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July 08, 2003
Eurosif Releases Transparency Guidelines for European SRI Funds
    by William Baue

Eurosif asks socially responsible investment firms to disclose their policies and procedures around SRI issues.

Late last week, the European Sustainable and Responsible Investment Forum (Eurosif) released a pilot version of its Transparency Guidelines, a voluntary initiative for the retail socially responsible investing (SRI) sector in Europe. The project aims to inform consumers about SRI while also encouraging accountability amongst SRI asset managers and research providers.

"The European Commission, combined with industry players, and the press and media, said 'wouldn't it be great if we had a better understanding of what is an SRI fund?'" said Matt Christensen, Eurosif's executive director. The project is co-financed by the European Commission, Friends Provident/ISIS Stewardship Funds, Henderson's European Fund, and Jupiter Green Funds.

"A number of different groups said it would be great if there was a guideline that starts to create a uniform approach toward disclosing information about these funds so people can learn and know what they're getting," Mr. Christensen told

The guidelines amount to a series of questions for SRI asset managers to answer regarding their investment criteria, research process, engagement approach, and voting policies, among other issues.

For example, questions on the research process ask whether research teams are in-house or external, whether there is external verification of the research, and whether research includes stakeholder consultation. Evaluation and implementation questions ask for disclosure of how asset managers make disinvestment decisions on SRI grounds, and whether and how they communicate disinvestments to investors and affected companies.

"The intention is that best practice will spread across pan-European SRI funds, allowing the investor to gain greater confidence in the SRI products," said Mark Campanale, associate director of SRI business development for Henderson Global Investors. Henderson served on the UK SIF Steering Committee for UK input into the Eurosif transparency guidelines.

While many European SRI firms already disclosed much of this information, the new guidelines create a single reporting platform.

"By SRI funds being more transparent about the principles and processes they follow in a standardized disclosure format, it allows the consumer to compare various products and to make a more informed choice," said Claudia Kruse, an analyst with ISIS Asset Management, which similarly served on the steering committee.

The influence of the guidelines may not end at the borders of the SRI community, nor at national borders.

"Although the guidelines are specifically designed for SRI funds alone, over the long term they may encourage non-SRI funds to improve their transparency as well," Mr. Campanale told

Mr. Christensen does not expect this influence on mainstream mutual funds to take effect immediately, but rather over a two-to-three year period.

"A great part of the guidelines' value lies in the fact that they are being applied across various countries, attempting to further international integration and the development of a common set of standards and principles," added Ms. Kruse.

The guidelines also ask asset managers to disclose their proxy voting policies and practices, echoing the recent decision by the Securities and Exchange Commission (SEC) requiring all U.S. mutual funds to disclose their proxy voting guidelines and votes.

"Perhaps there is no direct relationship between the two tools; however, it is all pointing to a growing expectation amongst regulators, advisors and investors to understand how money is being managed, and how investor rights (such as voting) are being exercised," said Mr. Campanale.

Through the end of this year, as many as ten European SRI firms will follow these pilot guidelines in order to road-test them.

"The real litmus test will be their practical application, which is why we have agreed to pilot them," said Ms. Kruse. "Any shortcomings and pitfalls will surely surface during the trial period and can subsequently be rectified."

The question of how the guidelines will be verified remains unanswered as yet.

"Will they be self-policing, or will there eventually be some sort of verification arm involved with monitoring their usefulness and the ability of people to actually be following the guidelines?" Mr. Christensen said.

The experiences of the pilot process may offer some help in answering these questions.


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