can prove very helpful in Maple House, 149 Tottenham Court Road, assessing the financial strengths and weaknesses London W1T 7LB. Tel: 0207 896 2359 of companies. The Financial Times publishes a series of company guides covering the energy, mining Britain’’’ s Top Privately Owned Companies and insurance sectors. Invaluable. Jordans Limited, 21 St Thomas Street, Bristol BS1 6JS. Tel: 0117 923 0600 Hemscott Company Guide Hemmington Scott Ltd., 26-31 Whiskin Street, Gives financial profiles of companies ranked in London EC1R 0JD. Tel: 0207 278 7769 order of turnover. The data provided is organised under the same headings as that in Jordan’s guide Details on UK listed companies. Often gives

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useful statistical information that you will not accounting firm, bank and law firm; description find in the company’s annual report (for of company’s products and services; annual example, geographical breakdown of business). sales figures and number of employees, where available; division names and functions; Hoppenstedt Directories separate subsidiary listings with reference to parent companies; principal business Published by ELC International, 109 Uxbridge affiliations. Road, Ealing W5 5TL. Tel: 020 8566 2288 Information on 25,000 of Germany’s largest Standard and Poor’s 500 Guide companies. Details of ownership, turnover, staff, Published by McGraw–Hill, 25 Broadway, New top- and middle-management. York, NY 10004, USA Standard and Poor’s Register of Corporations,,, Guide to the top 500 publicly-listed US Directors and Executives – Volume 1: companies – each with an average worth of some $10 billion. Every entry includes an Corporate Listings appraisal of the company’s performance and PO Box 1628, Charlottesville, VA 22902, USA. valuation – a useful pointer to the strengths Tel: +1 804 977 1450 and weaknesses of the company, as perceived by Standard and Poor’s financial analysts. In Covers 65,000 US corporations and 10,000 addition, entries list: a summary of each major non-US companies. Gives addresses, company’s business activities, recent telephone numbers, internet addresses of over development and sales history; company 75,000 corporations; names, titles and functions addresses, telephone numbers and names of of approximately 437,000 officers, directors and key corporate officers; and earnings and other principles; names of company’s primary dividends.

At this point, you will probably need to round of research if you are to catch that spend quite a bit of time in a good public “hare” and begin cooking. library (see p.151), checking out directories for the names and addresses The type of information you will need of fund managers (one letter), analysts will vary considerably from one (another letter), branch managers of the campaign to another. In some cases, you company’s DIY subsidiary (explaining will need to dig deep into the history of why you are calling for a boycott of the a company; in others, it may be a market store) and ethical funds with shares in that needs researching – who the major the company (another letter). See pp.65, players are, what their records are, how 66 and 70 for specimen letters which the market is changing, and so on. you may be able to use. If your strategy revolves around a shareholder action, for example, you Step Six will need a full list of institutional Digging deeper shareholders; arguments to put to them; what the analysts say about the company; and the names of potential allies within Aim: To strengthen your arguments, the financial community (for example, winnow out those that are unlikely to ethical funds that might be sympathetic influence the financial community and to pushing a shareholder motion). identify key pressure points If you have opted for a boycott Sources: Libraries, web, interviews campaign, then you will need to know Where to find: Company’s record, see more about where the company p.128 Market intelligence, see p.163. produces its goods, how it markets them, and its major distributors. In such Once you have a better idea about the instances, your main need may not be for strategy that will maximise your detailed market research reports (see influence, you will then need a further p.163).

125 The Campaigners’ Guide to Financial Markets WHEREWHERE DODO . . . A company’s annual report?

II FINDFIND ...... If you’re researching a public limited company (plc) – that is, one that’s listed on the Stock Exchange (so you could buy its shares if you wanted to) – remember that the company is obliged to produce an annual report for investors and potential investors. Some companies in which you can’t buy shares also produce annual reports, especially government- owned ones. The annual report details: the company’s activities over the previous year; its accounts; a list of directors; and other useful information. From this, you will probably be able to find out where the company’s major projects and facilities are; what they do; and what its biggest brands are. You will also be able to gain some idea of its institutional culture – and how it likes to present its management. It will also often tell you how much the directors get paid; how many employees there are; how the company is structured; and so on. A one- sided view, of course, but a useful start to your research, and often an easy way of answering some questions about the company. If you are new to business research and unfamiliar with the language of annual reports, check out the website www.bized.ac.uk/dataserve/extel/ notes which provides excellent background explanations of key business terms – for example, what a profit and loss account is; what constitutes profit (from a mainstream business perspective); and brief explanations of terms and business theory. When using a company annual report, bear in mind that the company published it specifically to convince investors that the company is a good investment. So the “positives” (for the company) are

126 The Campaigners’ Guide to Financial Markets over-emphasised, as are some you do not know their address, the environmental and corporate governance “How do I find” section (p.129) policies, while the negatives are usually explains how you can find it via the Web ignored. So, use it with caution. For (assuming you have access to a more balanced and honest information computer). on US companies, try the annual reports that companies are obliged to file with Many companies now post their annual the US government, especially the reports on their web sites, from where Securities and Exchange Commission they can be downloaded or ordered. (see p.166-168). There are also websites and other Paper copies of the larger companies’ services that provide free annual reports latest annual report are generally for selected companies (see Table 3, available free on request from the p.127). You might find back issues of company: either telephone for a copy, or annual reports in a library, especially a write to the company headquarters. If business library.

Table 3 : Company Reports on the Web

Site Geographical URL Comments coverage

www.carol.co.uk/ Stands for Company CAROL UK, Europe, Asia reports/reports.html Annual Reports On-Line. Company Annual Enables you to search for Reports on Line a company and see if its annual report is available on the web. Sectors covered include: banks; merchant banks; retail; building/construction; chemicals; engineering; food manufacturers; health care; insurance; investment companies; leisure and hotels; life assurance; oil exploration; oil; pharmaceuticals; printing and paper; food retailers; and water.

Financial Times UK For the top UK companies. Alternatively telephone 020 8770 0770 for postal delivery of reports.

Investor Canada, USA, UK, www.icbinc.com/ Home site for several Communications Europe services (Financial Times, www.icbinc.com/cgi- Business Wall Street Journal, bin/.pl Barron’s, and the Globe and Mail) offering to mail you free copies of company annual reports.

Yahoo Finance Canada, USA yahoo.ar.wilink.com

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Sometimes these will be in the “about” . . . A company’s section of the web site, sometimes in their own sections. Whether the site website? contains this information depends on the company. If you want to go straight to the company’s website (assuming it has one) and don’t know its web address, try guessing. Most businesses have web ... . . A basic overview of addresses with their name sandwiched between “www.” and “.com” – a company? “www.companyname.com”, for example. For a basic overview, the two starting points are the annual report and the If that doesn’t work, you should be able company website. to find it using an intelligent search engine, such as Google (see p.154-156 Sometimes you might want something for information on search engines). either more concise or more impartial. The directories and websites listed on Failing that, look up the name through a pp.124 and 129-134 give such an specialist site such as www.Whois.net overview. which provides a searchable database of domain names worldwide. For US companies, Online Deductive – rbay.com/Spy/spy.htm – is also . . . A company’s helpful. Companies’ websites vary in what they record? contain, and in how useful they are. If your campaign is focused on lobbying Some are simply for marketing ethical investment companies, purposes (with pictures of company highlighting corporate governance issues products and /or ways to buy them or initiating a consumer boycott of a online); others offer little more than company and its products, documenting contact details. But many provide the company’s past record will be a information that will help you build up major part of the research work you will your basic picture of the company. Look need to undertake. The past record of a for sections like: company can also be useful in lobbying about us investors not to put their money into a corporate project to be financed or constructed: the company the company’s past, after all, is the best investor relations guide there is to its future performance. financial Many sources of information can be Later in your research, you might come tapped to build up a picture of a back to the company’s site for more company’s past behaviour, particularly detail, such as: with regard to the environment and company news and press human rights. The most productive are releases likely to be non-governmental company policies organisations, many of whom have plentiful data on companies operating in locations and contact addresses their field. speeches by company managers (usually in the news section) A good start is to search the super-sites

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Table 4 Researching companies on the Web – Top sites

Web sites providing business information proliferate by the day. The following list comprises those sites that we have found most helpful when trying to gain an initial picture of a company. For quick reference, we have coded the services provided by each site. [A] indicates that analysts reports are available, [S] that major shareholders are listed, [AR] that annual reports can be accessed and [KA] that key advisers are listed. All the sites have some free access; those that require payment for full access to databases are marked [P]. Site Coverage Comments Service

About.com Latin Directory of Latin American business sites by America region and by country. Click on the “Central/ globalbusiness.about.com South America” tab under the “Company Directories by Region” listing, immediately below the main Global Business logo. Countries covered are: Argentina, Bolivia, Brazil, Chile, Guatemala and Venezuela.

America’s Trade US US-based database. Gives name, email, ‘phone, fax, country and description of products. No Source financials provided, but the site serves as a useful www.atradesource.com lead to further information.

Asia Business Watch Asia Covers US, Japan, China, Taiwan, Singapore, Hong www.asianbusinesswatch.com Kong, Korea , Malaysia, New Zealand and India. Searchable database by country or company. The company pages have an A-Z index of companies. Coverage of some countries is thin – only five companies are listed for India – but of others more comprehensive. Bloomberg UK World Profiles of listed companies – good basic financial www.bloomberg.com data. Go to “stock quotes, Look Up symbol”. Useful financial glossary.

BUBL UK UK Links to 100 top UK companies http://bubl.ac.uk/uk/ companies.htm

Business Web World First Internet search site designed specifically for business users. Covers news, information and www.businesswebsource.com company websites from 11 different industrial sectors – including banking, chemicals, energy, insurance, pharmaceuticals and transportation. The database is refreshed in its entirety every two weeks. You can search by company or by one of 1,800 classifications, which helps to ensure well- targeted results. Company web pages can also be searched through the site.

Calvert Online US Click on “socially responsible investment” tab, then the “know what you own” entry on the sidebar www.calvertgroup.com listing. This enables you to access information on the companies that a US mutual fund is investing in.

CBS MarketWatch World Offers free company searches – using Hoover’s www.marketwatch.com On Line database – but its main strength is its news coverage and archive of news stories on companies. Market Watch.com also has a subscription service offering historical and financial data on companies.

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Site Coverage Comments Service

Corporate Information World One of the best sites available. Offers 15,000 [A], research reports on publicly-traded companies (in- [AR]. www.corporateinformation.com depth analysis of sales trends, profitability, stock [KP] performance, financial position, research and development expenditure, dividends and a comparison with the performance of three other companies – you specify the companies); 20,000 profiles (brief description of activities, names of top officials, address, ‘phone number and stock chart); links to over 1,000 other sites that offer corporate information; and a search engine that covers 300,000 company profiles at other sites. Reports covering companies in the financial sector will be available shortly. Many of the reports are available in French and Spanish. Corporate Finance World US Exim Bank bills this site as “the starting point for financial research on the Internet.” Useful links Network including to stock exchanges worldwide. www.corpfinet,com

Company Sleuth World Now a susbcription service but offers 14-day free www.companysleuth.com trial. Access to “in-depth company reports to uncover inside information on the companies you are tracking”. Provides email updates on companies you put on a “watch list”.

Dow Jones Business US Reviews of and links to useful websites with Directory company information. http:// businessdirectory.dowjones.com

Dun & Bradstreet World Describes its GlobalSeek database of 26 million www.dnb.com reports on companies worldwide as “the most up to date, most definitive database of business information in the world”. You can search the database for free (although you have to register); you pay only for the reports you order. There is also a free directory of 1.8 million UK businesses, which gives basic details such as names, addresses, telephone and fax numbers, email and web addresses and a contact name. Priced reports which can be accessed from the site include: company reports (US$23.00), which give the company’s addresses, sales, net worth, financial indicators, line of business, names of directors and officials, operations, company history, number of employees and facilities; snapshot reports (US$5), which give much of the above detail in brief; country risk reports (a subscriber service), which provide 60- page assessments of the perceived economic, political and commercial risks of operating in a given country; and supplier evaluation reports (US$89) which rate the record of US suppliers.

Far-East Corporate Far East Covers Singapore, Malaysia, Hong Kong, Indonesia, database Australia, Thailand and the Philippines. For US$35, you can order a detailed report on any of the www.capitaline.com companies in the site’s database. Each research report gives: company background, key officials, board of directors, top 20 shareholders, directors’ holdings, equity history, segmental information, information on subsidiaries, auditors report and key financials.

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Site Coverage Comments Service

Financial Times World Database of company profiles, searchable by www.globalarchive.ft.com industry and company. Entries give contact details, website, management details, product lines, a brief description of the business and key financials.

Fortune 500 World Links to the home pages of the companies in the www.fortune.com Fortune 500 list (1,000 companies) with snapshots of companies and media quotes.

Global Register New Provides information about New Zealand public www.globalregister.co.nz Zealand companies. Snapshots list basic financial details and company officers. In some cases fuller reports are available

Hemscott World One of the best UK services, especially the [S], www.hemscott.com Companies A-Z section. Provides excellent [AR] snapshot profiles of British public limited companies–plcs. Free entries include: a brief summary of key financial data, addresses and names of directors; major shareholders; the latest company balance sheet; a share price graph (3-, 5- or 10-year); and key company advisers (their stockbrokers, auditors, solicitors and financial PR advisers). More detailed information still, including access to detailed brokers’ forecasts and director’s share dealings, is available only if you join Hemscott’s new Internet service – hemscott.NET. Registration is free and you can use the service alongside any other Internet Service Provider (ISP) accounts that you may have. This means that you do not need to change your existing email address. However, you will need to use the hemscott.NET account when accessing the Hemscott website if you wish to access their Business Plus information. Hemscott.NET charges local call rates. Alternatively, you can subscribe to Business Plus for £10 (plus VAT) a month.

Hoover’s On Line World Free company search service. You can search the [KP] www.infocheck.co.uk database by company, industry, subsidiary and sector. The site also offers industry snapshots, with an industry and a news and analysis section, where you can pull up the latest news on a given industry or company. The company capsule page gives details of subsidiaries, the three top competitors, news and commentary and the names of the top company officials. The capsule has links to other pages, including company histories, annual reports (if available on-line) and other sites that offer further information. To dig deeper, you need to subscribe to Hoover’s. Subscribers can access information on a company’s products and operations (by industry segment), a full company profile, historical data on financials and a more complete list of competitors.

Investext World For a price, analysts reports from specialists with [A] www.investext.com leading banks and other financial institutions can be downloaded from this excellent site.

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Site Coverage Comments Service

Business News Americas Latin Subscriber-based research site, which offers a free www.bnamericas.com America trial for three weeks. Covers ten business sectors throughout Latin America, including infrastructure development, banking, electric power and metals. Information provided through own network of 45 journalists and researchers.

Mbendi’s Companies of Africa There are few on-line databases that give Africa information on African companies besides South African ones. Mbendi’s is one of them. The site is www.mbendi.co.za often difficult to get through to but does offer information on 3,700 African companies. The information provided varies from thumbnail contact details to fuller profiles.

Morningstar World Excellent source of snapshot information on over 10,000 US mutual funds, the companies they are Institutional Services investing in, their fund managers, news reports www.morningstar.com and commentaries. A search on biotechnology in the news archives yielded 2,053 references, pointing the way to many useful articles on who’s investing in genetic engineering. Morningstar’s “snapshots” on individual companies are among the best available for free (although you have to register for some services, such as Morningstar’s own analysis). Links are provided to pages which give further snapshots on the industrial sector in which the company operates; industry peers; who’s buying shares in the company and who’s selling them; share dealings by company directors; ownership; SEC filings; free (and priced) analysts’ reports on the company or fund; and the major mutual funds with holdings in a company. The snapshots on individual mutual funds are no less impressive, giving details and links to fund manager profiles, the 25 top holdings, addresses and telephone numbers. Many of the 300,000 investment reports on the Morningstar database are available for free so long as you register with its Multex Investor service. Registration also gives you free membership of powersize.com – a search engine giving “free access to business research from 2,400 newspapers, magazines and newswires.” There is also a chat room (useful for getting a debate going on a particular company) Morningstar’s own company analyses are available only to “premium members”: membership US$9 a month – but there is a 30-day free trial period.

Orient Business Express Far East Database of one million companies located in Hong www.accessasia.com Kong, China, Indonesia, Korea, Malaysia, Philippines, Singapore, Taiwan and Thailand . You can search for free on line – by name, product or SIC code – but some key information is blocked out unless you subscribe. The service costs US$95.00 per year, for which you get a CD of the database.

Quicken.com World Click on the investing tab. This takes you to a [A] www.quicken.com search facility where you enter the tciker symbol of the company you are researching (you can look it up if you don’t know it). A snapshot profile

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Site Coverage Comments Service

comes up, with links to news article, analysts reports and critical assessments of the company’s recent financial performance. Invaluable.

Thomas Register of World A particularly useful site if you are trying to find American Manufacturers out who manufactures a particular product in the US. European site for European products. Links to www.thomasregister.com registers for Indian, Brazilian, Mexican and other www.tipcoeurope.com country producers. www.thomasindia.com

Trade UK UK An Internet service from the UK Government which www.tradeuk.com offers brief data on UK suppliers.

Wall Street Research US Covers US companies only, but offers free Net company and sector searches. Describes itself as “the most comprehensive resource for investors on www.wsrn.com the Web, mobilizing the best free, for-sale and in- depth information into one comprehensive, easy- to-use site”. Its free “company research” facility allows access to US Security and Exchange Commission (SEC) filings (see Part Seven, p.165), over 2,000 company home pages, press releases, charts and statistical analysis. Thousands of research reports, baseline reports and spreadsheets are also on offer.

The site is organised into eight sections which include: company information, which has entries for over 17,000 companies; economic research, with links to economic databases such as the US Department of Commerce, the World Bank and “the better university sites”; news, enabling access to The Wall Street Journal, Bloomberg On Line, CNN and others; research publications, which provides “links to economic and equity publications as well as trade associations and other groups”; and Mutual Funds, which provides useful profiles of mutual funds, including (if you are based in the US) links to CBS MarketWatch, which provides free copies of fund prospectuses and hence information on where the funds are placing your money. If users find a company missing, the site recommends that they “let us know and we will add it.”

Yahoo Finance World This is another excellent site. Look for company [A],[AR] biz.yahoo.com information via the company index or industry [S] index.

Company coverage is good. Each company page includes: – Profile: financial summary; significant developments (financial news on the company – 1 paragraph each, going back 2 years); lists of top institutional shareholders, mutual fund shareholders; history of analyst upgrades and downgrades (who, when, why); list of directors including short biography ( 1 paragraph – other directorships), salary (for some directors only), shareholdings and options in the company.

– Research: financial data; balance of ~25 broker

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Site Coverage Comment Service

recommendations (whether strong buy, moderate buy, hold, moderate sell, strong sell) over last 3 months (gives you an idea of company’s financial prospects); names of analysts who won a competition for accuracy in estimating the company’s earnings.

– Chart: share price graph, going back over 1 day, 5 days, 3 months, 1 year, 2 years, 5 years or longer – this is useful to see what factors have had the greatest impact on the company’s success in the past.

– News: financial news from financial press and newswires, up to 3 items per day for large company; links to full articles. The main site’s data relates to performance on the North American stock exchanges; but you can link to Yahoo Finance sites for other countries. These tend to be less detailed. For the UK, go to http:/ /uk.finance.yahoo.com/uk.finance.yahoo.com, then select an index (eg. FTSE 250), which lists the companies comprising that index as links to their pages. Content is similar in the news, research and chart sections, but there is less in the profile.

Some words of caution. None of these sites is likely to provide you with everything you need to find out. You will often need to try several of them. Although most will give you information on listed companies from the major industrial countries, few have coverage of companies listed in developing markets. To find information on these, you will generally need to work through contacts on the ground. As web sites develop, they are likely to change their layout - so the navigation descriptions given in this table may be rendered redundant. But if changes do occur, persevere: a little digging usually enables you to find a page that has been moved.

such as www.essential.org (a web site with further details and information (see hosting about 30 US anti-corporate p.135 for some key NGO sites). NGOs, especially Multinational Monitor at www.essential.org/ A further source of invaluable monitor) and www.oneworld.net information is the press. Track which (which includes over 500 organisations journalists are covering any stories from around the world, both North and critical of the company – and give them South, focused on development, a call. environment and human rights). OneWorld also functions as a magazine and provides profiles on particular issues, plus campaigning guides. . . . A company’s Table 3 (p.129) gives a summary of environmental policy? some of the best NGO sites, with their URLs and postal addresses. The sites Many companies, particularly the more are all useful first ports-of-call – and savvy multinationals, now produce have links to NGOs working in specific annual environmental policies – indeed, areas. Give the NGOs a call – or email such policies are increasingly viewed in them: they will probably be able to help the City as a key indicator against which

134 The Campaigners’ Guide to Financial Markets to rate a company’s corporate governance. As one might expect, the Table 5 policies are generally worthy but rarely Websites with attitude commit companies to anything radical. Nonetheless, they are useful sources of Business and HumanRights quotes and policy statements that can be www.business-humanrights.org used to argue against a company’s Superb portal. Pages give links to over 200 involvement, for example, in an other sites, organised by sector, country, groups, international agreements, lawsuits environmentally-destructive project. against companies and shareholder initiatives. For companies which have been Corporate Agribusiness Research Project criticised on environmental grounds, www.ea1.com/CARP Monitors corporate agriculture. Research there may be a short statement on the reports and an invaluable guide to researching company’s web site or in the annual the sector (click on “Fact Miners”). Good links. report. The company may also produce a Corporate Critic On-line separate environmental report each year www.ethicalconsumer.com – ‘phone up and ask for a copy. Unit 21, 41 Old Birley Street, Manchester, M15 5RD. Email: [email protected] Tel: 0161 226 2929 Tomorrow magazine, sponsored by the Database run by the Ethical Consumer Research Swedish-Swiss engineering giant, ABB, Association. A one-off subscription of £60 plus low on-line charges allows access to over offers a directory of on-line 48,000 records on more than 27,000 companies. environmental reports, with coverage of Company searches undertaken for a modest companies in Germany, Japan, US, UK, fee. The Netherlands, South Africa and Corporate Europe Observatory Canada. The site also has pages devoted www.xs4all.nl/~ceo/ to environmental accounting and First class for background information on industry lobby groups. Primary focus on Europe. “environmental performance and Excellent links to other sites. shareholder value”. The directory can be Corporate Watch UK found at www.enviroreporting.com . www.corporatewatch.org.uk Email: [email protected] In the EU, many larger companies are Tel: 01865 791 391 signing up for the EU-wide Eco First rate site. Includes briefings, sector reports, back issues of Corporate Watch magazine and Management and Audit Scheme – one of the best archives of articles on EMAS. Under the scheme, a company’s companies and their records. environmental policy, programmes and Corporate Watch US management systems must be publicly www.corpwatch.org available and published as part of an PO Box 29344, San Francisco, California, USA Email: [email protected] environmental statement. Tel: +1 415 561 6568 Human rights and environmental justice site. Other business standards schemes also Excellent research guide available. require the company’s environmental Critical Shareholders Association policy to be publicly available – for oneworld.compuserve.com/homepages/ example, in the UK BS7750 and ISO Critical_shareholder/ 14000/1 (contact British Standards Schlackstrasse 16, D-50737, Cologne, Germany Email: [email protected] Institute, Tel: 020 8996 9000). Tel: +49 221 599 5647 Site run by coalition of over 30 shareholder activist groups. Archive on major German companies – from Krupp to Siemens. In German. . . . Subsidiaries and Endgame Research Services www.endgame.org parents? PO Box 95316, Seattle, WA 98145-2316, USA Tel: +1 206 723 4276 Tracing who owns a company can be Provides A-Z Directory of Transnationals. Profiles environmental and social impacts. helpful to reveal links with bigger or

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better known companies. This is necessary if you are choosing to go Friends of the Earth - US Friends of the Earth - US down the route of a boycott. www.foe.org 1025 Vermont Ave. NW, Washington DC 20005, USA The most useful source of information is Email: [email protected] Tel: +1 202 783 7400 to be found in the directories listed in Friends of the Earth–England and Wales Table 6 (p.137). Note that none are www.foe.co.uk comprehensive (there are just too many 26, Underwood Street, London N1. Tel: 0207 490 1555 companies). To get a comprehensive Use the search facility to find FOE campaigns on list, you will need to look up subsidiary specific companies, many of which are subject to companies individually in a government FOE investor campaigns. Check out the FOE-US site for one of the best guides available on registry and see who owns them (see shareholder activism – www.foe.org/ p.165). How to do this varies from international/shareholder country to country, but wherever you do Focus on the Corporation it, it’s long-winded and probably http://lists.essential.org/mailman/listinfo/ expensive. We recommend using the corp-focus Moderated listserve that distributes the weekly directories first. Focus on the Corporation newsletter. Coverage of corporate double standards, human rights abuses, pollution records, workplace conditions. .. . . The products that International Rivers Network ... . . The products that www.irn.org 1847 Berkeley Way, CA 94703, USA a company Email: [email protected] Tel: +1 510 848 1155 All the information you need on dam-building manufactures? companies, plus page of links to campaigns internationally fighting dams. When you are considering a boycott Multinational Resource Centre against a company, finding out its brands www.essential.org/mdc PO Box 19405, Washington DC 20036, USA is important – the boycott should be Email: [email protected] directed against those that are best Tel: +1 202 387 8030 known. Send in a request and MRC will respond with a package of information on the history of the company, its record, size, ownership structure If you are trying to find out who and major shareholders. manufactures a particular product in the Public Services International – PSI US and Canada, or wish to match a www.world-psi.org brand name to a company, consult the Site run by international federation of public Thomas Register of American sector trade unions. Much of the site – including its database on companies – is restricted to Manufacturers. Its website – union affiliates. Open access to briefings on www.thomasregister.co – has a transnationals in the water, energy and waste management public service sectors. searchable database which covers 156,914 US and Canadian companies Project Underground and 135,415 brand names. There are no www.moles.org 1946 MLK Jr Way, Berkeley, CA 94704, USA charges for access to the information, Email: [email protected] but you must register. If you can’t find a Tel: +1 510 705 8981 A key site on the mining and oil industries. product, you can send an email and Thomas will reply by post, email or fax. Transnationale www.transnationale.org For UK products, Kompass (Volume 2: Two superb A-Z databases – one organised by company name, the other by brand name. Company Information and Volume 3: Industrial Trade Names) are most useful. Scorecard www.scorecard.org They can be obtained from a good Information and action tools on US toxic public library. For further details, see pollution. p.124.

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If you are researching the trade names of products produced by a particular Table 6 company, consult Volume 2 which gives Directories on company ownership details on the trade names used by over

45,000 UK companies. If the trade name y far the best directory for up-to-date is known, but not the company, consult ownership details is: Kompass Volume 3 – Industrial Trade B Names, which details the companies Who Owns Whom? behind over 65,000 registered trade Dun & Bradstreet, Holmers Farm Way, High names. There are different Kompass Wycombe, Buck HP12 4UL. directories for different countries. A multi-volume directory covering Europe, UK and Ireland, North America, Asia, Latin Who Owns Whom (see Table 6) may America and Africa (continental volumes organised by country). For each region, the also be useful, as it tells you the names first volume gives a parent company and of a company’s subsidiary companies its address and registration number, then which often coincide with the bigger its direct subsidiaries (the companies it owns completely), then the subsidiaries of brand names. each of those, and which country each subsidiary is registered in. This tells you whether a company has operations in a particular country. The second volume is ... . . The names of an index of all the subsidiary companies, and tells you what their parent is. institutional You could also try: Kompass – Volume 3: Parents and Subsidiaries shareholders in a Reed Business Information, Windsor Court, East Grinstead House, East Grinstead, West Sussex company? RH19 1XD. Details over 40,000 parent companies in the UK and 130,000 subsidiaries, showing The largest shareholders (those holding their corporate structure. more than 3% of the company) are listed in the company’s annual report and in the Standard and Poor’s Register of Corporations,,, directories published by Hemscott (see Directors and Executives – Volume 1: Corporate p.124). These can also be retrieved from Listings and Volume 3: Indices... the web via Hemscott’s web site: Standard and Poor’s, PO Box 1628, Charlottesville, www.hemscott.com (companies A-Z VA 22902, USA. index). Section 4 of the third volume of Standard and Poor’s Register consists of a cross- The best free source on the web is reference index which lists subsidiaries, divisions and affiliates in alphabetical Yahoo Finance (company index: order and links them to their ultimate biz.yahoo.com/i/ ), which lists the 20 or parent company listed in Volume 1. A so biggest institutional shareholders, the further index – the ‘Ultimate Parent Index’ – lists ultimate parent companies in biggest mutual fund shareholders, and alphabetical order with their subsidiaries, the holdings of the company’s directors. divisions and affiliates, and indicates each unit’s relationship to its parent company. If you have access to a supportive institutional investor, ask them to run the Britain’’’ s Top Foreign Owned Companies company name through their Bloomberg Jordans Limited, 21 St Thomas Street, Bristol BS1 or CDA/Spectrum databases (most use 6JS. these). It will spew out the names and Financial profiles of 1,500 companies addresses in a matter of minutes. ranked in order of turnover. An index is provided which lists the companies CDA Spectrum offer one-time searches alphabetically under the country of ownership. for a fee of a few hundred pounds. If you

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have the money – and can’t find a friendly insider – it is probably worth Spotting the key investors the cost. The only other way to find out the names of shareholders is through the etting a list of investors is only the start of an government agency where companies are investor campaign. Once you have got the registered. This can be time-consuming list, you then have to decide which ones are Gmost worth targeting. Many factors bear on this and frustrating. decision – among them, the vulnerability of the investor to adverse publicity or a consumer The company registrars, which are boycott and their record as socially responsible different for different countries, are investors. described below. For those unfamiliar with the acronyms and abbreviations of the financial markets, the list itself can be bewildering. Some of the names may be UK-registered companies known to you – Barclays Bank, for example – but UK-registered companies often the fund management organisations that hold the shares are not household names. Who, You can get a full list of shareholders except for the specialist, knows what company lies behind the 500 Fund? Answer: Barclays Funds Ltd. from Companies House (see p.166). Experienced campaigners are able to pick out the The list comes on a microfiche, which best investors to target. Novices, however, will not have the experience to do this. you will need to view on a special machine – your local library should have We would suggest that you approach the list using the following steps: one. The list gives the names and 1. Check whether any known ethical investment addresses of shareholders, in addition to funds have shares. A list of such funds can be the number of shares they hold. For a obtained from www.ethicalinvestment orgorg. For large company, the list can be enormous US ethical funds, check out www.socialfunds.com . – one major international oil company 2. To identify the names behind other funds, go to has over a million shareholders. In such www.trustnet.comwww.trustnet.com. This has a listing of 1,879 UK instances, you may be better off (at least funds sorted by fund name. in terms of time spent) paying the £100 3. Identify any funds that are managed by or so that it costs to get a targeted list – companies that have an active commitment to using their holdings to promote socially for example, of pension funds that hold responsible investment – for example, in the UK, shares in the company – from a fee- Morley Fund Management, Henderson Global Investors (also responsible for NPI funds), Jupiter, paying service. One of the best is Friends Ivory and Sime, and USS. Approaching Thomson Financial First Call. A basic these funds should be a major priority – your “A” search is likely to cost about £100. list. 4. Identify others, such as Standard Life Often the real owner of shares is Investments, Murray Johnstone (which manages the “represented” by a fund manager or $300 million Calvert World Values fund, one of the most progressive SRI houses in the US) and Scottish “Nominee”, but each nominee entry will Equitable, which have made noises about SRI or have a code for the client (the person / who are members of SRI networks (see p.110). These should form your “B” list of investors to organisation whose money it is) before lobby. the number of shares. You can look these 5. Check for the major banks – Barclays or the codes up in the Index of Nominees and Bank of Scotland. Several of these have signed up Beneficial Owners, which will tell you to the UNEP statement on banking and the environment (see p.63) or, like the Bank of who each code stands for. It’s published Scotland, are involved in “discussion on Socially by Fulcrum Research (Tel: 020 7253 Directed Banking”. Use these policy initiatives as 0353) and costs about £300 – get it leverage in your discussions. through a business library (see p.153). 6. If you want to know whether a US mutual fund is an investor, the Calvert Group (one of the top SRI firms in the US) has a search facility on its website – www.calvertgroup.com – which enables you to US-registered companies find which US mutual funds are investing in a given company. Click on the SRI tab on the home page, To obtain a list of a US corporation’s then the “Know what you own tab”. top 200 or so institutional investors,

138 The Campaigners’ Guide to Financial Markets check it’s SEC 13-F filing. You may be some cases (Jakarta is an example) the able to find this via the Web on the names of the major shareholders are EDGAR database (see p.166) but the provided. Corporate Finance Network – 13-F filings are not often on the web. www.corpfinet.com – provides useful links to the major stock exchanges of the If you are based in Washington, go to the world. Business Reading Room of the Library of Congress where you can get access to the SEC/Disclosure database. But as Michelle Chan-Fishel of Friends of the Earth (US) describes, the search does ... . . Help in launching a not end there: “The 13-F list will be pretty long, so you may want to target shareholder action? those institutions which you think may be more receptive to your message. Shareholder actions – notably special Many institutions are large asset resolutions at company Annual General managers and hold stock for their Meetings – are well-established in the institutional clients in ‘street name’.” US and becoming increasingly common For example, “a foundation endowment in the UK. may not be listed as ‘The Jones family Two excellent guides to shareholder Fund’, rather its shares would be under lobbying are now available. For the UK, ‘Putnam Investment Company’, the we highly recommend Craig foundation’s asset manager.” 68 Mackenzie’s Shareholder Action If you are filing a shareholder resolution Handbook, published by New (see p.139), the company is obliged to Consumer, 52 Elswick Road, Newcastle provide a list of shareholders so that you upon Tyne, NE4 6JH. The guide can be can solicit their vote. You are required downloaded from www.ethics.fsnet.co.uk . to sign an affidavit promising that you will use the list only for this purpose and For the US, consult Friends of the Earth- that you will not share it with others. US’s Handbook on Socially-Oriented Further information on obtaining US Shareholder Activism, written by Michelle Chan-Fishel. This is a superb shareholders’ names can be obtained step-by-step guide. Although US- from FOE-US’s Handbook on Socially- focused, it offers invaluable insights for Oriented Shareholder Activism, which activists outside the US. The handbook is available from the group’s web site – is available from www.foe.org/ www.foe.org/international/ international/shareholder. shareholder. Companies in Asia, Africa and Latin . . . What companies a America As in the UK and US, a local contact financial institution is willing to do the necessary leg work is probably necessary. investing in? In most cases, it will be necessary to Getting details of an institution’s retrieve the information through the investments is far from easy. The big national agency that regulates institutions usually have a wide range of companies. Some stock exchanges now funds and most won’t tell you how they have searchable databases of the are invested. In such instances, your companies listed on their exchange. In only option is to look up the

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shareholders in every possible company – and see if your institution is . . . How well a among them company is performing Unit trusts and mutual funds, however, are obliged to disclose their holdings. financially? For the former, every three months, fund managers produce a report on their Company strategy is usually explained investments; if you telephone them, they in the company’s annual report. It is will usually send you a copy of this given in much more detail in a report. You can also download many company’s quarterly presentation of US Mutual Fund reports from financial results, and other strategy www.edgar-online.com . If your area presentations to the financial markets. of concern is mining, the Mineral Fund These are often on company websites, in Advisory Party Ltd. the “investor relations” section. You (www.mineralfunds.com) has a should always check out this section of database which gives the braod areas the company’s website – the company that mutual funds worldwide are doesn’t expect people who aren’t investing in. interested in investing to look at it, so UK companies you can often find out things you There are over 1,000 unit trusts in the wouldn’t otherwise come across. These UK managed by around 200 companies. presentations are also reported in trade Unit Trust Advisory Services monitor and financial press. them and will give you detailed reports Of course, company presentations are on their investments. The first report is intended to “sell” the company’s free. strategy – so they need to be treated with US companies caution. The most accessible source of For the US, try Standard & Poor’s 500 more balanced analysis is the Financial (see p.124). This lists the main Times, especially the ‘Lex’ column. companies that US Mutual Funds invest Search the www.ft.com website by: in. The Calvert Group – one of the “company name” + “lex”. Also try leading SRI firms in the US – has an searching: “company name” + “analyst” invaluable “Know what you own” or “results”. facility on its webpage Another option is to look at the broker (www.calvertgroup.com) that enables recommendations in the research section you to look up a mutual fund and see of the Yahoo Finance website (see Table what companies it has shares in. 4, p.129). For US Mutual Funds, you can also If you’re prepared to do a bit of leg- download free the prospectuses of the work, look at a company share-price major funds via CBS’ MarketWatch graph (for example, on the Yahoo Fund Info Service – Finance or Hemscott websites) and see cbs.marketwatch.com – provided you whether it is on a general upward or have a mailing address in the US. For downward trend, both in absolute terms legal reasons, fund documents cannot be and relative to its sector or relative to sent to those outside the US. The Fund the stock exchange. Check out the news Club also delivers (by post, mailed the on the days of its sharp peaks and next business day) other documents troughs and steep rises and falls. made available by the Mutual Funds they cover. These may include annual If you’re really serious, though, you’ll reports. want to see some analysts’ reports….

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pipelines – are increasingly common...... Analysts’ reports? Finding out up-to-date information on which companies are involved, and who The best-informed and most detailed is backing them, is not easy without analysis of company strategies and access to specialist fee-paying financial prospects can be found in the databases. reports of financial analysts. Such databases offer an impressive Analysts advise investors on whether to research tool. The US–based Quantum buy or sell a company; they specialise Leap project, a joint project of the generally in one industrial sector, and it National Wildlife Federation and is their job to know that sector, the Friends of the Earth US, has access to an companies and their financial industry database that gives information performance (see Part Four, pp.77-118). on over 9,000 infrastructure projects The reports are generally only available which are currently being financed to a firm’s clients – and, unless you through the private sector or for which know a sympathetic insider, you will finance is being sought. The database need to pay a lot of money to get hold of gives details on: them. Occasionally, they get leaked to the costs of the project; the press (in 1999, Deutsche Banks’ which banks are financing it; report announcing that “GMOs are which multilateral development Dead” made headline news throughout bank (MDB) is involved; the world – see p.60) but this is rare. which Export Credit Agency (ECA) is Some reports are available on the web – providing guarantees or loans. for a price. Investext According to Quantum Leap: “The (www.investtext.com) and Dialog database provided us with the names of (www.dialog.com) both offer a free trial commercial banks financing the period – or allow you to buy reports on Kumtor mine in Kyrgyzstan, the site of a one-off basis. Check them out. an egregious cyanide spill. Another search on ‘Dabhol’ provided us with The Yahoo Finance website offers some the current status of financing and cheaper (and consequently less detailed) banks involved in the Enron/Dabhol reports. There are some very brief free power project in India. A third search ones, plus others ranging from $5 to $50. provided detailed information on the Go to yahoo.multexinvestor.com. You gas pipelines being planned throughout will need to register (which is free), Latin America.” then click “research” and enter the company’s stock market “ticker symbol” The database does not provide – if you don’t know it, find the company information on company activities that through “company lookup”. are internally financed, nor does it cover forestry activities, unless the project includes a capital investment in infrastructure (for example, a pulp mill). . . . Who is financing a For further details, contact Julie Tanner at the National Wildlife Federation private sector (1400, 16th St., NW, Suite 510, Washington DC 20036, USA). Emails infrastructure project? should be sent to [email protected] . A number of commercial and Private sector infrastructure projects – government organisations also provide from roads to dams, power plants to oil searchable databases of projects on

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their web sites, although the information provided is often quite limited. Those Table 7 we have found most useful are listed in Infrastructure project databases on the Web Table 7 (p.142). Harvard Business School also runs a project finance portal – with links to 800 related sites, Project Finance including several that offer free access www.projectfinancemagazine.org to their databases. The Harvard portal In addition to providing a searchable database of projects, the database also gives details of over can be accessed through www.hbs.edu/ 500 company addresses and 1,500 project projfinportal . financiers. Free trial period. The World Bank’s web site contains a InfrastructureWorld searchable database of infrastructure www.infrastructureworld.com Free, but you need to register. Main industries projects worldwide. This can be useful covered are electric power, energy, telecoms, if you want to know whether or not the transport and water. Bank is involved, for example, through Global Infrastructure Projects Database its private sector arm, the International http://infoserv2.ita.doc.gov/td/Infrastr.nsf Finance Corporation (IFC). Developed by the US Department of Commerce’s International Trade Administration to assist Many projects now backed by official companies track projects worldwide. Useful for export credit agencies (ECAs), few of upcoming projects. which publish details of the projects Private Finance they are supporting. You may be able to www.privatefinance-i.com find out if your country’s ECA is Searchable database of public/private partnership involved through asking your Member of projects Parliament to submit a parliamentary International Finance Corporation Project question. Under pressure from campaign Document Database groups, some ECAs are becoming more http://wbln0018.worldbank.org/IFCExt/ willing to respond to requests for spiwebsite1.nsf/$$Search?Openform information. It is worth telephoning them Projects being backed by the IFC, the private direct; ask to speak to the official in sector arm of the World Bank. charge of the country where the project World Bank Private Participation in is being constructed. Infrastructure To find the names of the project finance www.worldbank.org/html/fpd/privatesector/ ppidb.htm officers in the world’s major banks, Records contract and investment information for consult Euromoney’s Project Finance infrastructure projects that have reached financial Yearbook (Euromoney Publications, 11 closure since 1984. A charge is made per request, but there is a discount for NGOs. North Hill, Colchester, Essex CO1 1DZ, UK) or the web site of Project Finance World Bank Project Search journal (see Box, “Project Finance”, www.worldbank.org/sprojects p.20). Contains information on more than 9,500 World Bank projects, from 1947 to the present. Mbendi . . . What public money www.mbendi.co.za/afproj.htm Search any country in Africa. is backing the Latin American Power Projects Database www.latinenergy.com/latinpowerdb.html company? Asia Infrastructure Database Many companies rely on public sources www.aidresearch.com of funding – particularly government- backed export credits and investment

142 The Campaigners’ Guide to Financial Markets guarantees – to underwrite the projects in which they involved overseas - particularly when the projects are too Table 8 risky for private insurance firms to take Pension fund directories on. Such official export credits are supplied Pension Funds & Their Advisers through national “Export Credit AP Information Services, Roman House, 296 Golders Green Road, London, NW11 9PZ. Agencies” (ECAs). Most countries have Useful for names of key individuals and contact one. Finding out which export credit details for the major UK pension funds and their agency may be backing a project can be advisers, such as investment managers. Also has an international section which includes major US problematic, however, since the ECAs and European pension funds. Now available on themselves are secretive and CD-ROM. untransparent. One avenue for NGOs is New York Institute of Finance’s Guide to Mutual to contact the Quantum Leap project for Funds research assistance (see p.141). Author: Kirk Kazanjian. Publisher: Prentice Hall, Parliamentarians, particularly your own 240 Frisch Court, Paramus, New Jersey 07652, USA. representative, may also be a useful Lists 100 top US mutual funds. Each entry gives the name of the fund manager, contact details means of finding out whether public (including a telephone number) and the fund’s institutions from your own country are top ten holdings. The Guide also contains a useful listing of web sites devoted to mutual involved in backing a project. Write to funds. your own representative and enlist the support of sympathetic members of the Nelson’’’ s Directory of Investment Managers 1999 national legislature (see p.171). Unlike a Volumes I-III database search, this route to obtaining Nelson Information, One Gateway Plaza, Port Chester, NY 10573, USA. information enables you to enlist Useful for global fund managers, especially US. political support for your concerns.

The Euromoney Directory of European Fund Management ... . . The names of Euromoney Publications plc, Nestor House, Playhouse Yard, London, EC4V 5EX. company analysts? Details of fund managers across Europe. UK Fund Industry Review & Directory 1999 Analysts are key to many lobbying Professional and Business Information Publishing strategies (see Part Four, p.80). Ltd, Charterhouse Communications plc, 12-18 Paul Street, London, EC2A 4NX. As with details of shareholders, the Useful for names of individual company officers (Chief Executive Officer, Chief Investment easiest way to find out the names of Officer, and fund managers for each sector). analysts is through a major financial Also profiles the company or group and its database, such as Bloomberg. Ask a investment philosophy. sympathetic insider, if you can. PIRC Local Authority Pension Fund Yearbook Edited by Alan MacDougal. If you do not have access to such a Pensions Investment Research Consultants/ NPI. database, you will need to do some leg Cityside, 40 Alder Street, London E1 1EE. Tel: 0207 work. The best way to find out the names 247 2323 Invaluable resource tool for anyone seeking to of analysts is from the following influence how pension funds are invested. In directories. All are available in the City addition to providing a series of overview Business Library, London (see p.153). essays on the industry, it lists all the local authority pension funds in the UK, with details of how their funds are managed (in-house or Nelson’’’ s Directory of Investment through an investment company) and who sits Research on the key supervisory committees. Volume I – Research Firms & Indexes, Volume II

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– US Companies, for the accuracy of their estimates of a Volume III – Getting the names of International Companies. company’s future earnings. These individual fund managers Nelson Information, One analysts don’t tend to be from the big- Gateway Plaza, Port name merchant banks. takes time, but is critical if Chester, New York 10573, USA. If you can’t get access to any of these your concerns are to be Vol I gives resources, you could try the Financial institutional addressed to the right Times: analysts are often quoted on the investment manager. research firm profiles, analysts by back page of the “Companies & industry/research Markets” section of the paper. This will speciality, analysts and the companies lead you to some of the influential they follow. analysts. Just search www.ft.com for the Vol II – US company profiles/analyst company’s name, along with “company’s coverage. report” (the name of the section) or Vol III – International profiles analyst “analyst”. coverage. More detailed than Briton’s, For those tracking mining companies, an as this gives analysts for a particular invaluable resource is Follow the company. Mining Money, a toolkit written by the Briton’’’ s Index: Investment Research Western Mining Activist Network. The Analysts report has a comprehensive listing of PR Newswire (Europe) Ltd, Communications North American analysts who have House, 210 Old Street, London EC1V 9UN. Tel: commented on the mining industry. It is 0207 490 8111 available from Western Organization of Does not give analysts for each Resource Councils (WORC), 2401 company, only by industry sector. Montana Avenue, #301 Billings, MT Using Nelson’s will probably give you 59101, USA. WORC’s web address is: far more analysts’ names than you want www.worc.org (up to 100 for each company). You can select the most important and best recognised ones as they are marked with an asterisk...... The names of fund Alternatively, Primark Extel Survey run managers? a competition each year for the best analysts in the City, sector by sector. Getting the names of individual fund Winners are worth noting, as they tend managers takes time, but is critical if to be the most important and influential your concerns are to be addressed to the people in the financial markets. The right investment manager. results are published; a copy of the report is held in the City Business You will need to search through several Library, London (see p.153). Directories, since the funds don’t all appear in one place. If you have access to the fee-paying Bloomberg database, the names of You should also ring the company to analysts and the companies they follow check that the fund manager is still there can be obtained at the press of a few – and hasn’t moved to another group. buttons. We have found the directories listed in You can also find some analysts via the Table 7 (see p.143) most useful when research section of the Yahoo Finance researching the names of fund managers. website (see Table 4, p.129). It lists Euromoney’s comprehensive directory analysts who have won a competition of European fund managers is now

144 The Campaigners’ Guide to Financial Markets available on its website – the loans are still probably still in www.euromoneyfunds.com. The effect. company offers a free trial period...... The names of a ... . . The names of company’s directors? company advisers? There are many reasons why it is useful to know the names – and the UK and US companies backgrounds – of the principal officials The most accessible source of and directors in a company. Is the information is the Hemscott website manager a long-standing insider? A (www.hemscott.com), on which each “company” man or woman? If they have company page has a list of company civic appointments outside the company, advisers, including bankers, financial might they be more open to change? If advisers, brokers, auditors, solicitors they have come to the company from and financial advisers. another company, what was their record For more comprehensive lists, use there? Crawford’s Directory of City Connections (AP Information Services, Roman House, 296 Golders Green Table 9 Road, London, NW11 9PZ, UK). Directories giving details of company Published every year, it is available in officials London’s City Business Library (see p.153), where you can also use a CD of Who’s Who in World Coal Financial Times Business, Maple House, 149 the Directory, which includes a Tottenham Court Road, London W1P 9LL. substantial amount of information that Provides contact and biographical details for doesn’t appear in the book due to a lack over 2,500 senior personnel in the coal of space. The Directory gives industry. information on major companies in the Who’s Who in European Business and Industry UK and the advisers that act for them – Who’s Who Edition GmbH, Starnberger Weg 62, stockbrokers, financial advisers, pension D-82205, Germany. Tel: +49 8105 390653 fund investment managers, auditors, Contains biographies of “top managers” in European business and industry. The Directory solicitors, insurance advisers, financial lists the respective manager’s name, title, place public relations consultants, pension and date of birth, marital status, present fund consultants and actuaries, position, education, career, publications, honours, memberships, and recreational investment trust managers, unit trust activities. managers and substantial shareholders. Who’s Who in World Mining For US companies, the Securities and Financial Times Business, Maple House, 149 Exchange Commission’s EDGAR Tottenham Court Road, London W1P 9LL. database – www.freeedgar.com – is Provides contact and biographical details for over 3,500 senior personnel in the industry. again a useful (if not always perfect) reference, particularly for information Standard and Poor’s Register of Corporations,,, on a company’s bank financiers. Find the Volume 2 : Directors and Executives Standard and Poor’s, PO Box 1628, Charlottesville, 10-k form for the company (see p.166): VA 22902, USA. at the end, you can find copies of loan List of over 72,000 directors, trustees and agreements between the company and partners. Provides principal business affiliations bank syndicates. The form also lists the with titles and business address. Where obtainable, home addresses and email name of the loan officer of the bank. The addresses are included. data is sometimes a few years’ old but

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Or again: Are there rivalries between family status, club/society membership, different sections within a company? leisure activities and so on. The highest- The bigger companies get, the less profile directors of large companies homogenous they are in outlook and may have full-length (sometimes book- priorities. If two divisions are at length) biographies written about them. loggerheads over policy, you may be Try searching library catalogues (see able to make considerable gains by p.151). playing one off against another. Getting More information on directors may be to know something of the background of obtained from the press (both company officials is one route into mainstream and trade press) – for these internal conflicts. Some example, in interviews and profiles. Try companies list the heads of their searching the web sites of trade journals different divisions in their annual (see p.159) with the director’s name reports. It is often worth writing to them (and possibly the company’s name, too) all to inform them that the activities of and “interview” or “profile” as the one of their colleague’s divisions is search terms. The trade press updates under scrutiny. personnel changes in their industry and Knowledge of the directorships and often also publishes brief biographical other positions held by directors of a information. Try “appointments” or company can help to broaden a “people” as search terms. campaign. For example, a director may be a leading light in, say, the Prince of UK companies Wales Business Trust. A letter to the In the UK, the names and addresses of Trust explaining the director’s all company directors must be filed by involvement in a controversial project law with Companies House and can be may help open up a new front. obtained for a search fee of £1 per The annual report or interim report tells company. All directors have to file the you who the directors are at the time of names of other directorships held. the report’s publication (as will Disqualified directors are also listed at probably the company website): Companies House (see p.165). Recently, changes since then may be in the some campaigners have targeted Financial Times (although not always directors at their homes: this has led to in the online version) or the trade press. calls for directors’ addresses to be The annual reports will also often tell excluded from the publicly-available you how much the directors get paid company records (see Box, “Huntingdon (they call it remuneration – be aware Life Sciences”, p.27). that packages include share options and Directories giving details of company other benefits such as a company car officials are listed in Table 9, p.110. and medical insurance), and will give a one-paragraph biography for each director. Some salaries, company US Companies shareholdings and short biographies can The quickest way to find information on also be obtained from the “profile” directors of US companies is to consult section of the Yahoo Finance website the Securities Exchange Commission’s (see Table 4, p.129). EDGAR database – There are also versions of Who’s Who www.freeedgar.com . Find the DEF for particular industries – look in a form, which supplies the name, age and business library. These books will give background of directors, together with a short biography of each entrant: place other company affiliations and of birth, parents, education, career, transactions with realted parties.

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Table 10 Importers and exporters – Web sites and directories

UK EXPORTERS register. If you can’t find a product, you can send an email and Thomas will reply by post, email or fax,“depending on the information Corporate Information you provide”. www.corporateinformation.com Provides detailed information about over Hoovers Handbook of American Business 90,000 British exporters. Data include name, Hoovers Inc., 1033 La Posada Drive, Suite 250, address, products, trade names, number of Austin, Texas 78752, USA employees, whether the company is public or private, the names of its chief executives Overview of major US companies. Gives and other information as well. A very good addresses, subsidiaries, products and key site and free to use. competitors. Kompass – Volume 1: Products and Services The Directory of UK Importers Reed Business Information, Windsor Court, East Vol 1: A-Z Listings, Vol. 2: Country of Origin Grinstead House, East Grinstead, West Sussex Index. RH19 1XD. Newman Books, Newman Data Services, 32 Vauxhall Bridge Road, London SW1V 2SS. Gives details of over 44,000 different products and services offered by UK Volume 1 arranges all importing companies industrial companies. (Other volumes do the alphabetically, with each entry listing an same for other countries). Identifies what address, telephone number, contact name, companies are producing what goods and the types of goods imported and the main selling them in the UK. Breaks down suppliers countries from which they are imported. into manufacturers or direct providers; Volume 2 provides indexes arranged by: wholesalers, merchants or indirect providers; country of origin; product (divided by type manufacturers without own works in the UK; of product imported); and import frequency. distributors; exporters and importers. The Food Trades Directory of the UK and IMPORT/EXPORT ASSOCIATIONS Europe Newman Books, Newman Data Services, 32 British Importers Association Vauxhall Bridge Road, London SW1V 2SS. www.britishimporters.org If you are trying to find out who retails a particular foodstuff – industrially-farmed American Importers Association shrimp, for example – this is an invaluable American Importers Association source of information. The index allows you www.americanimporters.org to search by products and brand names and the entries give basic contact details, key Canadian Association of Importers & personnel, parent company, associated Exporters companies and subsidiaries. www.importers.ca/ SECTORAL DIRECTORIES PRODUCTION & RETAIL The Soya Bluebook Published by Soyatech (www.soyatech.comwww.soyatech.com) Thomas Register of American Manufacturers “The annual directory of the world oilseed www.thomasregister.com industry”. Companies listed by commodity A particularly useful site if you are trying to (soyabean, rapeseed, maize, cotton, palm) find out who manufactures a particular and by country, with symbol indicating product in the US and Canada, or wish to commodities, activities (import / export / match a brand name to a company. The processing) contact address and person’s database covers 156,914 companies and name. Also trade and production statistics, 135,415 brand names. There are no charges trade association contacts for all countries for access the information, but you must and other reference information.

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where companies’ markets are, as do ... . . Importers and some company annual reports (see p.126), and some government filings exporters? (see p.165). For information on Finding out who is importing a retailers, market research reports (see particular commodity into a country (or p.163) are probably your best bet, exporting to one) is generally vital if although some sectoral directories may one’s strategy revolves around be helpful. puncturing demand for a product by, for We have undertaken research in this area example, boycotting certain goods or mainly on two issues – the import of threatening to boycott them. Talking to tropical shrimp (a major cause of importers and explaining the problems mangrove destruction and an industry surrounding the production of the goods associated with human rights and labour they are buying and selling can also abuses) and the import of genetically prove effective in turning markets in a modified crops such as soya – so the list more sustainable direction. of directories reflects a focus on the Start by checking out whether your food industry. country is a major export destination from the country of production you’re Table 10 (p.147) gives some useful interested in. For example, for the food general directories of importers and and agricultural industries, the US exporters for the UK and North America Department of Agriculture produces (all sectors). excellent figures on world trade flows between all countries and for all commodities. Or for oil, gas and coal, ... . . What research a use the BP Statistical Review of World Energy (www.bp.com/bpstats/). company is funding? Many sectors produce directories of Knowing what research a company is importers to help companies find funding can be useful for a number of contacts for doing business. Some of reasons: these directories are listed below, or in the sectoral research section of Part the research itself may be problematic for social or environmental Seven (see p.177). Alternatively, you reasons; could approach the trade or professional associations for the sector the amount spent in a given area is a strong indication of the company’s future you are researching, and ask their direction or its commitment, for example, library or information service what to environmentally-sustainable directories are available. production methods; and You may also be able to get advice where academic researchers are used from the importer and exporter to counter critics of the company’s associations, some of which are listed products or activities, it is important to below. Failing all that, you could look know what research links they may have with the company. at what happens either side of the international transaction: production in For the US, two databases are the source country, or retail in the particularly useful : destination country. For information on www.ssw.umich.edu/grantetc/ producers, some business directories corps.html and www.fdncenter.org/ give geographical breakdowns of grantmaker/gws_corp/corp.html .

148 The Campaigners’ Guide to Financial Markets Part Six FurFurtherther rresearesearcchh –– SkillsSkills andand rresouresourcesces

149 The Campaigners’ Guide to Financial Markets WWherheree toto ggoo fforor infinforormamationtion

esearching companies and business sectors is R often portrayed as a highly specialist affair. It is actually much easier than many people think. Anyone can find out about a company with a little time and imagination. Obviously, it’s easier to find out about a large company than a small one, and a local company than a distant one. The smaller and further they get, the more you will have to use your ingenuity.

This section gives details of where to go for information. It starts with the libraries in the UK where you can research companies and businesses. It also provides a brief introduction to researching companies on the Web; which search engines have proved most useful in our work; how to phrase your web searches to get the best results; and where to find non-English search engines. The section also includes a guide to government, industry, media and NGO sources of information, and information on sectors.

150 The Campaigners’ Guide to Financial Markets LIBRARIESLIBRARIES

Uses of libraries are very helpful in this – most see it as a vital part of the service they provide. Libraries can be used to find all paper- Few local libraries in the UK have their based sources, including: catalogues on the web; but if you are business directories; looking for a newspaper or journal, the company and other reports; MagNet website – www.earl.org.uk/ magnet – catalogues these for many mainstream, financial and trade press; libraries across the country (it covers over 40 library authorities, such as biographies of officials; county councils, borough councils and guides; unitary authorities). You can search it by information on governments and geographical region. laws; telephone and address directories; 2. University libraries reference sources, such as listings Try the business studies section, or other of publications or useful associations. relevant subject sections (for a chemicals company, look in the Some libraries also have electronic chemistry section; for a construction resources, such as CD-ROMs and company, look in engineering). subscription online services. University libraries also provide good general reference sources, good media coverage (including trade journals), and abstracts databases – if they let you use Choosing your library them. Universities vary in how willing There are five different types of library: they are to give access to non-university members. 1. Local libraries These provide fairly basic coverage, 3. National libraries but the periodicals sections can be These are generally the best non- useful. In the UK, the main county specialist libraries, and have extensive libraries (usually in each county town) collections (especially of books generally have up-to-date business published in the library’s own country). directories in their business section. If They are usually located in the capital your target company is based locally, city. In Britain, there are six copyright local history books and local papers libraries (see Table 11, p.153). By law, may be useful. If a directory or other all these libraries are entitled to receive reference book is not available through a copy of every publication published in your local public library, ask the the UK. The best is the British Library librarian to get a copy through the inter- in London, which is obliged to take a library loan service – in the UK, the copy of all UK publications (the others library is obliged to try to get the book can choose to opt out). They also have for you if it is held in the national public extensive foreign collections. library system, although they may charge To use copyright libraries, you will you for doing so. Generally, librarians need to be registered as a reader: this

151 The Campaigners’ Guide to Financial Markets

Basic skills and techniques

f you have never researched real use. Maybe even write it note book and use it to log a company or market down. List possible research where you got your before, you might well avenues, plan your time, information from – jot down thinkI that there is little prioritise and continually re- web site addresses and information readily available evaluate progress as you work – telephone numbers in to the public. Much of it is, to avoid spending all your time particular. If later in your indeed, commercially getting over-absorbed in one investigations you come to confidential – and companies source of information. doubt some of your go to considerable lengths to information (for example, if keep it that way. But enter a Don’t be afraid to ask you get conflicting facts), you library or begin searching the someone else need to be able to check out Web and the problem soon There are very few companies – its reliability. Also, being able becomes less one of “How do or sectors in the world – that to go back to your sources I find out about this or that don’t have some group already may give you new leads. The company?” and more one of tracking them. At the start of author of The Corporate “How do I make sense of all your research, you should scope Watch DIY Research Guide says this information?” Confronted what other researchers and he “goes so far as to log by shelves of reference books campaigners have already done everything I do during a and pages of web sites, it is that could be helpful and could research project, including all easy to feel overwhelmed – avoid duplication of work. names, ‘phone numbers, and and even easier to get lost in Look for leads details of where I get each the material which you will Throughout your research, look piece of information. And I’ve quickly manage to unearth. not just for information itself frequently been very glad I do. I also keep photocopies So, before setting out to but also for potential further sources, whether publications, of all useful paper sources, “catch your hare”, it is and printouts of web pages.” worthwhile bearing in mind a websites and contacts. Ask few golden rules of research. interviewees for any contacts There isn’t one single way to Corporate Watch, a UK-based they’ve got; follow all links do research – as you go research group, has produced from useful websites; always along, you will evolve your an invaluable DIY Guide on look through bibliographies and own short cuts, favourite researching companies, which reference lists in the back of directories and web sites, and begins with some excellent publications. Look at the source ways of getting information. advice for would-be of all your information and For example, you will researchers: follow it (for instance, if the probably build up your own source was a newspaper or web bookmarks of sites you Know what you want magazine article, talk to the have found useful. journalists, find out where they Be clear about what kind of got their information.) A lot of information you need for your good stories begin with a campaign. Beware of rumour – “Have you heard that Source information addiction – if you ABC plc does this?” Always don’t know exactly what you How to research companies – follow these rumours: “Where Corporate Watch DIY guide. The want, you can spend hours did you hear that?” guide can be downloaded from picking up reams of www.corporatewatch.org.uk/ www.corporatewatch.org.uk/ “information”, which is all very Note all references publications/ interesting, but in the end no This really is essential. Buy a diy_research.html

entails filling in a form and convincing stack, and then come back when they’ve the library’s administration that you arrived; at the British Library, this can would not be able to find the materials take a couple of days. you need elsewhere. A letter of recommendation from an academic 4. Business libraries definitely helps. Business libraries are specifically The Bodleian in Oxford and the British designed to meet business needs, so Library in London (and possibly the have excellent collections of business others) keep most of their collections in directories, trade journals, company stack storage. This means you need to reports, market guides and other go beforehand to order them up from the resources. Almost as useful, however,

152 The Campaigners’ Guide to Financial Markets are business studies libraries in universities and business sections of public libraries. Table 11 Both London and New York have a UK business and copyright libraries dedicated business library – the City Business Library in London (see Table City Business Library 11, p.153) and the Brooklyn Business City Business Library 1 Brewers’ Hall Garden, London EC2V 5BX Library in New York (nearest tube: Moorgate. The library is between (www.brooklynpubliclibrary.org/ London Wall and Aldermanbury Square) Open: Monday to Friday 9.30am - 5.00pm business/business.htm). Excellent, with a wide range of business directories, some 750 periodicals, 90 daily papers and other Other business libraries are listed in interesting sources. Its periodicals are catalogued Euromonitor’s World Directory of on the web (along with those at various other libraries). The library also offers a fee-based Business Information Libraries – research service. although to use this, you’ll need to find a library which stocks it. It is held in the Westminster Reference Library British Library’s business section, so if 35 St Martin’s Street, London WC2H 7HP (nearest tubes: Leicester Square, Piccadilly Circus and Charing you have contacts in London, ask them to Cross). look it up for you. Trade Partners UK Information Centre Room 134, Kingsgate House, 66-74 Victoria Street, 5. Specialist libraries London SW1E 6SW (nearest tube: Victoria) Many interest groups have special www.tradepartners.gov.uk/ information_centre/home/welcome/ libraries. Some trade associations and professional institutes (see p.163) have Department of Trade and Industry Library excellent libraries on their industries. 1 Victoria Street, London SW1 0ET (nearest tube: You may need to be a member to use Westminster or St James Park) Students must have an appointment and proof of them, or you might have to pay for a identity day’s visit. Other specialist libraries in the UK British Library include the library of the National Motor 96 Euston Road, London NW1 2DB Museum in Beaulieu (Hampshire) on the (nearest tube: Kings Cross). Catalogue: www.blpc.bl.uk auto industry, and the Private Finance Has a Science, Technology & Business Reading Initiative library in the Treasury – the Room, plus extensive bookstack. The business resources in the Science and Business reading room UK government’s finance department. are on “open shelf” – so you don’t have to wait (See also sectoral research sources, Part whilst books are bought up from the basement. A Seven, p.177) reader’s ticket is required. Bodleian Library (Oxford University) Broad Street, Oxford OX1 How to use libraries Catalogue: www.bodley.ox.ac.uk/elec-res.html Start by asking library assistants which National Library of Wales book is best for your purposes – Aberystwyth, Ceredigion SY23 3BU librarians are usually keen to help. Or Catalogue: geacweb.11gc.org.uk:8000 search the catalogue by subject National Library of Scotland keywords or by author or publisher (for George IV Bridge, Edinburgh EH1 1EW. example, a company or trade association Catalogue: http://main_cat.nls.ok may publish many useful reports). There may also be books about the company or Cambridge University Library West Road, Cambridge CB3 9DR. its industry. Browsing can yield results – Catalogue: www.libcam.ac.uk/Catalogues/ but be careful of getting sidetracked. OPAC

153 The Campaigners’ Guide to Financial Markets THETHE WEBWEB

The web is becoming an increasingly thousands of search engines available, powerful tool for research, especially which vary widely, so it’s important to for those who live in the US and other use a good one (and one which suits countries where local telephone calls you). Bear in mind that different search are not charged. engines “think” differently: consequently, they rank pages in For those living in the South, however, different orders, and search in different computers may not be readily available ways, so it’s sometimes worth trying and, even where they are, on-line more than one. Some of our favourites research can be expensive and are listed below. frustrating, particularly where telephone connections are unreliable. Southern groups without access to Types of search computers or the resources to undertake You should always read the “search intensive web searches might be tips” on how the logic of the search advised to contact partners in the North engine works – this tells you how to to request their support. enter your search terms. There are basically three types of The dangers search: Extra care is needed recording what you do with websites, as it’s easy to get 1. Random searches lost when “surfing” and forget how you This involves putting in keyword search got there – so noting sources is terms and searching the whole web. It is critically important. Always note the probably the least fruitful type of search, web page address (its “URL”) and the and it will give you all sorts of web date viewed. pages, only some of which are of use. But if you’re starting from scratch, it can In addition, websites are not enduring be good way of getting some initial like paper publications – they get information and some leads. Judicious changed and updated from time to time. use of keywords can help here – such as For this reason, it’s good to print out the the company name with “pollution” or page (make sure the URL is printed “prosecution” or “protest”. You will with it – sometimes it isn’t in full if it’s often get thousands of results. Improve too long); or to save it on your hard your searches by using intelligent search drive and note the URL; or to take engines or by using Boolean operators comprehensive notes on everything that (“and”, “or”, “not”) or understanding the might be useful. logic your search engine is working to; The other danger – even more than with by using less general words (for libraries – is of getting swamped with example, the name of a project in which information. It is very easy to spend a company is involved, rather than just many hours surfing without realising it. the company’s name); or, if looking for a project, by using a search engine with an Search engines “exact phrase” option. By far the most important tool is your 2. Specific searches search engine. There are literally If you are looking for a specific report,

154 The Campaigners’ Guide to Financial Markets

Table 12 Tried and tested engines

number of “portals” offer pages with It can search only for pages linking to a excellent reviews of search engines, such particular type of web medium (for example, as Business Information on the Internet – images, video, audio, pdf). Some companies, www.dis.strath.ac.uk/businesswww.dis.strath.ac.uk/business.A These can for example, web-cast their quarterly be extremely helpful in pointing you to a financial presentations to analysts, and this search engine that is most suited to your function could be used to find such audio or needs. Our favourite search engines are: video content. Google Debriefing www.google.com www.debriefing.com One of the most “intelligent” in how it ranks One of the best search engines that we have pages for usefulness – judging pages by come across. Fast (20 results on “Balfour how close your search terms are to each Beatty” in 0.871 seconds) and with search other, and by how many other sites link to results that are relevant. Described by that page. We find that Google always tends “Business Information on the Internet” as to get what we really want very high in its “Australian metasearch engine that seems . . . list. to avoid sites which count as ‘noise’ for a It also has two other excellent features: business search.” The only drawback that Business Information identified was that “it It holds a “cache” of each page it has does not group by site so you may find all registered. In other words, if a web page the selected hits come from the company’s has changed (as they often do), Google will own company sites”. Also has a French show you how the page looked when version. Google indexed it. It allows you to just search a specific site. Pinstripe Write “site:www.[domain name]” after your search terms, and it will just search that www.pinstripe.opentext.com domain name. Alternatively, use the Specialises in “crawling” business-oriented “advanced search”. web sites, with the database updated every Google also allows phrase searching, and two weeks. Sites include businesses on the Boolean operators (“and”, “or”, “not”). These Fortune 1000, Global 500 and Forbes 500 features are explained in the “search tips” lists, as well as sites with content about and made easy to use on the “advanced business issues. According to search” page. In each search result, Google “Searchenginewatch”, “The idea is that this has a “similar pages” link, which takes you to focused database will present results more other pages containing many of the same suited for business users.” Searches can be words. Use this if you found a page that requested across all sites in the database or meets your needs, and you want more like just among sites that belong in particular it. Google works in many different categories called “slices.” These categories languages. include topics such as “Construction” or “Retail Trade.” It is also possible to search for specific people using the “WhoWhere” Hotbot facility. All specialty services are available via www.HotBot.com a navigation bar at the top of the screen. Hotbot has many of the same features as Northern Light Google, including Boolean operators, phrase www.northernlight.com search, site search and some languages. It is www.northernlight.com less intelligent than Google, however, and Has particular appeal for researchers because doesn’t have the cache or “similar pages” it offers access to online versions of functions. But it does have three useful published articles. Its Special Collection – features in its advanced search which over four million full-text articles from Google lacks: newspapers, magazines, trade journals, and other sources – provides full citations (and It can restrict results to pages modified even abstracts) for free: the full text of the after, on or before a certain date; article, however, costs $1 to $4. “Business It can search for results containing words Information on the Internet” rates Northern stemming from some of your search terms Light’s free database as being “good for (for example, with search term “finance”, it searching US government sites”. In addition, will also find pages containing “financial”) or Northern Light operates the priced use wildcards; “govsearch” service for US government sites.

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publication or dataset, the Web can be than 1,200 search engines from around one of the quickest ways of accessing it. the world. If you know the name of the report, or its author, try a specific search – just enter the name of the report. Filtering software You might consider using a programme 3. Site searches to search several engines at once. For Some search engines allow you to example, Copernic filters out duplicates search specific websites or domains for and downloads the results so that you particular words or phrases. This can can browse them off-line. This means be fantastically useful, especially for that you don’t have to spend valuable big sites containing lots of information time waiting for each page of your and resources, or when a site’s own search results to download before you built-in search engine isn’t very good. can read it on screen. You can get the For example, the excellent basic Copernic software off their Multinational Monitor website has a website for free from poor search engine – but a site search www.copernic.com . The latest version, of the essential.org domain, using the which includes more search engines, Google search engine, gets much better costs US $75. results. English isn’’’ t Other techniques More effective use of the web comes the only language in with practice. But there are two main techniques for research: the world . . . 1. Following links Some of the best known search engines Most sites have a links page, and these only trawl English-language based are usually worth following (although be databases. But with Google, our selective). Use the “back” key to return favourite search engine, you can set the to the site from where you branched off. interface to be in one of 26 languages – 2. Bookmarking from Chinese (simplified) to Chinese 2. Bookmarking Some sites are repeatedly useful, such (traditional), Danish, Dutch, English, as financial sites, media sites or search Finnish, French, German, Italian, engines, and as a researcher you will Japanese, Korean, Spanish and want to keep coming back to them. Keep Swedish. It can display its interface in a well-organised set of bookmarks for 15 different languages. Use the these. advanced search page or consult Google’s “Frequently Asked Questions” page. Hundreds of other search engines exist Free trials in other languages. Search engine Many of the best business and media colossus – www.searchenginecolossus sites on the web charge for the – provides an international directory of information they provide, usually by more than 1,000 search engines subscription, but sometimes by item organised by country. It can be searched downloaded. Since they are targeted at in the language of the country covered. business, the prices tend to be high. But Beaucoup – www.beaucoup.com – is almost all will give you a free trial. Use another useful megasite, listing more it wisely.

156 The Campaigners’ Guide to Financial Markets THETHE MEDIAMEDIA

The media are invaluable sources of 3. Alternative/campaign media news and historical information on both companies and the sectors in which they This is where you will find criticism of operate. It’s difficult to beat the companies by others who’ve done work Financial Times for broad and like yours. It’s a source not just of comprehensible, yet serious and information but also of contacts. engaged, company information. If you’re involved in corporate campaigning, it’s worth reading the FT regularly. The front Media on the Web of the “Companies and markets” section has an index of the companies covered These days many of the main in that issue – so you can quickly check newspapers, and some broadcast media, whether yours is covered. Other media sources that are most useful for researching companies fall into three Table 13: Guides and portals categories:

f you want more ideas on using the web for 1. Mainstream media company research, a number of “Guides” to business research using the Internet can now be Primarily, the broadsheet national downloadedI for free: most consist of listings of useful sites, but some go further and include dailies (for various countries), but also helpful advice on Web-based research. Our advice weeklies and broadcast media. Local would be to download the pages and print them newspapers can also be useful in areas out; that way, you have a paper copy to consult. where a company has operations, The following sites have proved particularly helpful in filtering out those sites that have less to especially for small and local offer. companies. Business Information Sources on the Internet www.dis.strath.ac.uk/business 2. Trade and financial press One of the very best general directories of internet business resources, the site has been The trade press consists of magazines run since 1994 by Sheila Webber, a lecturer at published for people working in the Department of Information Science at the particular industries and business University of Strathclyde (Livingstone Tower, Glasgow G1 1XH.) The site, which is checked sectors. As a result, articles in the trade roughly every few months, includes pages on press give you far more detailed and search engines, sources of advice on search techniques, and reviews of hundreds of specialised information on companies business sites. than those in the mainstream media. For example, a construction journal will CEO Express often tell you what projects a company is www.ceoexpress.com chasing or which contracts it has been “Designed by a busy executive for busy executives”. Click on the tabs across the top of awarded; where the sector is heading; the home page to go to specific pages for what issues people in the sector think “Daily news and information” or “Business research”, where you will find links to a host of are important; and so on. It is worth useful sites. For example, “The Daily News” regularly reading at least one trade page has links to Business Week, Barrons, journal for the industry on which you’re Singapore Business Times, Fortune, Forbes and Strategy and Business. campaigning.

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are archived on the web: access is often For more specialist material, academic free. Some key, web-based UK media abstracts databases (giving one- or two- sources are listed in Table 15, p.160. paragraph summaries of articles) can be These archives allow you to search by useful, especially in vocational subjects. key words such as company names, These are found in university libraries, names of directors, names of projects, although often they require password and key words such as “prosecuted”, access. Try applying for a reader’s “pollution” or “protest”. ticket, or maybe ask a friendly student. You should always read the website’s search tips or help page to see how best to frame your search terms – for Indexes – example, whether to write exact phrases or to use Boolean operators or The old-fashioned way whether you can use “wildcards”. Some If you can’t get access to the Web or databases allow you to sort your results CD-ROM access, you can use indexes. by relevance; some let you narrow In the UK, most major newspapers down your search by only scanning in publish monthly indexes, amalgamated the headlines. at the end of each year: you may find these indexes in a library. Most importantly, the indexes will go back CD-ROMs much further than electronic archives (most media websites only go back to Many newspapers and magazines now about 1997/98). make their archives available on CD- ROMs, which can be found in public Also available are the indexes which libraries. If you’re based near such a cover several publications – such as the library, using these CD-ROMs may be Research Index, published by Business better than using the web, as you can Surveys Ltd, which covers most of the search several publications at once. major newspapers and magazines, including some trade journals, or the 6- One of the best is FT McCarthy, which monthly Clover Newspaper Index, contains around 40 titles, including all which covers the four main UK the UK broadsheets; the main broadsheets, plus the Financial Times, newspaper from each of several major The European and the Economist; it industrialised countries; and two UK also has a company data supplement. local papers (Birmingham Post and Neither of these are comprehensive – Yorkshire Times). There is a copy in the for example, they don’t index every City Business Library, London (see single article in the papers and journals p.153). which they cover. Another good CD-ROM-based archive, Trade journals often have an index in the although less commonly available, is first issue of the year, covering the dialog@carl, which contains many US previous year – you could call the state newspapers, plus others from editorial office to ask whether this is the elsewhere in the world (for example, case. When old editions are bound, an Asia and Latin America). Try a index is often inserted. university library for this. A few alternative media have indexes, You can also obtain some magazines on although this is more rare. CD-ROM, such as New Scientist and the Times Higher Education Libraries don’t generally hold more than Supplement. a couple of years of back issues due to

158 The Campaigners’ Guide to Financial Markets limited space. For older newspapers, try ‘phone them up, to see what they publish the British Library’s Newspaper Library on the industry you’re interested in. (Colindale Avenue, London NW9 5HE) Some of these companies are listed or a copyright library. below. Most trade associations and And failing that – professional institutes (see “Industry Sources”, p.163) will publish a the hard way magazine, journal or newsletter; while some just report on the association For some publications, there are neither itself, others will include general electronic versions nor indexes industry news. available – including local papers, some Another option is to look in Ulrich’s countries’ national papers, and many Directory of Periodicals (published by trade and alternative papers. You could RR Bowker, 121 Chanlon Road, New try calling up the editorial team, who Providence, NJ 07974, USA), which is may be helpful in telling you where to a massive listing (5 volumes) of all the find a story, or who might search their periodicals published in the world, office archive. organised by subject. It also tells you But in most cases, you’ll just have to set aside plenty of time and work your way through a pile of journals. Most journals Table 14: Trade journal publishers have contents pages, so you can often get away with just reading this for each The main UK trade journal publishers are: issue. The contents page often doesn’t cover the news section, so you may want Reed Business Publishing to skim through this, too. It gets easier www.reedbusiness.com with practice – you learn to scan The biggest publisher of trade journals, with many titles. headlines; first paragraphs usually give a good sense of whether an article’s likely FT Business to be useful. With practice, you become www.ftbusiness.com able to scan pages quickly to pick up the Specialist journals on the financial and energy visual shape of words (for example, sectors. company names), rather than actually EMAP Business Communications reading every word on the page. www.emap.com Large range of titles; sectors covered include: advertising, automotive, communications, construction and cicil engineering, health care, local government, materials, media, oil and gas, Finding trade journals and retail. Every industry sector has a large number Haymarket Group of trade journals, of differing degrees of www.haymarketpublishing.co.uk obscurity. Sometimes, the best way to Various, including Management Today, find a useful one is to go to a business or Campaign, PR Week and others. university library and browse. William Reed Publishing Alternatively, try searching the library www.william-reed.net catalogue by subject. Mainly food and retailing industries. There are only a small number of Hemming Group companies which publish trade journals. www.h-info.co.uk Most list the journals they publish on Various, including Surveyor, International Trade their websites, or alternatively you can Today and others.

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which country they’re published in. You possibly handle. Narrow it down by should be able to find it in the reference selecting the most useful-sounding titles. section of a library. The directory will The directory is also available to give you some really obscure journals, subscribers on the Web – probably far more than you can www.ulrichsweb.com . A free trial period is offered. Once you’ve got the title of the journal Table 15: UK Press databases on the Web you want, browse the on-line catalogues of copyright, business, university and The Guardian relevant specialist libraries and see if http://www.guardianunlimited.co.uk/ they hold copies (see “Libraries”, Select “search the archive” from pull-down menu p.151). at top of page. Archive goes back to September 1998 (Guardian and Observer). Allows Boolean operators. BBC News Alternative media http://news.bbc.co.uk/ Click in top right of page. Taken from the BBC’s World Service, so Few alternative media have electronic has good international coverage and generally versions – exceptions include quite good depth. Goes back to November 1997. Multinational Monitor Allows Boolean operators and wildcards in its advanced search option. (www.essential.org/monitor/ ) and Corporate Watch Financial Times (www.corporatewatch.org.uk) or http://globalarchive.ft.com/globalarchive/ indexes (exceptions are ENDS Report, This site has recently been upgraded, and allows you to search over 2,000 publications, including one of the best journals available on newspapers from around the world and a good pollution-related issues, and Ethical selection of trade journals. This will often give you too many results to be useful; you can narrow Consumer). down the range of publications (including searching only the FT), and you can select a precise The best way to search the alternative date range. You view headlines of the articles it media is via the Ethical Consumer finds 10 at a time, then select the ones you want and retrieve them. The interface is somewhat Research Association’s Corporate clumsy, and often it will tell you it is unable to Critic – at www.ethicalconsumer.org/ perform a particular search. Usually simply clicking the “back” button and doing exactly the same ECnewsite/pages/corp_critic.htm. again is successful. The search terms are not This is essentially a database of brilliant, in that Boolean operators are not allowed abstracts, covering all the main (although it does have an “exact phrase” option); but it remains one of the best free resources alternative media (over 50 available. publications). Daily Telegraph When you type in a search term, it gives www.telegraph.co.uk you a list of articles, indicating Click

at top of page. Goes back to 1994. Doesn’t have Boolean operators. Can search companies involved, date and nature of on a particular date, or more usefully a month or the criticism (in 15 categories, including year. It lists all articles that match any of your environmental pollution, worker rights search terms, starting with those that match all of them – these score 100%. This search facility is and irresponsible marketing). more opaque than some others. You can then select from the list, and The Times download abstracts, which include full www.thetimes.co.uk source details and a one-paragraph Click at bottom of page. Can search back to October 1999. Can specify a date range. description of the article. You then need Allows the ‘AND’ Boolean operator. Also has an to get the article yourself, or pay ECRA unsearchable archive back to January 1996 (you need to specify exact date). to send it to you (about £2). A one-off lifetime subscription costs £60; getting

160 The Campaigners’ Guide to Financial Markets the initial list is free, but you have to pay You can specify an exact date range, £0.75 per abstract you download. countries you want to search in and publications you want to search (or publications grouped by the industry Press databases sector they cover). You can also narrow down your search by specifying how The most powerful press resources of early in an article a search term should all are online press databases (for the appear, or whether it should appear in UK press, see Table 15, p.160), the same sentence or in the same allowing you to search electronically paragraph. vast chunks of the media – for a fee. There is one free such service – the The downside is that it is very global archive of the Financial Times expensive – a minimum of £6,000 for a (www.ft.com). This can be very useful, year (+ VAT), for 20 hours per month although it is rather inferior to paying online time. But they do give a two- services. week free trial – call sales on Tel: 020 7542 5455. The best online database we have found is Reuters Business Briefing – The other downside is “information www.briefing.reuters.com. It covers overload”, as you can retrieve vast over 6,000 publications in 10 different numbers of articles. You need to choose languages, including all major national your search terms well: if it returns press from around the world, some local more than about 200 headlines, try to press and an excellent collection of narrow your search more. Another trick trade press. The search options are very is to minimise your online time – print sophisticated, allowing Boolean out all retrieved headlines, save all operators (“and”, “or”, “not”), including downloaded articles, then log out and bracketing; it also allows “wildcards”. read them off-line.

161 The Campaigners’ Guide to Financial Markets COMPCOMPANYANY ANDAND INDUSTRINDUSTRYY SOURSOURCESCES

Information is playing an increasingly industry; services include key role in business, and each industry information, professional sector has its own sources of qualifications and accreditation, information which people in the conferences, training and others. industry rely on from day to day. Many of these are accessible to the corporate 3. Trade journals researcher, too. Magazines which focus on a particular industry. For a listing of The six main industry-derived sources trade journal publishers, see p.159. of information on companies and business sectors are listed below, 4. Market research followed by details on where to go for Guides to how a sector works, information. For listings on specific including: the main companies sectors, see Part Seven, p.177. involved and their market shares; breakdown of the importance of 1. Company annual reports and different chunks of the markets; websites future prospects; major issues facing These are an invaluable source of basic the sector and so on. As such, they information on a company – from the can be extremely useful in getting to company’s point of view. To find out know an industry and the how to access them, see p.126. competitive positions of its companies. 2. Trade associations 5. Directories and websites These are organisations whose These range from simple listings of members are the companies in an contact details for companies in a industry; they exist to serve their sector to quite detailed guides, members through information provision, which may also give: information on technical advice, setting of industry what goods and services companies standards, lobbying, public provide; financial details; market communications and other services. All shares; breakdown of companies’ industries have at least one trade markets by geographical area or association, as do some small and business activity; directors; advisers obscure sectors of industries; there are and service providers; company also associations for companies with histories; and current issues. In fact, interest in a particular issue of directories and websites are such an relevance to their industry. important source of information that we have given them their own 3. Professional institutes section, see p.151 and p.154. In contrast, these organisations’ members are the people who work in an 6. Trade associations and

162 The Campaigners’ Guide to Financial Markets professional institutes updated at intervals of a few years. Many industry bodies have libraries, Buying market research reports tends to which can be invaluable for their be prohibitively expensive; many specialist focus – assuming you can libraries, however, have market persuade them to let you in. Some will research sections, which are well worth charge you for use of their library. The browsing. The British Library’s (in the organisations often also have business section) is especially good. information services, whereby you can Even local libraries often hold market ‘phone up for statistics, market data or research in their business section, but other information they have to hand – the reports they hold tend to deal with although they will generally charge you less industrialised, less capital- if you need more of their time than just intensive sectors since they are there to speaking on the ‘phone. Perhaps most usefully, you can ask these information departments for advice on how to do your research, pointers to good Table 16: Trade associations websites, directories, journals and libraries. Trade association employees generally have an excellent knowledge or UK and US trade associations, the following web sites and directories are particularly of their industry (see “Interviews”, Fhelpful: p.173). Many trade associations also publish their own journals and Trade Association Forum newsletters. www.martex.co.uk/taf/index.htm Search by UK industry or by association name In the case of professional institutes, you Trade Associations and Professional Bodies of might even consider joining. Of course, Trade Associations and Professional Bodies of the United Kingdom institutes vary in the toughness of their the United Kingdom Graham & Whiteside, 5-6 Francis Grove, London membership criteria, but it has been SW19 4DT. Tel: 0208 947 1011 done. Some offer reduced membership rates for students. Directory of British Associations CBD Research, Chancery House, 15 Wickham Road, You can find the trade association and Beckenham, Kent. Tel: 0208 650 7745 professional institute for the industry Gateway to Associations you’re tracking by using listings either http://info.asaenet.org/gateway/ on the web or in directories in the OnlineAssocSlist.html reference section of most libraries. Search by US industry, state or city; it’s worth Directories tend to have subject indexes also trying various search terms in the search box for the organisation’s name. in the back. International directories inevitably are less comprehensive. But try: Market research Encyclopedia of Associations Market research Gale Group, 27500 Drake Road, Farmington Hills, Market research companies tend to MI, USA. publish reports regularly, often monthly, In 3 volumes covering a different sector or sectors World Guide to Trade Associations each time. Some are published in journal KG Saur, Ortlerstrasse 8, D-81373 Munich, format and then bound – in which case Germany. you need to look through the index of the Directory of European Industry and Trade most recent, which will point you Associations towards the issue you need. Others come CBD Research, Chancery House, 15 Wickham Road, as whole reports on particular sectors, Beckenham, Kent. Tel: 0208 650 7745

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help local businesses. The market country-specific markets. research reports most commonly held Market research is also carried out by by UK libraries are those published by trade associations, banks and other Keynote (see below). Photocopying of service companies (this, too, is usually market research is generally prohibited expensive – although you can try under copyright. libraries). Many publishers of market research list Some governments carry out market their titles on their websites, including research (for example, the US contents pages in some cases – although Department of Agriculture, see you’ll still have to find the reports in a “Sectoral Resources”, p.175), although library once you’ve got their titles. this tends not to list company names but For the UK, two important publishers to discuss markets and countries are Keynote – www.keynote.co.uk – generally. These reports are usually and Mintel – www.mintel.co.uk . Both available free online. cover British markets. Mintel also One fairly good government resource is publishes useful industrial reports, as Strategis – http://strategis.ic.gc.ca/ well as market intelligence reports. SSG/bi18355e.html. This is a website For coverage outside the UK, check out of Industry Canada (the trade and Market Research Europe and Market industry ministry), which searches US Research International – Department of Commerce market www.marketresearch.com and http:// research reports. You can select a db2-rev.ecnext.com/. These cover both country or region and sector, and it gives international markets and markets you a list of reports available. Market within individual countries. assessment and competitive situation Euromonitor – www.euromonitor.com reports tend to be the most useful. Both – also reports on both international and give qualitative descriptions of markets.

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– for advice, information, publications GOGOVERNMENTVERNMENT and libraries. Statistics departments All governments have statistical SOURSOURCESCES departments, producing data especially on their own countries, but also on trade While companies are often quite and markets. secretive about their business, the culture of government and the public Parliament sector (at least in Europe and North In theory at least, governments are America) is often much more open. accountable to the bodies of elected representatives. While in practice the A number of government departments elected bodies themselves have have regular dealings with companies relatively little power, their monitoring and hold useful information. These role is generally carried out seriously include: (in OECD countries, at least), and as such they are a useful source of Company registrars information. The government agencies where companies legally are obliged to submit Quangos their documents of incorporation, annual Public sector bodies, which are accounts, directorships and corporate answerable to particular government governance information. They are departments. There are three types: usually connected with the government advisory committees, nationalised trade or enterprise department. industries and executive agencies (including regulators, funding agencies Regulators and the like). Some quangos can be The government agencies which track, useful for information on the industry monitor and enforce standards of they relate to. The UK has several corporate behaviour – for example, on hundred, listed at www.cabinet- environmental impact, workplace safety office.gov.uk/quango/ and anti-competitiveness.

Sponsoring departments The government departments which Using company work most closely with particular industries, providing them with their registrars main route into government, consulting In the UK, companies register at with them on new legislation and Companies House, which is an supporting inter-company executive agency of the Department of communication. Obvious examples are Trade and Industry. Various information government departments covering is recorded, including lists of agriculture, energy, finance and health. shareholders; annual accounts; details of Trade and industry departments tend to special financial transactions; lists of be the catch-all for most other industries; directors (and their home addresses and in the UK, the Department of the other directorships); and, in some cases, Environment is also the sponsoring a short text report on the company’s department for the construction industry. activities (with the accounts). For the researcher, these departments can be used much like trade associations Companies House will only give you

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information on companies registered in available documents on that company. the UK – but not on overseas parents or These are generally the latest annual subsidiaries. (In contrast to SEC, where accounts (£4), the latest annual return the 20-F and 6-K forms are required by (£4) and the directors’ report (£2.50). In foreign companies with operations or our view, the accounts tend to be the subsidiaries in the US). But the filing most useful, and sometimes the annual requirements apply to all companies, return. If you get stuck, there is a regardless of their size or type. Smaller button at each stage of the search and and private companies tend to give less order process. information than larger and public ones. You will need to know the company’s Europe precise registered name. While you can There is a list of contact details of some choose at Companies House from an of the other European counties’ company alphabetical list, this does not tell you registrars on the European Business the name of a company’s parent Register (EBR) site at www.ebr.org/ company or its various subsidiaries. We partner.htm – covering 12 countries recommend looking these up in a (but not UK). If you are based in one of directory such as Who Owns Whom these countries, you can use the EBR beforehand (see p.137). service via your own country’s registrar Companies House has branches in to access information held by the other Birmingham, Glasgow, Leeds, London, EBR members. Manchester, Cardiff and Edinburgh. It is open Monday to Friday, 9am to 5pm. United States The general enquiries telephone number In the US, all companies with over $10 is 02920 380 301. The staff will show million of assets and over 500 you how the computer terminals work. shareholders (or more precisely, holders To print out all directors and their home of a particular type of share) are legally addresses cost £1. Other documents obliged to register with the Securities cost £2.50, plus 10p per sheet (or £3.50 and Exchange Commission (SEC). They maximum). You can get a full set of have to give quite substantial (and records on microfiche for £5, but you useful) information, and most of it is will have to wait overnight for this. available for free over the web. (This Microfiche reader-machines can be applies to records filed since May 1996, found in most libraries. Companies when electronic filing became House will also post you information, compulsory for all publicly-traded but there is an extra charge for this. companies, following intensive lobbying Alternatively, you can use Companies by consumer activist Jamie Love). House on the web at www.companies- In fact, SEC filings rate as one of the top house.gov.uk . This service is sources for the corporate researcher. available Monday to Friday, 7am to 10pm UK time. Click on , then . Write the name of the fairly easy to get into the database and company you’re interested in, and you enter search terms, the results tend to be will be taken to the relevant place on an quite bewildering. There are many alphabetical list. Select the company by different types of forms filed at SEC, clicking on the number on the left-hand and EDGAR lists them by their form side of the screen. Click the codes: you have to look up separately button, and you will be shown the what these all mean. But once you know

166 The Campaigners’ Guide to Financial Markets your way around, it’s an extremely managers (and salaries of executives). powerful resource. A full list and The requirements are described in detail description of the various forms is given at www4.law.cornell.edu/cfr/ at www.sec.gov/info/edgar/forms.htm . 17p229.htm The most useful ones are: 10-Q 10-K The quarterly (less-detailed) update to The company’s annual report. This is 10-K legally required to include the following information: 8-K The occasional update to 10-K when description of the company’s business important details change or events occur. areas, both financial data (covering 5 (An SB suffix to any of these indicates a years) and narrative, including “direction small-business version of the same). of travel”, geographical breakdown and breakdown by business segments; 13-F location and general character of the List of holdings in the company by the principal plants, mines and other assets; top institutional investors. These can be details of all court proceedings the in alphabetical order – which is obviously company is involved in, those which are less convenient (or more tedious) than in pending, or even are “known to be order of size of holding. Be careful as contemplated”, both civil and criminal – many institutions are large asset in particular, environmental or anti-trust managers and hold stock for their cases against the company; institutional clients in “street name”. full and balanced discussion by 20-F company managers of the financial state Annual report for foreign companies. of the company; assessments of market risk; 40-F list of directors, executives and main Annual report for Canadian companies.

Using SEC disclosure requirements to challenge companies

he US Securities and Enforcement, Securities and strenuously resisted the new Exchange Commission Exchange Commission, 450 5th regulation. (SEC), not only provides Street N.W., Washington, DC. Scotts’ SEC filings since Tuseful information on 20549-0801. August 2000 make no specific companies (see p.167), it is reference to UK regulations, also a means to challenge Friends of the Earth, in May nor to the Habitats Directive. companies. Under the SEC 2000, challenged the Annual In a letter to the SEC, FOE regulations, companies are Report filed by the US parent argued that the company’s obliged to disclose any company of the Scotts “failure to disclose risks material information – from Company (UK) Ltd, which associated with new and new legislation that might extracts peat from four significant regulation of its impinge upon the company’s peatlands in the UK. peat extraction activities in markets to court proceedings the UK” represents “a material against the company – that The three largest of these sites omission” that violates SEC might affect shareholder (Thorne Moor, Hatfield Moor rules and “deprives value. and Wedholme Flow) are shortly to receive formal designation as shareholders of information Where campaigners find that protected areas (Special Areas needed to appraise the quality the company has failed to of Conservation) under the EU’s of management”. disclose such risks, they can Habitats Directive. As a result, FOE is pressing the SEC to challenge the company’s SEC Scotts’ peat extraction activities investigate Scotts’ alleged filing by writing to Mr. Richard would almost certainly be disclosure failure and “to Walker, Director, Division of halted. Scotts is alleged to have enforce its rules”.

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6-K Update to annual report for foreign Table 17 companies (equivalent to 8-K for US Regulatory agencies on the Web companies). An alternative to the EDGAR site is www.secinfo.com, an independent (non- egulators only deal with their own countries – SEC) site containing information from they do not comment on what a company does abroad. There are, of course, SEC filings, which claims to be better manyR regulators in each country. Here are a few than EDGAR. In some cases, it lists which can be useful information sources: more documents under a company (or at Health and Safety Executive (UK) least, makes it easier to find them), and www.hse.gov.uk helpfully reminds you what each of the Although HSE has generally tended to prefer form-codes means. The hardest part, constructive engagement with offending however, is getting in there. From the companies rather than prosecution, in 1999 it began listing its prosecutions on the web at homepage, enter a search term (usually a www.hse-databases.co.uk/prosecutions/ company name), and it will match this with possible entries. Select the Environment Agency (UK) company you’re interested in, and in the www.environment-agency.gov.uk The EA, too, has recently adopted a policy of next screen, if possible, take it as a publishing company names – this time of both registrant (rather than just as a group saints and sinners. See the 1999 report member). This gives you a list of filings (published July 2000) at www.environment- agency.gov.uk/envinfo/spotlight/ – click on the company name. Finally, spotrep.pdf. Prosecutions are also press- you get a list of documents. Select the released by the agency. one you’re interested in. Occupational Health and Safety Administration (USA) www.osha.gov The website has a page of data on inspections Finding your way carried out by the OSHA, and recorded accidents, which you can search by company name (“establishment”) or by industry (using the around government SIC (standard industrial classification) code – there is a link to help you find the SIC you want). Accidents have short descriptions of what happened. Search results are presented in Making sense of the government a table, including a column for the number of machine, and making use of its violations discovered; but there is no qualitative resources, has become considerably information, and no description of offences (beyond broad categories), so it can be easier with the arrival of the Web. somewhat opaque. Perhaps the best way to use it is as a starting point, to find out when Many governments tend to have general violations occurred, and then to search elsewhere for more detail on these. homepages for all parts of government, from which you can access the separate European Commission Competition Regulation websites of the various departments and http://europa.eu.int/comm/competition/ agencies. A good starting point is the The most useful part is the mergers section, main entry point into the UK government which studies market share and market power of companies involved in major mergers. If a www.open.gov.uk . (Ironically, one of company you are interested in has been its best pages is the link.) site can give you useful market intelligence on that company, in those markets relevant to the merger. Click the link, and search by For the UK, there’s also company name. Also of possible use is the anti- www.ukstate.com – this is much less trust cases section, although there’s not a similar easy way to search this. comprehensive, and less logically structured, than www.open.gov.uk, and has more of a magazine-type format. It’s

168 The Campaigners’ Guide to Financial Markets good if you find www.open.gov.uk too for example, regulation of utility big or bewildering, and so can be more monopolies. user-friendly, but it won’t give you the On top of these ongoing roles, most same level of detail. The Cabinet Office regulators have a power to investigate (www.cabinet-office.gov.uk) is the reported breaches of the rules, and to department which overseas the rest of prosecute offenders. But many government, and has some guides which regulators now prefer to work may help you understand how it all constructively with companies to works. achieve improvements, rather than to For the US, a guide to the government is punish law breaking; so treat with published by the National Technical caution any apparent clean bill of health. Information Service, part of the US Still, most will prosecute in serious Department of Commerce. US Business cases. Advisor (www.business.gov) is a guide All of this can give you a useful insight to the US government for companies. into a company’s record – and some Especially handy is the button, which gives a better Regulators often require the companies listing than the fedworld site. You may which they regulate to publish operating also find useful www.whitehouse.gov and financial information, which you Another way into US Government is the may find also useful. Federal Web Locator (www.infoctr.edu/ fwl/), produced by The Center for Information Law and Policy, or the US Federal Government Agencies Directory Getting information (www.lib.lsu.edu/gov/fedgov.html). And if you still need guidance, or can’t find from government what you’re looking for, try Greg Notess’ book, Government Information on the departments and Internet (published by Bernan, Lanham MD) or see www.notess.com/write/ quangos gioti/), which has over 4,800 entries. Government departments and agencies are an often neglected source of information. In particular, individual Regulators staff members know a huge amount about their specialist industry – and are Regulators exist to ensure that companies generally far more willing to talk and comply with the law, and also to advise you than those working in the improve companies’ standards (in industry itself. It’s well worth getting on particular, in relation to their external the ‘phone to them. costs). This may be done through: a requirement for the regulator’s The best way to find these people in the approval for a course of action by a UK is from the Civil Service Yearbook, company – for example, mergers and published annually by the Cabinet acquisitions in competition regulation; Office, which should be in the control of licences, quotas and government or reference section of any allowances – for example, in pollution good local library. Alternatively, you regulation (licences to release chemicals could try the “about” section of the into the environment) and agricultural department’s website, or its annual seed regulation; report, or published departmental on-going monitoring of the industry – guides.

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Many government departments have Examples are the UK Department of “public inquiry units”, whose role is Trade and Industry, the US Department specifically to answer your questions, of Commerce and the US Overseas and help you make use of the Private Investment Corporation. department. They will either answer Sometimes, the government issues press your questions themselves, or tell you releases relating to an industry. All UK who the departmental expert is. government press releases are available Government departments also have via the Central Office of Information. libraries, which may or may not be Go to www.nds.coi.gov.uk/coi/ accessible to the public. These hold coipress.nsf , which you can search by many of the specialist journals and department / organisation, date and publications on an industry that you keywords. won’t find elsewhere. As well as regulators, quangos include Sponsoring departments serve a funding agencies (for example, research coordinating role for their industries, so councils) and advisory committees publish some industry guides which you (many of whose discussions will be on may find useful. subjects of interest to the corporate researcher). There are over 800 in the Trade, industry and commerce UK, listed with contact details at departments, and also export agencies, www.cabinet-office.gov.uk/quango/. provide guides for exporters, which Some quangos have extensive websites may give useful information on foreign of their own; some have reports on the countries and their markets. In some sites of their coordinating departments; cases, they also give detailed risk and others you will have to ‘phone to get economic analysis on projects, their publications. Being “quasi- including investment details, in the autonomous”, quangos can be more agriculture, chemicals, construction, secretive than direct parts of mining and water supply sectors. government.

170 The Campaigners’ Guide to Financial Markets PPARLIAMENTSARLIAMENTS

The published notes of parliamentary representative to ask questions of a debates consume reams and reams of government department, either formally paper. In the UK, Hansard (the official in parliament, or via personal letter. record of the UK parliament’s Whereas many government departments proceedings) includes debates in the will not respond to your letters, it is House of Commons and the House of your representative’s job to make sure a Lords; verbal and written questions to reply gets to you. ministers and their answers; and Members of parliaments who are not committee discussions. These can now your representative but who are be accessed on the web, at sympathetic to your issue may also be www.parliament.the-stationery- willing to help. You can then ask them office.co.uk/pa/cm/cmhansrd.htm . either to put a question to a department, There is a good search page at or to provide you with information from www.parliament.the-stationery- the parliamentary library or from the office.co.uk/cgi-bin/ other extensive resources available to empower?DB=ukparl , where you can them. search the whole record, or just bits of Find sympathetic members by searching it. For example, if you are looking for a parliamentary debates to see who has parliamentary question, you can specify spoken on your issue. UK Members of date ranges or the name of the MP who Parliament (MPs) are listed, together asked it. with some details on their interests, at Most parliaments have a number of www.parliament.uk/commons/ committees specialising on particular cminfo.htm . The names of US issues, or monitoring the policies and Congressional representatives can be actions of particular departments. These found at www.house.gov/house/ committees carry out investigations, MemberWWW.html . usually by calling for submissions from In the UK, Members of Parliament are companies, organisations and also entitled to put private motions, individuals, and then cross-examining called early day motions (EDMs). them. Witnesses from industry are often Although these don’t feed directly into subjected to intense questioning and the legislative process, they are a useful their answers can be more revealing gauge of support, and can be used to than, say, newspaper interviews. publicise an issue. They are also a good Many countries now make the reports of way of identifying sympathetic parliamentary committees available on members. EDMs and their signatories the Web. The UK House of Commons’ are listed at http://edm.ais.co.uk/ select committees are listed at Several parliaments also have their own www.parliament.uk/commons/selcom/ research services. In the US, the results cmsel.htm . US Congress committees of congressional investigations are are listed at www.house.gov/house/ published: these can be extremely CommitteeWWW.html . valuable sources of information. The Individual members of parliament also reports can be obtained from the undertake research on their own behalf. Congressional Information Service – You can ask your own elected www.cispubs.com .

171 The Campaigners’ Guide to Financial Markets STSTAATISTICALTISTICAL SOURSOURCESCES

How many times have you been writing listing in Strathclyde’s University’s a campaign report, and found yourself Business Information on the Internet missing a key statistic? The Web sites portal invaluable – http:// listed in Table 16 (below) can help personal.drs.strath.ac.business/ relieve some of this frustration. Bear in mind that official statistics For statistics on particular companies, reflect the political agendas of those industries and markets, see also our who collected them, as much as any sections on sector-specific research other source of “facts and figures”. resources (p.175), market research Peoples’ movements, for example, (p.162), and general directories and frequently dispute the World Bank’s websites (p.124 and p.127). lofty descriptions of their economies and local livelihoods – Lesotho, for A number of sites also provide pages example, was once famously described with links to statistical information by the Bank as a “subsistence relevant to their specialist area. The agricultural economy”, when, in fact, Project Finance portal run by Harvard few people are engaged in agriculture Business School, for example, is well and the bulk of household incomes worth a visit – www.hbs.edu/ comes from wages earned in the mines projfinportal/. We have also found the of South Africa.

Table 18 Statistics sources on the Web

The World Bank DOSFAN Electronic Resources Library . www.worldbank.org dosfan.lib.uic.edu/ERC/index.html This is one of the most-used and accessible sources Archive of US government reports, mainly from the of national statistics for countries around the world. State Department The areas of data covered for each country tend to be development-focused, whether economics and trade or social development (for example, health). Financial National Statistics (formerlll y Office for National institutions – and for that matter most mainstream Statistics) organisations – consider the World Bank to be the www.statistics.gov.uk authority on development. Using its figures can be persuasive, but be careful if you’re trying to get an Useful source of UK government figures on health, accurate picture for yourself, since the figures are labour markets, business, the economy and frequently disputed by those with grassroots demography. The best way in is through the knowledge. The site also offers sectoral statistics of “statbase” section. all sorts, development indicators, and narratives on many of the issues covered (although again, bear in FT500 mind the political bias). www.ft.com/ft500/ Annual ranking of the 500 largest companies in the CIA World Fact Book world, with sub rankings for Europe, US, Japan and http://www.cia.gov/cia/publications/ the UK. Also ranks the largest 100 companies in http://www.cia.gov/cia/publications/ Eastern Europe, Canada, Latin America and Asia- factbook/ Pacific; the largest 30-50 in Africa and in the Middle Provides systematic basic information about most East; and various individual OECD countries. Gives countries of the world, including data and maps (no details of market capitalisation, turnover, profit and great level of detail). employees, plus commentary.

172 The Campaigners’ Guide to Financial Markets VERBVERBALAL SOURSOURCESCES

While the bulk of research on companies journalist: ring the company organising and industrial sectors has to be done the meeting (they tend to be public through the “donkey work” of trawling relations’ firms) and ask if you can libraries and the web, if you are new to write it up on a freelance basis for a working on a sector, company or issue, publication you’ve made an arrangement it’s easy to go wrong. You might, for with beforehand. example, (quite reasonably) jump to wrong conclusions early on, and hang To find out where conferences on a the rest of your further information and particular sector are being held, a good analysis on a misleading framework. site to consult is Trade Show Central – www.tscentral.com – which provides a Often this problem can be resolved by searchable database of 50,000 trade talking to someone who really knows the shows, seminars and conferences. In the subject – especially someone who UK, the Financial Times advertises works in the company or sector you are business conferences and runs its own researching. What’s more, talking to conference service. It is worth keeping people can give you access to an eye on the advertisements and ringing information you’d never otherwise have up if there is a conference on your found, including information which subject. The trade press for the sector hasn’t been published at all. For you’re interested in will also advertise example, company reports and upcoming conferences. information garnered from directories and business web sites are unlikely to reveal a great deal about company News groups strategies. To get an insight into how a company – or group of companies – is Useful information can also be gleaned thinking, you need to talk to those in the on investor concerns about specific know. companies by logging in to the newsgroup discussions hosted by www.deja.com. The site allows you to search for a particular company or Conferences product – and links you to the One useful source of “inside” appropriate discussion groups. There is information is the business conference. also scope for publicising your concerns Those attending such conferences tend to through such newsgroups. assume that everyone else attending them is “on-side”; the presentations – and the talk in the bar – are often candid about the problems an industry is facing and Interviews the strategies for overcoming the difficulties which have been identified. Much can be found out by telephone – “phone a friend” is often the best advice Most conferences are open to anyone when starting out on researching a who has the money – but they are not company. It does not take long before cheap (typically £750 or more for a two- you find you are in touch with others day meeting). One way in is as a who are also looking into the firm.

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Interviewing your target company, telling you anything. Throwing in a few either directly or by telephone, should general questions can help with this. usually be saved until the end of your research – at that stage you will have a Make your questions open- much clearer idea of what you still need ended to know, and how to find it out from Open-ended questions allow the subject them. Indeed, it makes strategic sense to to tell you more – and you may get some get as far as you can with your research unexpected answers. Look for leads (for before alerting the company you are example, other people) as well as investigating: that way, you can make answers. What the subject doesn’t want the most of any interview you might be to talk about is often as important as granted – you won’t need to spend time what they do want to discuss. going over the basics and you are more likely to pick up on any “economies Know when to stop with the truth”. If your subject offers to send you a When conducting interviews, the useful document, by post, fax or email, following guidelines may be helpful: then end the interview there. Best to wait until you’ve actually received what Prepare for your interviews they send, and then telephone again with Brush up your jargon and background more questions. knowledge; work out three or four different ways in which you can Document your interviews squeeze out the information you require, Always document your interviews, and anticipate possible responses. including time, place, who you spoke to Decide beforehand whether you’re and their position, major points and going to leave your source friendly or quotes. Do this during or immediately hostile to you after the interview. after your interviews – things can be forgotten extremely quickly. Bear in mind that companies contain many people Respect “off the record” If one is unhelpful, you can always try comments someone else. Looking at the company’s Respect “off the record” comments (and website beforehand, or talking to the use them only as leads) – otherwise you receptionist, may give you an idea as to damage your own reputation and other how the company is structured and who peoples’ chances of getting information you want to speak to. Getting direct line in the future. But the convention is that numbers is always useful. the person being interviewed makes it clear what is and what is not “off the Be polite and friendly record” before making any comments, You should aim to put the person you’re rather than after the game has been given speaking to at their ease, rather than away. Don’t offer to keep something off making them nervous and cautious about the record – leave this to your subject.

174 The Campaigners’ Guide to Financial Markets FinancialFinancial InstitutionsInstitutions

Many of the market players discussed in particular, its perceived strengths and Part Four (see p.77) are themselves weaknesses. sources of potential insight into companies and the sectors in which they Those working within the ethical operate. investment sector (see pp.107-112) are most likely to prove helpful in this Where you are able to develop a regard. In addition to the working relationship with a fund manger sociallyresponsible investment networks or analyst, she or or he will often be and research organisations listed in willing to brief you as to the latest views Table 1 (p.110), those listed below are on a company within the City and, in well worth approaching for advice.

Table 19: Ethical Investors

United Kingdom Jupiter Environmental Research 1 Grosvenor Place, London SW1X 7JJ Tel: 020 7412 0703 Fax: 020 7412 0705 AEGON Asset Management (Scottish Email: [email protected] Equitable) Contact: Emma Howard Boyd AEGON House, 3 Lochside Avenue, Owned by Commerzbank, Jupiter are a fund Edinburgh EH12 9SA, Scotland. manager specialising in the retail market. Tel: 0131 549 3401 Fax: 0131 304 3460 Email: [email protected] Contact: Charles Henderson Morley Fund Management (Norwich Union) 1 Poultry, London EC2R 8EJ UK subsidiary of AEGON, one of the world’s Tel: 020 7809 8198 Fax: 020 7489 7940 largest insurers. Manage fund for Scottish Email: [email protected] Equitable, including ethical funds. Increasing Contact: Anja Laitinen interest at a group in socially responsible investing. Manage funds for the CGNU plc Group, including the Norwich Union Funds. Highly Friends,,, Ivory & Sime respected SRI team moved to Morley in 2000. Run six funds “Sustainable Future” 100 Wood Street, London EC2V 7AN. funds on an SRI basis. Also engage on social Tel: 020 7506 1100 Fax: 020 7600 4180 and environmental issues on behalf of the Email: [email protected] whole funds. Contact: Neil Osborne

Fund Managers for the Friends Provident Life Insurance Company. Manage the largest US SRI Funds Ethical Fund in the UK, and also operate and Ariel Mutual Funds engagement policy across all the groups 200 East Randolph Drive, Suite 2900, Chicago, funds (some £40 billion) IL 60601, USA Tel: +1 800 292 7435 Fax: +1 312726 7473 Henderson Global Investors (NPI) E-Mail: 4 Broadgate, London EC2M 2DA [email protected] Tel: 020 7410 3110 Fax: 020 7956 9191 www.arielmutualfunds.com Email: [email protected] Contact: John W. Rogers, Jr., President and Contact: James Guiseppi Co-Chief Investment Officer Part of the AMP Group (Australia fund Offers two publicly traded, socially manager), managing most of the groups responsible mutual funds. Focuses on funds outside Australia. Manage the NPI investing for the long term in US domestic Global Care group of funds. companies with market capitalizations below

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$5 billion at the time of investment. socially screened assets under management. Focus on companies that conduct business in a manner that contributes to the Calvert Group enhancement of the quality of life. 12th Floor, 4550 Montgomery Avenue, Bethesda, MD 20814-3304, USA Neuberger Berman Tel: +1 800 368 2748 Fax: +1 301 654 2960 605 Third Avenue, 2nd Floor, New York, NY E-Mail: [email protected] 10158-0180, USA www.calvert.com Tel: + 800 877 9700 Fax: + 212 476 8848 Contact: Dianne Saenz, Manager, Social E-Mail: [email protected] Products Sales and Policy www.nb.com With more than $6 billion in assets and eight Contact: Janet W. Prindle, Portfolio Manager mutual funds, Calvert offers the largest Mutual fund manager that seeks long-term family of socially and environmentally capital appreciation by investing in common screened mutual funds in the US. Its social stock of companies that meet both financial research department is a leader in standards and social criteria. shareholder activism efforts. Citizens Funds The Parnassus Fund 230 Commerce Way, Suite 300, Portsmouth, One Market, Steuart Tower, Suite 1600, San NH 03801, USA Francisco, CA 94105, USA Tel: +1 800 223 7010 Fax: +1 603 433 4209 Tel: +1 800 999 3505 Fax: +1 415 778 0228 E-Mail: [email protected] E-Mail: [email protected] www.parnassus.com www.citizensfunds.com www.parnassus.com Contact: John Shields, President and CEO Offers four mutual fund portfolios. Invests in Mission is to earn an above-market rate of companies that treat employees well, respect return for shareholders while investing in the environment, and have good community companies that operate in a socially relations. responsible manner. Offers a full range of funds . Pax World Management Corp... 222 State Street, Portsmouth, NH 03801- Domini Social Investments,,, LLC 3828, USA P.O. Box 60494, King of Prussia, PA 19406- Tel: +1 800 767 1729 Fax: +1 603 431 8732 0494, USA E-Mail: [email protected] Tel: +1 800 225 3863 http://www.paxfund.com/ E-Mail: [email protected] index_COGP3.htm www.domini.com Contact: Anita Green Contact: Sigward Moser Organized in 1970, focused on SRI. Largest Domini Social Investments manages more fund over $1200m. Has an affiliated than $2.0 billion in assets. Its Domini Social foundation working for the world’s poor and Equity Fund is the oldest and largest socially for world peace. responsible index fund in the USA. Close links to KLD (www.kld.comwww.kld.com) who are Trillium Asset Management Corporation responsible for research and calculate the 711 Atlantic Avenue, Boston, MA 02111-2809, underlying social index . USA Tel: +1 800 548 5684 Fax: (617)482-6179 ) The Dreyfus Corporation E-Mail: [email protected] www.trilliuminvest.com 200 Park Avenue, 55th Floor, New York, NY Contact: Cheryl Smith, Portfolio Manager. 10166, USA Tel: (800)782-6620 Trillium is an independent investment E-Mail: [email protected] management firm committed exclusively to www.dreyfus.com socially responsible investing, founded in Contact: Paul Hilton, Portfolio Manager 1982. It runs the Advocacy Fund, a mutual fund that advocates progressive social Dreyfus is a mainstream fund manager (part change through the use of shareholder of the Mellon group) with over $2 billion of power.

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Part Seven RResearesearcchinghing sectorsectorss

177 The Campaigners’ Guide to Financial Markets

AAGRICULGRICULTURE,TURE, AAGRGROINDUSTRIESOINDUSTRIES && BIOBIOTECHNOLTECHNOLOGYOGY

Many of the resources on biotechnology (especially on scientific Library resources companies) combine food / crop biotechnology with medical / pharmaceutical biotechnology. In such directories and websites (which include most that have “biotechnology” in their title), you will find considerably more information on the medical side than on crops, as the industry is bigger, more developed and involves more companies.

The 2001 Biotechnology Venture Capital Directory: US Venture Capital Companies and Contacts Institute for Biotechnology Information, PO Box 14569, Research Triangle Park, North Carolina 277709-4569, USA. www.biotechinfo.com Identifies companies that have invested in biotechnology and lists 523 sites of 449 venture capital companies.

2001 GEN Directory of Biotechnology Companies Mary Ann Leibert Inc., 2 Madison Avenue, New York, NY 10538, USA. www.liebertpub.com Contains basic company information on over 5,000 biotechnology companies; their markets, products, capitalisation, technologies and key personnel. Entries cover ownership, R&D partnerships, marketing and licensing agreements, technologies, products in the market, products under development, clinical trial results and international ventures.

The UK Biotechnology Handbook Biocommerce Data / Bioindustry Association, Prudential Buildings, 95 High Street, Slough, Berkshire SL1 1DH. www.pjbpubs.com Detailed profiles of all the major UK biotech companies, including equipment suppliers and venture capital providers. Also profiles academic research institutions and government agencies in the sector.

Biotechnology Guide USA: Companies, Data, Analysis Macmillan Reference Ltd, 25 Eccleston Place, London SW1W 9NF. www.macmillan-reference.co.uk Directory of over 1,400 companies.

Biotechnology Directory 2001 Macmillan Reference Ltd, 25 Eccleston Place, London SW1W 9NF. www.macmillan-reference.co.uk Covers over 10,000 organisations, including 5,300 profiles of commercial companies, research organisations and biotechnology institutions in 88 countries. Entries include details of research funding.

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Biotech Phone Book Institute for Biotech Information, PO Box 14569, Research Triangle Park, North Carolina 277709-4569, USA. www.biotechinfo.com Free directory of 1,500 US Biotech companies. Extremely useful for basic contact information (addresses, ‘phone and fax numbers, and email addresses).

Corporate Information www.corporateinformation.com Industry- Excellent listing of biotechnology sites. We would advise printing a copy oriented of the page out; it is an invaluable resource. From the home page, select option 2 (“Research a country’s industry”), then “health and websites pharmaceuticals” and “USA” – this is the best of the country lists for biotechnology.

Biolinks www.biolinks.com Site with links to a range of useful databases, covering scientific companies, science meetings, scientific journals and medical sites. If you are researching biotech companies, click on the “scientific companies” link on the main menu; this takes you to an A-Z listing of US companies working in biotechnology , with links to a thumbnail profile (address and brief description of the companies main products or lines of research) and to the company’s home pages. Very useful for preliminary research.

Cato Research Ltd www.cato.com Site of Cato’s Worldwide Web Virtual Library Biotechnology Directory. The site’s Directory gives “over 1,000 web addresses of companies and research institutes, universities, sources of information and other directories specific to the biotechnology, pharmaceutical development and related fields.” The index page has easily found links to further pages on “Sources of Information” (400 URLs), “Pharmaceutical Companies” and Publications” (electronic and paper). At the foot of the index page, there is a link to Cato’s “Calendar of Meetings, Seminars and Courses” in the biotech sector (with a link to a European “mirror” page).

Biospace www.biospace.com Searchable database of biotech companies – access is free. Entries give ownership details and basic profiles. There are also links to news releases on the industry as a whole and on individual companies.

Bio Online www.bioline.com Free, searchable database on biotechnology and pharmaceutical research.

Biotech Innovations www.biofind.com Lengthy profiles of some 200 companies.

The Nature Biotechnology Directory http://guide.nature.com

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Database of over 10,000 organisations, product and service providers in the biotechnology industry.

Institute for Biotech Information www.biotechinfo.com Priced service. Bills itself as providing “high quality strategic business information to the biotechnology, pharmaceutical and life science scientific communities.” Provides database of biotechnology companies – with information on financing (public or private), key personnel, products, US and foreign investors and parent company. The database is available on disc for US$790 or you can subscribe to IBInternet for $990 a year, which gives unlimited access to the database. Undertakes market research and competitor analysis.

SciCentral www.scicentral.com Links to databases on biotech companies, specialised resources, research news, special reports and selected articles on biotech developments. From the homepage, you can also browse the contents of the latest Nature – a useful source of information on biotechnology – in addition to linking to selected articles from New Scientist and newspaper articles. Click the “Science in the News” tab at the top of the home page.

Genetic Engineering News www.genengnews.com Site of “Biotechnology News of the Day” service – which is free. Gives daily reports on biotech mergers, research agreements, product development and much more. A key resource if you are tracking the industry.

Open Directory Project http://dmoz.org/Science/Biology/Biotechnology/Companies Listing of major biotechnology companies with links.

Morningstar www.morningstar.com Helpful for researching individual biotech companies, particularly in medicine, and mutual funds devoted to biotech investments.

Dialog www.dialog.com If you are looking for investment analyses on the biotech industry, you can order Investext’s reports through Dialog. Many of the reports are inexpensive – $0.60 each – and cover both companies and the industry as a whole. From the Home Page, go to the “products” page (click tab at the top of the page). Select “business and news” from the menu in the left-hand column. This brings up a new page with another menu, again in the left-hand column. Select “Business Research” and then “Investment Research” – which gives two options: searches by industry or company.

EuropaBio www.europa-bio.be Web site of industry umbrella group, representing 40 corporation and 13 national associations involved in researching, testing, manufacturing and distributing biotechnology products.

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US Department of Agriculture www.usda.gov Government Database of biotechnology permits which have been issued by the US Department of Agriculture. Entries, which are searchable by applicant and sites state, give details of release permits and the status of any applications.

UK Department of Environment, Food and Rural Affff airs www.defra.gov.uk Useful for background data on UK agriculture and UK agricultural policy.

UK Advisory Committee on Releases to the Environment www.defra.gov.uk/environment/acre/index.htm Lists location of trial genetic releases.

The UK Patent Office Harmsworth House, 13-15 Bouveries Street, London EC4Y 8DP. www.patent.gov.uk If you are looking to see whether or not a company has taken out a patent on a particular biotechnology product, you can search the databases of the UK Patent Office, the European Patent Office and other European national patent offices through this site. Entries provide a basic minimum set of data for each application published in the UK: publication number, publication date, application number, application date, applicant name, inventor name and title text. For fuller searches, it may be necessary to visit the Patent Office and access the CD-Roms available there; printed copies of the full patent application can be ordered for the price of photocopying.

Friends of the Earth–England and Wales 26-28 Underwood Street, London N1 NGO sites www.foe.co.uk/campaigns/food_and_biotechnology Updates and background information of FOE’s biotechnology campaign. Links page has list of UK supermarkets and other organisations.

Rural Advancement Fund International 110 Osborne St., Suite 202, Winnipeg, MB R3L 1Y5, Canada. www.rafi.org One of the first organisations to raise questions about biotechnology and the patenting of seeds. Publishes a regular updated chart of “Who Owns Whom?” in the seed industry. Focuses on genetic diversity, intellectual property rights and patents.

Union of Concerned Scientists 2 Brattle Square, Cambridge, MA 02238, USA www.ucusa.org Publishes quarterly newsletter, FoodWeb. Monitors environmental impacts of GM crops in the USA.

Edmonds Institute 20319 92nd Avenue, Edmonds, WA 98020, USA www.edmonds-institute.org Excellent research reports on biosafety, patenting and the social and environmental impacts of genetic engineering. Publishes Manual for Assessing the Ecological and Human Health Effects of Genetically- Engineered Organisms.

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Institute for Agriculture and Trade Policy 2105, 1st Avenue South, Minneapolis, MN 55404, USA www.iatp.org Invaluable source of information on US agricultural policy. Campaigns focus on trade and agriculture, food and agriculture, global governance and the World Trade Organisation.

US agricultural We would highly recommend the following reports on consolidation in US agricultural the food / agriculture industry : industry Consolidation in the food and agriculture system statistics William Heffernan, Dept of Rural Sociology, University of Missouri, USA www.calfu.org/whstudy.html

Cargill’s acquisition of Continental Grain’’’ s grain merchandising business Marvin Hayenga and Robert Wisner, Dept of Economics, Iowa State University, USA www.econ.iastate.edu/outreach/agriculture/marketing/hayenga

OILOIL && GASGAS

Library Financial Times Oil and Gas International Yearbook www.directories.ft.com resources Excellent profiles of operations of around 1,500 oil and gas companies – size of investments, in which countries, and so on.

Who’s Who in World Oil and Gas Longman, Avenue of the Americas, New York, NY 10036, USA. www.ablongman.com

FT Energy www.ftenergy.com Publishes numerous reports and journals on energy industry issues.

Oil Company Financial Analysis in Nontechnical Language by Daniel Johnson Pennwell, 1421 S. Sheridan Road, Tulsa, Oklahoma, USA. www.pennwell.com

Where’s the Shortage? – a Nontechnical Guide to Petroleum Economics by Bob Tippee Pennwell, 1421 S. Sheridan Road, Tulsa, Oklahoma, USA www.pennwell.com

Oil Economist’s Handbook by G. Jenkins Elsevier, PO Box 221, 1000 AE Amsterdam, The Netherlands www.elsevier.nl Vol.1: statistics; Vol.2: dictionary, chronology, directory

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The Energy Report Vol.2: Oil & gas resources of the United Kingdom (the “Brown Book”) Department of Trade and Industry, 1 Victoria Street, London, SW1. Published annually, statistical, operating and company information on the North Sea, field-by-field, and with aggregate and company information.

Digest of United Kingdom Energy Statistics Department of Trade and Industry, 1 Victoria Street, London, SW1.

Oil and Gas Information International Energy Agency, 9, Rue de la Federation, Paris, Cedex 15, France. Detailed statistical breakdown of energy sources and uses, by country.

The best trade journals (in terms of content and accessibility) are: Trade journals

Petroleum Review Institute of Petroleum, 61 New Cavendish Street, London W1M 8AR. Monthly. Includes excellent news section (~10 pages) and various features on companies, countries and issues.

Upstream www.upstream.tm Newspaper-format, quite easy to read, dealing just with exploration and production.

Petroleum Economist www.petroleum-economist.com Also publishes directories and statistical handbooks. More technical, but an invaluable source of information.

The Institute of Petroleum 61 New Cavendish Street, London W1M 8AR. Industry www.petroleum.co.uk One of the best resources on oil and gas. The IP is a professional institute organisations for those working in the oil and gas industry. In particular, the library is excellent (catalogue on website). Use of the library costs about £30 a day and web sites or £20 a half day for non-members, or free for IP members. The library has a vast array of trade journals (about 40-50 different titles, including Oil company profits (statistical), Oil industry outlook and others), and numerous reports and directories. There are also files of press cuttings collected by the librarians on well over 100 subjects, ranging from stocks to insurance to industrial relations. The library also has an abstracts database and (pay-per-hour) access to Reuters Business Briefing. Membership of the Institute costs £75 a year (or £10 a year if under 26 years old). For this, you also get the monthly trade journal, Petroleum Review, notification of industry conferences and use of the IP’s information service – researchers who can advise you on industry issues and information, on how to find something out, and who will even fax you information you require. This service is free, as long as it can be done over the ‘phone – that is, not more than about 10 minutes of their time. The IP

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also publishes useful guides to industry information sources, and statistical data on the industry (especially but not exclusively in the UK), both of which are available to non-members. The website is also excellent, in particular the news in brief (in the “industry information” section), which gives on average about 8 stories a day (each just 1-3 sentences), archived back to January 1997 – and for this, it’s well worth searching the site. Also good links page.

BP Statistical Review of World Energy www.bp.com/stats/ Statistics on production, consumption and trade of each energy source, by country.

Alexander’s Gas & Oil Connections www.gasandoil.com/goc/ News and trends in the oil and gas industry, organised by geographical region, plus fortnightly email update, and access to (expensive) market research.

Offshore Technology www.offshore-technology.com The information here is more at the operational level than the corporate / financial, but is excellent. For the oil and gas projects it covers (which isn’t all in the world, but includes many important ones – offshore only), it gives detailed information on how the project was / is carried out, and lists the contractors who worked on it and what they did.

OilOnline,,, World Oil & Gas www.oilonline.com/infomall_worldoil.html Detailed information on oil and gas activity in each country, plus background economic and political information.

Oilwatch NGO web sites www.oilwatch.org.ec Grassroots network of groups in the South affected by oil and gas operations. Website in Spanish and English, some in French. Produces briefings (Tegantai) on various relevant subjects, and the monthly Resistance Bulletin of news and campaigns.

Project Underground 1916A MLK Jr. Way, Berkeley, CA 94704, USA. Tel: +1 510-705-8981 Email: [email protected] www.moles.org The source of information on the impacts of the oil and mining industries on communities in the South. Website includes reports, campaigns, and best of all, the fortnightly newsletter, Drillbits & Tailings, which is a must (also available on email).

SANE BP links page www.sanebp.com/links/links.html Excellent list of links on the arctic, oil-focused NGOs, renewable energy, oil and gas intelligence, climate and investment. Produced by Greenpeace’s financial campaign against BP.

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MININGMINING

Who’s Who in World Mining Financial Times Business, Maple House, 149 Tottenham Court Road, Library resources London W1P 9LL. Tel: 020 7896 2000 Provides contact and biographical details for over 3,500 senior personnel in the mining industry.

Mining: Financial Times Yearbook Financial Times Business, Maple House, 149 Tottenham Court Road, London W1P 9LL. Tel: 020 7896 2000 Over 600 international mining companies covered. Each entry typically includes: brief histories of companies; their address and contact details; details of directors and officers; subsidiaries and associates; main activities and operations; three-year financial and operating summaries; ownership and structure information; latest ore reserves; recent company developments; property and operations.

Digging Deeper::: A Minewatcher’s Bibliography by Roger Moody Minewatch Asia Pacific, Agpaoa Compound, 111 Upper General Luna Road, Baguio City, Philippines. Tel/fax: +63 74 443 9459 Concentrates on recent documentation which addresses major current issues in mining, and on older sources which have stood the test of time. Only a few titles are included from regular industry and NGO publications (including Raw Materials Report, Clementine, AGID, MERN, Higher Values, Mining Environmental Management) which are easily available.

The Gulliver File Roger Moody, Minewatch/WISE-Glen Alpin, 218 Liverpool Road, London N6 5AA. A classic. Details the record of all the major mining companies. Can be downloaded from www.sea-us.org.au/gulliver

Taking Responsibility: Metal Mining,,, People and the Environment Milieudefensie (FOE-Netherlands), Damrak 26, 1012 LJ Amsterdam, The Netherlands. Tel: +31 20 626 2620 www.milieudefensie.nl General critique of mining industry with a dozen short case studies.

Hazardous Wastes from Mining Mineral Policy Institute, PO Box 21, Bondi Junction, Australia. Tel: +61 2 9387 5540 www.mpi.org.au

Plunder! The Story of Rio Tinto Zinc Roger Moody Partizans, 218 Liverpool Road, London N6 5AA. Follow the Mining Money: An Activist Toolkit for Direct Corporate Campaigning Western Mining Activist Network c/o Western Organization of Resource Councils, 2401 Montana Avenue, #301

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Billings, MT 59101, USA Tel: +1 406 252 9672 First class guide. Sections cover: getting information on mining companies; different strategic options for drawing the attention of investors to concerns over mining operations; and listings of organizations, books, databases and web sites. Available on line from http:// emcbc.miningwatch.org . Risky Business: The Grasberg Gold Mine: An Independent Annual Report 1916A MLK Jr. Way, Berkeley, CA 94704, USA Tel: +1 510-705-8981 Email: [email protected] www.moles.org

Mineral Funds Advisory Party Ltd. Industry- www.mineralfunds.com oriented web Invaluable industry-focussed web site. Has searchable database on sites companies worldwide.

Oxfam Community Aid Abroad NGO web sites 156, George Street, Fitzroy, Victoria 3065, Australia. Tel: +61 3 9289 9444 Email: [email protected] www.caa.org.au Useful information on Australian companies mining in Indonesia, with links to campaign pages.

Project Underground 1916A MLK Jr. Way, Berkeley, CA 94704, USA. Tel: +1 510-705-8981 Email: [email protected] www.moles.org

Mineral Policy Institute PO Box 21, Bondi Junction, Australia. Tel: +61 2 9387 5540 www.mpi.org.au Research and advocacy organisation. Monitors impacts of mining in Asia- Pacific region.

Western Organization of Resource Councils 2401 Montana Avenue, #301 Billings, MT 59101, USA www.worc.org Association of grassroots organizations in western US.

Environmental Mining Council of British Columbia (EMCBC) #201-607 Yates Street, Victoria, BC, Canada V8W 2A7 Tel: +1 2050 384 2686 http://emcbc.miningwatch.org Works with community groups, unions, government and industry on mining issues in British Colombia and the Yukon.

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Dams and Development: A new framework for decision-making Library by the World Commission on Dams Earthscan Publications Ltd, 120 Pentonville Road, London N1 9JN. resources www.dams.org Report of a two-year inquiry by an independent commission, drawn from industry, government and NGOs, to examine the development effectiveness of dams. Full of information. Sets out a path-breaking framework for future decision-making on energy and water projects, based on principles of equity, efficiency, participatory decision-making, sustainability and accountability. Recommends that no dam should be built unless it enjoys “demonstrable public consent” (or, where indigenous communities are affected, “prior informed consent”). The report can be downloaded from the Commission’s web site. The site also contains one of the best archives of information on the impacts of dams, consisting of background “thematic papers” and case studies commissioned by the WCD as part of its inquiry and submissions to the regional hearings held by the Commission during its investigations. Invaluable.

Dams Incorporated: The Record of Twelve European Dam Builders by Kate Geary, Mathew Grainger, Nicholas Hildyard and Chris Lang Available from Svenska Naturskyddsforeningen, Box 4625, SE - 116 91, Stockholm, Sweden. Tel: +46 8 702 6500 Fax: +46 8 702 08 55 Details the record of twelve European dam building companies: ABB (incorporating Alsthom), Balfour Beatty, Coyne et Bellier, Electrowatt, Knight Piesold and Partners, Kvaerner Energy (now GE Hydro), Lahmeyer, Siemens, Skanska, Sogreah, VA Tech (incorporating Sulzer Hydro). The report contains a wealth of information on the social and ecological impacts of the dams built by the companies who financed the projects and eight case studies.

Power Conflicts FIVAS www.solidaritetshuset.org/fivas/pub/power_c/index.htm Excellent 1994 report on the Norwegian hydropower industry and its involvement in the South.

Silenced Rivers: The Ecology and Politics of Large Dams by Patrick McCully Zed Books, 7 Cynthia Street, London N1 9JF. A classic. If you need one book on the case against large dams, this is it. Invaluable chapter on the political economy of dams.

World Directory of Renewable Energy James and James, 35-37 William Road, London NW1 3ER.

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www.jxj.com/yearbook/wdress/index.html Over 5,000 companies described, including hydro industry firms.

Water Power and Dam Construction Yearbook International Water Power and Dam Construction, Wilmington House, Maidstone Road, Foots Cray, Sidcup, Kent DA14 5HZ. www.connectingpower.com Annual. Details dams built and under construction, hydro resources, companies and project updates.

International Commission on Large Dams Industry-oriented www.genepi.louis-jean.com/cigb web sites Industry umbrella group, with national chapters. International Hydropower Association www.hydropower-dams.com Useful for insights on how the industry is thinking.

World Renewable Energy Suppliers and Services Online www.jxj.com/suppands/renenerg/index.html Arguably the most comprehensive global database of hydro-industry companies available. You can tailor your search by region and country, activity or alphabetical listing. The database can be searched for free.

World Water Buyer’s Guide www.connectingpower.com/buyers_guide Useful searchable database of suppliers in the hydro industry.

International Rivers Network NGO web sites 1847, Berkeley Way, Berkeley CA 94703, USA. Tel: + 1 510 848 1155 Email: [email protected] www.irn.org First port-of-call for anyone seeking information on current and past dam conflicts. All issues relating to the social and environmental impacts of dams. Excellent links to organisations challenging dams around the world.

Swedish Society for Nature Conservation PO Box 4625, Asogataan 115, 11691 Stockholm, Sweden. Tel: +48 8 702 650 Email: [email protected] www.snf.se Monitors Swedish involvement in destructive development projects. Dams Incorporated (see above) can be downloaded from the site (type “Dams Inc” into search facility; the report comes up under “Vattenkraft”) FIVAS Oserhausgt. 27, 0183 Oslo, Norway. Tel: +47 22 98 9300 Email: [email protected] www.solidaritetshuset.org/fivas/Nyforsideeng.htm Monitors Norwegian dam building companies and Norwegian involvement

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in destructive development. You can download FIVAS’s report on the Nordic hydropower industry – Power Conflicts – via www.solidaritetshuset.org/fivas/pub/power_c/index.htm

Berne Declaration Quellenstr. 25, PO Box 1327, CH-8031 Zurich, Switzerland. Tel: +41 12 777 000 Email: [email protected] www.evb.ch Swiss NGO dedicated to promoting more equitable, sustainable and democratic North-South relations. Campaigns against Swiss involvement in destructive development projects and programmes, including dams. Produced 1998 financial analysis of ABB’s involvement in the hydropower sector – High Risk, Low Returns. This (together with other reports on the ABB campaign) can be accessed via www.evb.ch/bd/index.html. Site has English, French and German versions.

Hydropower and Dams www.hydropower-dams.com/journal.html Bi-monthly industry journal.

International Water Power and Dam Construction www.connectingpower.com Monthly industry journal. Useful for news of contracts and updates on projects.

PULPPULP && PPAPERAPER Compiled by Larry Lohmann

The following books are industry outsiders’ treatments of the paper industry and its effects: Library resources

Pulping the South: Industrial Tree Plantations and the World Paper Economy by Larry Lohmann Zed Books, 7 Cynthia Street, London N1 9JF. World Rainforest Movement, Tree Plantations: Impacts and Struggles by Ricardo Carrere and Larry Lohmann World Rainforest Movement, Maldonado, 1858-11200 Montevideo, Uruguay. Tel: +598 2 403 2989 Email: [email protected] www.wrm.org.uy

Timber from the South Seas: An Analysis of Japan’’’ s Tropical Timber Trade and Its Environmental Impact by Francois Nectoux and Yoichi Kuroda World Wildlife Fund , 1196 Gland, Switzerland. Tel: +41 22 364 9111 www.panda.org

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Logging the Globe by M. Patricia Marchak McGill – Queens University Press, 3430 McTavish Street, Montreal, Quebeco H3A 1X9, Canada The US Paper Industry and Sustainable Production: An Argument for Restructuring by Maureen Smith MIT Press, Five Cambridge Centre, Cambridge, Mass., USA The Last Great Forest: Japanese Multinationals and Alberta’s Northern Forests by Larry Pratt and Ian Urquhart NeWest Press, 201,8540 - 109 Street, Edmonton, Canada Tel: +1 780 432 9427 Cut Waste,,, Not Trees Rainforest Action Network, 221 Pine Street, Suite 500, San Francisco, CA 94104, USA. Tel: +1 415 398 4404 Email: [email protected] www.ran.org

Dying from Dioxin: A Citizen’’’ s Guide to Reclaiming Our Health and Rebuilding Democracy by Lois Marie Gibbs South End Press, 7 Brookline Street #1, Cambridge, Mass 02139-4149, USA. Tel: +1 800 523 8478 www.southendpress.org

Paper Cuts: Recovering the Paper Landscape – Worldwatch Paper 149 by Janet Abramowitz and Ashley Mattoon WorldWatch Institute, 1176 Massachusetts Ave NW, Washington DC 20036-1904, USA. Tel: +1 202 452 1999 Email: [email protected] www.worldwatch.org

Of many industry journals, the following two are perhaps the most Trade journals useful in providing insiders’ updates on both industry evolution and the roles of particular firms. They are available in the Science and Business Information Service of the British Library and other large business collections:

Pulp and Paper International (PPI)

Paper & Packaging Analyst Other valuable industry periodicals available in business libraries include Asia Pulp and Paper, Paper, Paper Asia, Paper Europe, Paperboard Packaging, Papermaker, Pulp and Paper, TAPPI Journal, and World Wood. Both PPI and the Japan Paper Association publish an annual collection of pulp and paper Statistics. Specific paper or paper- machinery companies such as ENSO and Valmet also produce periodicals. Providing interesting overview articles on the industry is

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Know-How Wire, the client journal of the giant forestry and engineering consulting company Jaakko Poyry, headquartered in Finland.

NGO periodicals providing updates on the paper industry’s activities include: NGO periodicals

Down to Earth 59 Athenlay Road, London SE15 3EN, UK. Tel: +44 207 732 7984 Email: [email protected] www.gn.apc.org/dte Excellent. Covers environmental justice issues in Indonesia, where plantations and pulp mills are leading social and ecological menaces.

Taiga News Taiga Rescue Network, Box 116, 96223 Jokkmokk, Sweden. Tel: +46 971 17039 Email: [email protected] www.taigarescue.org Also invaluable. Provides information on corporate threats to boreal forest lands.

Earth First! PO Box 3023, Tuscon, AZ 85702, USA. Tel: +1 520 620 6900 Email: [email protected] www.earthfirstjournal.org Often covers paper corporations’ impacts on North American lands

Everyone’s Backyard Center for Health, Environment and Justice, Inc., PO Box 6806, Falls Church, VA 22040, USA. Tel: +1 703 237 2249 Email: [email protected] www.essential.org/cchw Offers updates on and shrewd analysis of grassroots environmental justice issues connected with dioxin and with the paper and other industries.

PR Watch Center for Media & Democracy, 520 University Ave., Suite 310, Madison, WI 53703, USA. Tel: +1 608 260 9713 Email: [email protected] www.prwatch.org Valuable for its analysis of corporate strategy.

Regularly-held Financial Times conferences on pulp and paper are Conferences useful places to pick up the latest information on the industry.

Pulp & Paper Online Industry-oriented www.pulpandpaperonline.com An industry website; provides useful information about the paper industry websites

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as well as links to other sites.

Paper Loop www.paperloop.com Inter-industry website with the information on research, companies and conferences.

American Forest and Paper Association. www.afandp.org

Paper Federation of Great Britain. www.paper.org.uk Information on members of Paper Federation of Great Britain

Canadian Pulp and Paper Association www.cppa.org

Corporate Information www.corporateinformation.com/jpsector/peper.html Information about 45 Japanese pulp and paper companies.

Pulp and Paper International www.ppi-mfi.com

Index of Pulp and Paper Books www.books.mfi.com/paper

Center for Health, Environment and Justice NGO web sites www.chej.org PR Watch www.prwatch.org Taiga Rescue Network www.snf.se/TRN World Rainforest Movement www.wrm.org.uy Has an extensive section on pulpwood plantations. CARBONCARBON TRADINGTRADING Compiled by Larry Lohmann The trade in rights to pollute the atmosphere with carbon is a new market sector which, although it may soon be worth hundreds of billions of dollars, is still very much under construction. A background briefing on the issue (“The Dyson effect: Carbon ‘offset’ forestry and the privatisation of the atmosphere”) is available from The Corner House, Station Road, Sturminster Newton, Dorset DT10 1YJ, but there are no comprehensive guides to the territory. An electronic version of the Corner House’s briefing can be obtained from www.cornerhouse.icaap.org .

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For general background to the scientific issues surrounding climate Library change, see the Intergovernmental Panel on Climate Change’s reports and assessments. The IPCC (www.ipcc.org.ch) assesses the state of resources knowledge regarding climate change every five years in addition to producing technical papers, special reports and methodological work. The IPPC’s controversial Special Report on Land Use, Land Use Change and Forestry (Cambridge University Press, May 2000) lays out some of the methodologies that corporations and governments might use in planting trees as a way gaining permission to emit carbon dioxide, but conveys little understanding of the social issues involved in carbon trading. Some of the narrower technical issues are treated, with widely varying degrees of professionalism, in academic or technocratic journals such as Global Environmental Change, Energy Policy, Environmental Economics, Biomass and Bioenergy, Mitigation and Adaptation Strategies for Global Change, Environmental Science and Policy and Joint Implementation Quarterly (www.northsea.nl/jiq). More useful in tracking the activities and interests of the growing carbon business is Environmental Finance, a new periodical edited out of the UK (www.environmental-finance.com). Subscription inquires should be addressed to [email protected] . Also of interest is the Australian newsletter Carbon Market (www.carbonmarket.com), published by Ecos Corporation. Generalist newspapers and periodicals, such as the Financial Times and American Prospect, also occasionally carry coverage of the subject. The Gallon Environment Letter from the Canadian Institute for Business and Environment ([email protected]) is also useful. Uncritical analyses endorsing trading emissions for trees range from the early Mark Trexler and C. Haugen, Keeping it Green: Tropical Forestry Opportunities for Mitigating Climate Change, published by the World Resources Institute, Washington DC, to the more recent Michael Totten, Getting it Right: Emerging Markets for Storing Carbon in Forests (published by Forest Trends and the World Resources Institute, Washington DC).

Cantor Fitzgerald Environmental Brokerage Services Carbon brokers www.emissionstrading.com or www.cantor.com/ebs & consultants Carbon Storage Trust www.co2.org

C*Trade Email: [email protected] www.ctrade.org US company that helps business clients identify, design, develop, verify, register and certify carbon “offset” projects.

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EcoSecurities www.ecosecurities.com UK company which has worked with Shell, SGS Forestry, Conservation International and the Costa Rican and Australian governments on carbon projects. It recently developed an alliance with PriceWaterhouseCoopers in Australia (www.pwcglobal.com) to develop products and services relating to climate change, including emissions “reduction” (sic) credits.

Edinburgh Centre for Carbon Management www.eccm.uk.com Designs, assesses and monitors projects to sequester or manage carbon in Mexico, Britain and other countries.

Environmental Financial Products, Inc. www.envifi.com Chicago-based firm, run by the financial derivatives pioneer Richard Sandor. Sandor brokered a deal by which Ontario Power purchased emissions “reductions” (sic) credits from ZAPCO (Zahren Alternative power Corporation, www.zahren.com), a firm that converts landfill gas to energy. Environmental Finance works with a broad spectrum of organisations, including PriceWaterhouseCoopers, the world’s largest consulting firm, and has advised Brazilian, Canadian and Australian officials on carbon trades.

Forests for the Future www.futureforests.com Contracts with Mazda, Avis, British Telecom, Access Freight, J. Walter Thompson and other firms to plant trees to “compensate” for their emissions.

SGS (Societe Generale de Surveillance) Forestry www.sgs.co.uk/forestry Designs, monitors and certifies carbon forestry projects.

Trexler and Associates www.climateservices.com A US-based firm that promotes and monitors “climate mitigation projects”.

Winrock International Institute for Agricultural Development www.winrock.org Not-for-profit organisation. Undertakes contracts for carbon measurement and monitoring.

The Emission Marketing Association Associations, Email: [email protected] exchanges & www.emissions.org exchanges & Boasts 140 corporate members, arranges meetings and other events to information “serve the international emissions trading community”. Climate Ark www.climateark.org/climateark.html Useful web search tool on climate change, carbon trading and alternative energy sources.

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Resources for the Future www.rff.weathervane.org Industry-friendly think-tank. Champions carbon trading and maintains a website devoted to climate issues.

Rocky Mountain Institute www.rmi.org Leading think-tank in energy and energy efficiency.

The energy utilities, oil corporations, car companies, travel agents, NGOs and others in the market for carbon emission credits are too Companies numerous to list here. A Dutch consortium of energy utilities which was buying carbon one of the first in the field is described at www.facefoundation.nl/. In the mid-1990s, some 41 North American utilities formed a consortium emission called the UtiliTree Carbon Company to pursue carbon trades. Firms credits such as Suncor (www.suncor.com), Ontario Power (www.ontariopowergneration.com) and TransAlta (www.transalta.com) have sought carbon credits from a wide range of sellers. Shell (www.shell.com) and BP (www.bp.com), meanwhile, have launched internal carbon trading schemes to help themselves meet their own emissions-reduction goals more efficiently. The UN climate negotiations, which are expected to set out some of the rules for an international carbon market, are tracked by the International Institute for Sustainable Development (www.iisd.ca/climate). The United Nations Framework Convention on Climate Change’s web site (www.unfccc.de). The Intergovernmental panel on Climate Change (IPCC) has a web site at www.ipcc.org.ch . The World Bank’s Prototype Carbon Fund maintains a website (www.prototypecarbonfund.com) aimed largely at attracting corporate interest in carbon trading.

Various departments of the US government provide support for the International developing carbon market, including the Departments of State (www.state.gov) and Energy (www.doe.gov), as well as the agencies Environmental Protection Agency (www.epa.gov). The Department of Energy subsidizes research in carbon sequestration and its 1999 Carbon Sequestration State of the Science: A Working paper for Roadmapping Future Carbon Sequestration R&D is available at www.fe.doe.gov/coal_power/sequestration/index_rpt.html .

Many Latin American governments, including those of Costa Rica, Governments Chile, Colombia, Bolivia and Guyana support carbon forestry projects. promoting A useful source of information is www.iucn.org/reuters/articles/ winningweurope.htm. carbon trading

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The New South Wales government in Australia (www.forest.nsw.gov.au) is notably active in carbon trading involving forestry. The Sydney Futures Exchange also looks to play a large role in the carbon market and has a website at www.carbontrading.com.au .

The Nature Conservancy NGOs and www.tnc.org academics Environmental Defense sympathetic to www.edf.org carbon trading Union of Concerned Scientists www.ucsusa.org

Center for International Law www.ciel.org

World Resources Institute www.wri.org

Alex Michaelowa http://perso.easynet.fr/~michaelo

Centre for Science and Environment, India NGOs more www.cse.india.org critical of carbon Greenpeace trading www.greenpeace.org Global Commons Institute www.gci.org.uk

Transnational Research and Action Centre www.trac.org

World Rainforest Movement www.wrm.org.uy

World Wide Fund for Nature (WWF) www.wwf.org

196 The Campaigners’ Guide to Financial Markets RRefefererencesences

1. Kristof, N.D. and Sanger, D.E., “How US wooed Asia to let cash flow in”, The New York Times, 16 February 1999. 2. Brown, J., “From slow start to relentless build-up – globalisation of equity markets now looks unstoppable as the cheapest capital options are sought”, Markets 2000 – A millenium guide, Financial Times, January 2000, p.6. 3. Coggan, P., “Investors prosper in open economy”, Markets 2000 – A millenium guide, Financial Times, January 2000, p.6. 4. Business Week, “Global capitalism – can it be made to work better?” Special report, 6, November 2000, p.40. 5. Between 1980 and 1992, the World bank recorded a total of 6,832 state-owned companies being sold: the majority are now owned by transnational corporations. 6. Harbinson, J.R. and Pekar, P., “Institutionalising alliance skills: secrets of repeatable success”, Strategies and Business, Issue 11, Second quarter, 1998, p.80. 7. Crooks E., “Britain takes lead in overseas investment”, Financial Times, 9 February 2000. 8. Quoted in Khor, M., Rethinking liberalisation and reshaping the WTO, Third World Network, Penang, June 2000. 9. Business Week, Global capitalism: can it be made to work better?”, Special report, 6 November 2000, p.43. 10. Quoted in Khor, M., Rethinking liberalisation and reshaping the WTO, Third World Network, Penang, June 2000. 11. Utting, P., Business responsibility for sustainable development, UN Research Institute for Social Development, Geneva, 2000, pp.1-2. 12. Lash, J., “Foreword”, in Ghazi, J., Seymour, F., Buffet, S. and Dubash, N., leverage for the Environment: A guide to the private financial services industry, World Resources Institute, Washington, DC, 1998, p.iv. 13. Utting, P. Business responsibility for sustainable development, UN Research Institute for Social Development, Geneva, 2000, p.1. 14. In the 1980s and 1990s, pressure from environmentalists and development activists forced the majority of development agencies, such as the World Bank, to adopt environmental and development standards, which, though far from stringent and often not observed, nonetheless imposed a range of conditions on project developers. Environmental impact assessments are now mandatory for many categories of projects: the participation of affected groups is increasingly required; and project developers are (in theory) bound by a raft of rules governing involuntary resettlement, indigenous peoples, wetlands and forests. 15. Ganzi, J. and Tanner, J., Global survey on environmental policies and practices of the financial services industry: The private sector, National Wildlife Federation, Washington DC, 1998. Ganzi and Tanner report that less than 50% of the companies they surveyed “always” or “usually” require that environmental due diligence be performed on lines of credit, project finance

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transactions or equipment financing. In addition, while the survey found that monitoring by banks of a borrowers’ environmental performance has increased, the banks which lent the money rarely do anything with the information they gain, other than requesting the borrower to “fix the problem”. 16. Browne, A., “Trail of rainforest wood from the Amazon to the High Street”, The Observer, 23 July 2000. 17. Vidal, J., “Power to the people”, The Guardian, 7 June 1999. 18. Vidal, J., “Power to the people”, The Guardian, 7 June 1999. 19. Ward, A., “Squirming in the ethical spotlight”, Financial Times, 13 July 2000. 20. “Putting initiatives to the test”, Business in the community: A Financial Times Guide, Financial Times, London, 1998, p.6. 21. Vidal, J., “Consumer power ready to take on corporations”, The Guardian, 27 November 1999. 22. Brown, P. and Vidal, J., “GM investors told to sell shares”, The Guardian, 25 August 1999. 23. Quoted in Henderson, C., “Pilgrim in the casino”, Green Futures, March/April 2000, p.42. 24. Quoted in Business Week, Global capitalism: can it be made to work better?”, Special report, 6 November 2000, p.45. 25. Quoted in Maitland, A., “A code to export best practice”, Financial Times, 29 January 1999. 26. Maitland, A., “Human rights weigh heavier with investors”, Financial Times, 6 April 2000. 27. Hill, A., “Wall Street crush: the number of US citizens owning shares is higher than it has ever been but the image of the typical investor remains hard to pin down”, Financial Times, 30 August 2000. 28. Ward, A., “Pension holders back green funds”, Financial Times, 23 August 2000. 29. Ward, A., “Ethical investing: companies come under pressure to alter course”, Financial Times, 8 July/9th July 2000. 30. Jones, R., “What to look for if you go ethical”, The Guardian, 18 March 2000. 31. Quoted in Ward, A., “Ethical investing: companies come under pressure to alter course”, Financial Times, 8 July/9th July 2000. 32. Tanner, J., Statement to ABB shareholders’ AGM, Zurich, 1 April 1998. 33. Business Week, Global capitalism: can it be made to work better?”, Special report, 6 November 2000, p.42. 34. Personal communication, June 2000. The executive requested anonymity. 35. MacKenzie, C., Director of the Ethics Unit at Friends Ivory and Sime, quoted in Ward, A., “City funds added value in green credentials”, Financial Times, 31 August 2000. 36. Suranyi, M., “Blind to sustainability? Stock markets and the environment, Forum for the Future, London, 1999. 37. “Putting initiatives to the test”, Business in the community: A Financial Times Guide, Financial Times, London, 1998, p.6. 38. Burns, J., “Pressure groups ‘have influence on investors’”, Financial Times, 22 May 2000.

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39. Pensions Week, July 1999. 40. 1995 Pensions Act, London, The Stationary Office, www.hmso.gov.uk/acts . 41. Quoted in “Rise of the green factor”, The Guardian, 3 June 2000. 42. Henderson, C., “Pilgrim in the casino”, Green Futures, March/April 2000, p.41. 43. Turnbull Committee, Internal controls: Guidance for directors on the combined code, Institute of Chartered Accountants, London, 1999. 44. Henderson, C., “Pilgrim in the casino”, Green Futures, March/April 2000, p.39. 45. Department of Trade and Industry, Modern company law for a competitive economy, London, July 2001. 46. Crowe, R., “Start of quiet revolution in pension funds”, The Guardian, 30 June 2000. 47. Chitty, G., “Climate of change”, Green Futures, November/December 2000, p.21. 48. Chitty, G., “Climate of change”, Green Futures, November/December 2000, p.21. 49. Quoted in Crowe, R., “Start of quiet revolution in pension funds”, The Guardian, 30 June 2000. 50. Quoted in Birch, S., “Accentuating the positive”, The Observer, 2 July 2000. 51. Greenpeace, Re-source: Market alternatives to ancient forest destruction, Greenpeace, London, 1999, p.19. 52. Quoted in Sharma, A., “Ensuring corporate responsibility: Beyond sticks and stones”, Higher Values, 11, February 1997, p.17. 53. Chan-Fishel, M., Risk exposure: Revealing environmental risks to financiers – Anatomy of a deal, White Paper # 1, Friends of the Earth-US, Washington DC, 1998, p.5. 54. World Commission on Dams, Dams and Development – A new framework for decision-making, Earthscan, London, 2000. 55. Chitty, G., “Climate of change”, Green Futures, November/December 2000, p.21. 56. Chan-Fishel, M., Risk exposure: Revealing environmental risks to financiers – Anatomy of a deal, White Paper # 1, Friends of the Earth-US, Washington DC, 1998, p.5. 57. Chan-Fishel, M., Risk exposure: Revealing environmental risks to financiers – Anatomy of a deal, White Paper # 1, Friends of the Earth-US, Washington DC, 1998, p.4. 58. Control Risk Group, Business securities outlook 1996, McLean, Virginia, 1996, p.8. 59. Deutsche Banc Alex. Brown, GMOs are Dead, New York, 21 May 1999. 60. Nicholas Hildyard, ABB’s hydropower strategy under review, Berne Declaration, Zurich, February 1998. 61. Mineral Policy Institute, The buck’s gotta stop somewhere – social and environmental accountability in the financing of mining, Mineral Policy Institute, Sydney, 1998. 62. Mineral Policy Institute, The buck’s gotta stop somewhere – social and environmental accountability in the financing of mining, Mineral Policy Institute, Sydney, 1998, p.13.

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63. Blighe, F., International social investment – past, present and future, Paper read to conference on “Making profit while making a difference, New York, 23 July 1997. 64. Statement of environmental commitment by the insurance industry, United Nations Environment Programme, Cologne, 1995. 65. UNEP statement by financial institutions on the environment and sustainability, United Nations Environment Programme, www.unep.ch/etu/finserv/finserv/ english.htm , accessed 1 June 2000. 66. Chan-Fishel, M., Risk exposure: Revealing environmental risks to financiers – Anatomy of a deal, White Paper # 1, Friends of the Earth-US, Washington DC, 1998, Appendix 2. 67. For invaluable advice on socially-oriented shareholder activism, see: Friends of the Earth-US, Confronting companies using shareholder power, www.foe.org/ international/shareholder ; Mackenzie, C., The shareholder action handbook, New Consumer, Newcastle upon Tyne, 1993, www.ethics.fsnet.co.uk . 68. Chan-Fishel, M., Risk exposure: Revealing environmental risks to financiers – Anatomy of a deal, White Paper # 1, Friends of the Earth-US, Washington DC, 1998, pp.7-8.

200 The Campaigners’ Guide to Financial Markets GlossarGlossaryy

“Buy side” Used particularly in America to refer to fund managers and institutional investors that buy shares and other investments from investment bankers. Defined Benefit A type of pension where the pension fund pays its members a pension based on their final salary. This means the pension fund makes all the investment decisions, and the fund sponsor essentially carries the risk of the pension. Defined Contribution A type of pension fund where a fixed amount of money is invested for its members each period, typically a fraction of their current salary. This means the level of pension that scheme members receive will depend on investment returns, but also that members may have some choice about how their funds are invested. Equity A “share” or “common stock”. Ownership of a company is divided into a number of shares (which are usually all equal - hence the term “equity”). Also used to refer to the company itself, particularly in the plural. Equity market A term for all the shares quoted in a particular area or stock exchange. Flotation, Floated Essentially the same as IPO - the time a company is first quoted on a stock exchange. FTSE Usually short for “FTSE All Share” - the major benchmark index for the UK equity market. FTSE is the name of a company that develops and calculates a range of indices. IPO Initial Public Offering. When a company is first listed on a stock exchange, and its shares are sold to investors, including the general public. Listed As in “listed on a stock exchange”. This means that the shares are available to buy and sell, that the prices at which this happens are made public. Normally some brokers agree to “make prices” in the shares. It also means that the company has to obey the rules of the stock exchange, notably on disclosure of information about the company’s activities. Make a price State a pair of prices at which someone (typically a broker) is prepared to sell and buy a share.For example, 20-22 means they will buy shares (you can sell them) at 20, and they will sell them (you buy) at 22. Privatisation When the government sells off state owned assets to a private sector body. In particular, the selling of a state-owned company to the general public by “floating” it on the stock exchange. Quoted “Quoted” means somebody is “making a price” (qv) for the equity. See “listed”. “Sell Side” The investment bankers and stockbrokers (see Part Four, p.77) who make a price in shares, and organise new share issues for companies seeking to raise money. Share See “equity”. Sponsor A broker who is responsible for introducing a company to a stock exchange. Vouchsafes for the information provided about the company.

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