Swiss eco-investor Ethos warrior comes of age

Companies operating overseas, like those involved in bauxite extraction, need to have socially responsible methods, Ethos argues AFP

After 20 years as the prickly conscience of sustainable investment in the pension fund industry and big business, the Ethos Foundation is vowing to continue its soft guerrilla tactics.

“Zurich’s financial circles have long treated us like communists,” jokes Ethos President Dominique Biedermann. The backdrop of the five star Bellevue Hotel in Bern, a haunt of the corporate and political elite, should dispel any thought of the organisation being dangerous revolutionaries. Around 250 people are there to mark the organisation’s 20 year anniversary.

In the past two decades of advising pension funds on sustainable investments, Ethos has also set up two pension funds with a view to protecting the money of their clients. And as their goal of supporting socially responsible investment involves becoming shareholders in big corporations, they are in the habit of asking CEOs difficult questions.

In a big coup back in 2005, Ethos led a rebellion at Nestlé’s General Assembly against the same person holding the post of chairman and CEO. Their move was backed by a third of shareholders, leading to a resolution to revive the group’s statutes and sounding the death knell for such combined mandates of power.

The leader in this niche field, Ethos comprises over 200 pension funds that collectively manage around a quarter of Switzerland’s CHF800 billion pension investments. Coinciding with its 20 anniversary it has launched a new Swiss stock market index to reward socially responsible firms and penalise the stock value of companies with fat cat pay structures – one of its bugbears.

The Ethos Swiss Corporate Governance Index on the Swiss stock exchange under-weights companies that fall short of Ethos’s good governance practices. SIX Group, which operates the Swiss stock exchange, said the new index would “generate added value for investors through innovation”.

In a few weeks, Ethos will start welcoming its first private investors.

The guest of honour at the Ethos gathering in Bern, Justice Minister Simonetta Sommaruga, widely praised the organisation’s actions, while acknowledge that there remained a lot of work to do in building socially responsible corporations. Switzerland, particularly, is home to some of the giants whose practices in developing countries are often criticised.   

“The success can hide a chasm underneath,” she noted, citing “children working in near slave-like conditions and toxic land” she saw on a visit to a bauxite mineral extraction site in Guinea. “Productivity should not preclude ethical criteria,” she said.

It’s an area of concern for Ethos. The foundation backed a peoples’ initiative calling for responsible multinationals, and which intended to anchor in the constitution the need for Swiss-based companies to respect human and environmental rights in their foreign activities. The government recommended that voters should reject the initiative.

But how big a difference has Ethos made in the past 20 years? Co-founder Biedermann argues that in the past two decades “investors have become much more aware of the importance of environmental, social and governance issues”, or at least the majority of institutional investors such as banks, securities dealers and hedge funds.

And for the future? Biedermann said: “In the future we will have a lot to do within the framework of dialogue with corporations on environmental and social matters. Notably from the perspective of climate change, it’s a very important duty for companies listed on the stock exchange to act in favour of protecting the climate in the medium and long-term.”

It remains to be seen how many private investors will join Ethos.

Ethos has published a brochure outlining its eight guiding principles for members: professional transparency, the exclusion of companies from a portfolio that don’t meet responsible investment standards, the exercising of shareholders’ right to vote, asking questions and dialogue with management, grouping together with other shareholders.