Senior managers think there is a
strong link between the environmental and financial performance of
their companies, but the City has so far failed to make the connection.
However there are now signs this could be changing
If
further evidence were needed of the City’s indifference to the ethical
performance of UK companies, then a voluminous newly-published study
has provided it in spades.
The 600-page Corporate
Environmental Performance 2000 report (CEP2000), which sampled more
than 200 large and small UK companies and has been produced by a host
of organizations working in the field, shows that seven out of ten
companies have never been questioned about their environmental
performance during talks with financial institutions – even though the
vast majority of businesses surveyed (74 per cent) believe the link
between their environmental and financial performance is ‘considerable’.
However, even though the groundwork for the study was carried out as
recently as June and July, its conclusions already have a slightly
dated ring about them. This timely report is rapidly being overtaken by
events.
Since it was published late last year, a number of developments have raised awareness of the issue among investors.
Two of the three biggest UK pension funds have announced measures to
take greater account of environmental issues when making investment
decisions.
Other institutional investors are known to be
reviewing the complex relationship between the financial and the
environmental performance of companies.
Their interest
has arisen in part from the government’s new regulation requiring
pension funds to disclose their ethical policies: the deadline for
pension fund trustees is now less than five months away.
The recent improvement in the financial performance of ecological and
ethical funds, which are heavily invested in clean technology stocks,
may also be a contributory factor.
Meanwhile two recent
studies, a general one by the Swiss Bank Sarasin and a sector-specific
one from the international conservation organization WWF, both claim to
have found a positive correlation between companies’ environmental and
financial performance.
These developments, of course, by
no means invalidate the CEP2000 survey’s conclusion that there is ‘a
marked imbalance between the majority of companies that wish to see
their environmental performance issues being more closely linked to
financial performance and the City’s perceived lack of understanding
and inability to draw such issues together.’
Two-thirds of
respondents felt the financial community did not understand much about
their company’s environmental risk status. Only nine per cent thought
the City understood a great deal.
Just over half of the
207 respondents were from private companies. Eighty per cent of these
were small or medium-sized enterprises (SMEs). Quoted public companies
accounted for another 37 per cent.
Ironically, companies are being pressurised from almost every other quarter to improve their environmental performance.
The study found that more than a quarter (26 per cent) of respondent
companies had been targeted by an environmental or community pressure
group campaign during the past two years, with large companies (52 per
cent) especially under fire. Pressure from consumers and the media has
also continued unabated.
But interestingly, although
around half (43 per cent) criticised the media and the public for
failing to understand risk and lacking technical knowledge, more than
two thirds (69 per cent) believed the media and the public did not
overestimate the safety and environmental hazards associated with their
sector.
Large companies turning over more than £1
billion said they thought that recognition of environmental performance
from the City was very important to them (81 per cent).
Nearly two-thirds of the sample (62 per cent) said that their companies were engaging stakeholders more in dialogue.
As a further indication that more companies are turning from
environmental to social matters, around half (52 per cent) felt that
social and ethical issues were closely integrated with green issues
throughout their company.
The report was produced by the
Association of Certified Chartered Accountants, Market Tracking
International, New Economics Foundation, SERM, The Environment Council
and UNEP.
