Efforts by the London Stock Exchange to establish a central database of
information on companies’ social and environmental performance look to
have run into trouble.
Weaker than anticipated interest in the
Corporate Responsibility Exchange (CRE) – coupled with cutbacks at the
LSE related to an ongoing takeover bid by the US stock exchange Nasdaq
– appears to have undermined the project.
The small in-house
team that ran the CRE – including its head Georg Braun – has been laid
off, effectively putting the initiative on the backburner. There are
also fears that it could be killed off altogether if Nasdaq’s pursuit
of the LSE is successful.
When it was set up in 2004, the CRE
was hailed as a solution to ‘questionnaire fatigue’ arising from
demands on companies for CSR data from analysts, investors,
researchers, index compilers and rating agencies. The idea was that it
would enable businesses to submit such information just once, with the
data distributed to investors for an annual fee of around £20,000
($36,900).
However, only around 150 companies have been
providing data to the CRE, and just two organizations – Ethical
Investment Research Services and Business in the Community – are known
to have signed up as end users of the information.
One source close to the CRE told EP:
‘Things don’t look good, and the project has fallen some way short of
initial ambitions. It had the potential to achieve critical mass and
become the de facto aggregator for CSR data in the UK, but that has not
happened. You have to ask questions about the capability of the LSE to
take it forward.’
Another source said: ‘Basically it’s all
gone very quiet. The business model relied on getting lots of investors
and researchers to pay large amounts of money to use the service, and
that has not worked so far.’ One investment-side supporter of the CRE
also told EP: ‘It would be
ironic, after all the complaints about questionnaire fatigue, if this
system were to fail because of lack of support.’
Former Insight
Investment head of investor responsibility Craig Mackenzie, who was a
member of the LSE working party that developed the CRE, told EP
there were concerns about the consequences of a successful Nasdaq bid.
‘The CRE has always been a promising initiative and I hope the current
pursuit by Nasdaq doesn’t undermine or kill that potential, because I
think we really do need it,’ he said.
The LSE said the CRE was
‘alive and well’ despite the changes, and is being administered by an
in-house business unit called IR Solutions. ‘The CRE is still there,
but we’ve updated the system and we’ve been working with customers on
that,’ it said. However, it declined to say how many investors had
signed up to the service.
