Do Scots investors care about corporate social responsibility?

June 30, 2008 at 11:43 am 5 comments

The article below is one example more of the need of Corporate accountability vs responsibility. Corporations have managed to use the concept of CSR for their own benefit, setting up ethical principles and not binding rules which have facilitated their access to communities in the local level and to influential actors in the international arena, which can legitimised these voluntary practices.

Scots investors accused of backing £400m mine that threatens remote Indian

Pressure building on companies to sell their shares in mine’s owner By Billy

THE FUTURE of a remote tribe in India could be under threat from a proposed
mining development indirectly funded by Scottish companies and the nation’s
universities. Mining giant Vedanta Resources plans to create an open-cast
bauxite mine in the mountainous east Indian state of Orissa, an area that is
home to the Dongria Kondh tribe.

Protesting tribesmen and Survival International – an organisation that
fights on behalf of those whose cultures and human rights are threatened by
the modern world – have launched a campaign against the FTSE 100 company and

Campaigners, including Oscar-winning actress Julie Christie, claim the mine
would end the tribe’s way of life by polluting streams, cutting down forests
and destroying a mountain that people hold sacred.

Vedanta vigorously disputes the allegations and says it has a strong focus
on meeting its environmental responsibilities and a proud record of helping
communities in countries where it operates.

Survival is targeting not only Vedanta, but its major shareholders,
including Coutts Bank, Standard Life, Barclays Bank, Abbey National and
HSBC, urging them to sell their stakes unless the firm abandons its plans.
The Norwegian government recently sold its stake in Vedanta as a result of
the campaign.

Scotland’s universities – including Glasgow, Edinburgh, Aberdeen and St
Andrews – have money invested in Vedanta through the Universities
Superannuation Scheme (USS), which holds more than one million shares in the
company. The Dundee-based Alliance Trust and Martin Currie Investment
Management of Edinburgh also have funds invested in the company.

Vedanta’s subsidiary, Sterlite, plans to mine aluminium ore from an area
where about 10,000 people live. The proposed £400 million project has
already brought about clashes between local tribal people and security
forces. Hundreds of members of the Dongria Kondh tribe held a protest in
India recently, marching through Bhubaneswar, the capital of Orissa state,
and staging a sit-down protest near the state assembly.

Jitu Jakasika, a Dongria Kondh protestor, said that if the mining project is
allowed to proceed, it will destroy the hill’s ecosystem and dry up two
major rivers and 36 streams. “It will destroy the livelihoods of 10,000
tribals and the religious sanctity of our beloved Niyamgiri,” he added.

Survival’s director, Stephen Corry, said other investors should follow the
Norwegian government’s example and offload their Vedanta shares or face
boycotts over their human rights record. “The tribe cannot survive as a
people without their land,” he added.

The proposal has been several years in the approval process and has been
backed by both the national and state governments in India. A final ruling
from the Indian Supreme Court is imminent.

Vedanta vigorously disputes the claims made by Survival and said it takes
human rights very seriously. “It is fundamental to the way we work to ensure
that all our operations provide benefit in all the communities in which we
operate,” a spokesman said. “At the Niyamgiri Hills there is no habitation
on the bauxite mining area, as confirmed by the team of experts from Wild
Life Institute of India.

“We fully support this plan. We ensure the best practices in environmental
management and through the years have taken proactive steps towards being
compliant with evolving standards.”

Scotland’s universities, and their superannuated employees, indirectly fund
Vedanta through the Universities Superannuation Scheme (USS), which invests
to provide pensions for staff.

David Russell, head of responsible investment at USS, said the fund is aware
of Vedanta’s activities in India and would be meeting with the firm to
discuss the issue, along with the Norwegian Government’s divestment

“USS’s trustees believe that the fund can and should take ethical,
environmental governance issues into account in its investment
decision-making. It is worth noting that we only invest in the company via
our index fund – a passive fund in which we invest in the whole UK FTSE
index of 700+ companies,” he said.

The USS fund has more than 390 member institutions and more than 240,000
individuals for which it invests and pays pensions. It is governed under UK
trust law and in this regard is unlike a governmental fund that enables
individuals to express their personal values in their investments.

Mr Russell said USS responsible investment (RI) policy must be consistent
with its legal responsibility under trust law. “This means treating the
financial interests of our members as paramount and managing the fund
consistent with proper diversification and prudence. This means that the
fund invests in more than 1500 companies from around the world. The legal
advice received by the fund is that USS is not permitted to make investment
decisions based purely on ethical or moral factors, and we hence can only
divest on the basis of material financial grounds. However, USS’s trustees
believe that the fund can and should take ethical and environmental issues
into account in its investment-decision making where they are material to a
company’s performance.

“USS, therefore, seeks to integrate these factors into investment analysis
and engages with companies on these issues,” he said.

A spokesman for the University of Edinburgh said USS sets its own investment
principles, but that the institution’s investment committee strictly adheres
to a socially responsible investment policy. “The university has in place
procedures to consider any matters that are raised and the University
Court’s approach is one of engagement with companies on ethical issues
through the fund managers’ corporate governance unit,” a spokesman said.

The University of Glasgow said it also requires investment managers to have
socially responsible investment (SRI) policies, so that when concerns are
raised the behaviour of companies can be influenced by shareholders.

“While the university would not comment on the specific actions, or proposed
actions, of an individual company, we would emphasise our commitment to SRI
as a means of encouraging companies to demonstrate socially responsible
corporate policies,” a spokesman said.

The Alliance Trust, based in Dundee, confirmed it had £20m invested in
Vedanta. A spokesman said: “Our company policy is to give investment
managers the flexibility to invest where they believe that they can make the
best return for our shareholders. As part of any investment decision, we
take all the relevant factors into consideration, including corporate social
responsibility and environmental issues.”

Martin Currie Investment Management in Edinburgh said it expects companies
in which it invests to behave both within the law and morally. “Our approach
is to invest based on evidence, so we sent a detailed list of questions to
Vedanta and asked to speak with Survival to discuss its claims.

“We have now received responses to our structured questions from Vedanta. We
are still trying to arrange a call with Survival. Once we are able to assess
the evidence properly and fully, we will decide what to do with the shares,”
a spokesman said.

Standard Life in Edinburgh declined to comment.


Entry filed under: Communitties of resistance, Corporate Accountability, Indigenous People & Neoliberalism, Indigenous Resistance, Rights, and Survival.

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5 Comments Add your own

  • 1. dandurazo  |  June 30, 2008 at 6:01 pm

    No one ever said that socially responsible investing was easy. It’s critically important for socially aware investors like the USS to have procedures in place to watch where the money is going, and to ask the hard questions.


    Dan Durazo

  • 2. redamazon  |  June 30, 2008 at 6:56 pm

    Yes, that is why we should start talking about accountability and enforceable measures. We should also be careful about what we mean with the broad concept of “socially responsible”. We can not claim we are socially responsible by building a school in Africa while at the same time polluting the environment or not respecting human rights provisions, as it is the case of many international corporations operating in difficult areas. An emblematic case is Shell in Nigeria or Texaco in Ecuador.

  • 3. Andrew  |  July 3, 2008 at 4:11 am

    Great comment, Dan!

    Socially Responsible Investing is never easy, and can involve social and ethical dilemmas as well as the occasional dilemma between social responsibility and financial performance.


    Whilst I agree that funds which seek to be socially responsible should not hold shares of companies with poor records relating to human rights, I am somewhat skeptical about the use of divestment as a method of socially responsible investment.

    If USS divests its shares in Vendanta, then it loses any capacity it may have had to influence the company’s behavior. On the other hand, if the fund keeps its shares, it is in a somewhat better position to pressure the company into ensuring that the impact of the project, both from the perspective of the environment and from that of the native tribe, is minimized.

    Also, given that USS is not specifically an ethical fund, the fund must, in my opinion, undertake divestment only when that is in the financial interests of its members, as per the constitutional requirements of the fund.

    A SRI fund, on the other hand, should divest funds in companies where they judge that doing so would produce a better social and environmental outcome than not doing so.



  • 4. Teresa Martinez  |  July 3, 2008 at 2:31 pm

    Andrew and Dan, thank you very much for your contribution to the discussion and your useful comments.

    By no means, I a an expert on investment funds. Nevertheless, it seems to me from your comments and the information provided by Glasgow and Edinburgh university above, that a conflict of interest may arise. On one hand, we know USS main responsibility is to protect the financial interest of their members, and it is not an ethical fund. On the other hand we have members such us Glasgow and Edinburgh university which strictly adhere to SRI practices, and this is something USS will have to have into consideration.

    This is also a healthy discussion because it raises various questions:

    – Do we need enforceable regulations that can better define what we mean by SRI, Corporate Social Responsibility etc. We are using these big words and policies which in many cases are volunteer, and lack accountability.

    – Should universities and their related funds adhere to SRI policies?. During the last years there are growing demands from academics and students to do so

    – This third issue is more tricky, as it will require a shift of paradigm.. where funds and corporations can not always justify their actions on the basis of protecting the financial interests of their members. Specially when this means jeopardizing the livelihoods of communities that have no say or have not been consulted.

    Finally I welcome the interest of the USS’s trustees
    to take ethical and environmental issues
    into account , and I am looking forward to see how the may influence the company’s behavior.



  • 5. Sitakanta Sethy  |  February 10, 2009 at 7:34 am

    Investment certainly aims at good returns or profit, but at what cost? Whether it should be at the cost of environment and livelihood of the poor is a serious matter. So, there is a need to educate the investors to go for socially responsible investments and such investments should only be encouraged t any cost. I agree that the Dongoria Kondhs in Niyamgiri Hills are going to loose their livelihood and it would also destroy the environment.


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