"Imagining better: prioritising people and planet over growth"
Global Head of Sustainable Outcomes, Aviva Investors
I guess I thought you’d be here forever,
Another illusion I chose to create,
You don’t know what you got until it’s gone,
And I found out a little too late
These words are not clichéd relationship advice, but embarrassing evidence that I was a Chicago fan in my teenage years. The lyrics to their song “Hard Habit to Break” are glued to my memory and re-emerged when I sat down to write about the importance of civil society to a listed FTSE 100 company and major investor in corporate Britain.
Whether you like Chicago or not, these words are a reasonably accurate reflection of the relationship between big companies, investors and civil society. Despite grand gestures of partnerships and community support, civil society organisations tell me it is getting harder to work with UK plc.
Firms still want to collaborate with civil society, but on their own terms. In doing so, many businesses have replaced trust in civil society organisations’ expertise, and knowledge of where they can have the most impact, with outcomes that best support the company and its brand. Even at Aviva, whose 300-year history has shaped us into a company that values the communities in which we operate, we have a long way to go.
A case in point is the research that underpins where we invest our money. We need to know about the risks and opportunities facing the companies, projects and governments we put our clients’ money into. To this end, we source information from multiple sources, including civil society research. This brings insight that we use for our analysis – from the World Wide Fund for Nature’s (WWF) Living Planet report on biodiversity loss and the Zoological Society of London’s investigations into deforestation to Oxfam’s report on the unequal impact of climate change. But we rarely pay for it.
Instead, our research budget goes to big banks like HSBC or Barclays, who provide research on the outlook of companies, sectors and the broader economy. This is despite the fact that our own research found that sell-side analysts do not apply enough scrutiny to businesses’ Environmental, Social and Governance (ESG) approaches. Consequently, price targets and ratings often present an overly positive view of a company’s long-term prospects, which impairs the efficient functioning of capital markets. Over 40% of analysts said sell-side research has a detrimental short-term focus and only 35% believe it tackles controversial topics or offers negative assessments of companies when appropriate.
I was acting as if you were lucky to have me,
Doin’ you a favour,
I hardly knew you were there,
But then you were gone, and it all was wrong,
Had no idea how much I cared.
The problem is a matter of perception. Companies often behave as if civil society should be lucky to get a hearing. They fail to realise it is the other way around. To realise this, it is worth imagining the alternative.
In a world where civil society no longer exists, we would lose valuable information and expertise investors tend not to have in house. We would not know that over half (54%) of the biggest tropical timber and pulp companies do not publicly commit to protecting biodiversity and 44% have yet to publicly commit to zero-deforestation. We would also not know that black people held just 1.5% of the 3.7 million leadership positions across the UK’s public and private sectors in 2019, only a small improvement compared with 1.4% in 2014. And we wouldn’t know of the unethical and exploitative recruitment practices many migrant workers in the Gulf states are subjected to.
Independent information like this is invaluable to investors, in part because the knowledge can have an impact on fund performance. From oil spills to corruption scandals, history is filled with examples where bad behaviours have had an impact on the bottom line. Being aware of poor performance can help investors engage with companies to drive change or divest if the issue can’t be resolved to avoid future losses. Moreover, clients increasingly want their money to provide returns with a good conscience, investing in a way that aligns profit and purpose. The information we get from the network of civil society organisations is an essential part of that.
We would also risk not being held accountable for our actions. Every year, Aviva is ranked by ShareAction for our climate change voting. InfluenceMap is now assessing investors on how they work with policymakers to promote sustainable finance policies. Some might think of that unaccountability as a pleasant escape, but we see it differently. Society keeps us on our toes and makes us a more resilient company.
We would also lose the platform for voices of the stakeholders both we and the assets we invest in should serve, according to the UK Companies Act. In my role, I speak to companies’ boards and management, but we rarely get the opportunity to speak directly to workers in their supply chains or the communities that have been displaced by their latest mine or palm oil plantation. Civil society provides them with a platform, giving voice to the powerless so that we as investors can listen and respond.
Most importantly, we would lose the foundations on which companies are built. In Francis Fukuyama’s 1999 work, Social Capital and Civil Society, he wrote: “Social capital is important to the efficient functioning of modern economies, and is the sine qua non of stable liberal democracy.”
Civil society and the organisations that represent it are part of a broader social and political system that impacts all the assets we can invest in. As the Harvard Business Review recognised, conflicts that arise within companies “can quickly escalate to national or even international proportions.”
All this begs the question: if civil society is so valuable, why don’t we price it accordingly? How do we change the relationships and ensure we put a value on the invaluable?
It is clear that society, companies and investors need to put a higher price on the positive externality civil society provides. Similar to how research and development activities can have positive effects beyond those enjoyed by the company or government that funded them, the effects of the work of civil society span beyond those that paid for it.
We need to move from a transactional approach, where investors and companies work with civil society in a way that works for us, to a more collaborative approach. As a Norwegian, I often talk about having a ‘dugnad’. The term comes from the Old Norse ‘dugnaðr’, which means help but has been used for centuries in reference to community action, with people coming together to get big things done, like building a house or harvesting. I help you today, you help me in future. It was based on a recognition that we have a common goal; we all pitch in where we can – time, money, expertise – and we all reap the benefits.
How can we apply the principles of dugnad so that companies and investors reinvent the relationship with civil society for today’s environment? We need to listen and take action together.
On 24 April 2013, the eight-storey Rana Plaza factory building near Dhaka collapsed. The death toll from Bangladesh’s worst industrial accident passed 1,100, while more than 2,500 were injured. It was the deadliest garment industry accident in modern history, but it wasn’t the first. Just five months earlier, the Tazreen Fashions factory went up in flames in the Dhaka suburb of Ashulia. At least 117 died and more than 200 were injured. Between 2006 and 2012, more than 500 Bangladeshi garment workers died in factory fires.
Non-government organisations tried to enlist clothing and fashion brands to sign a legally binding agreement to improve factory safety, but only two — PVH and Tchibo of Germany — joined. Then Rana Plaza happened. People knew of the risks but didn’t listen or take action. Today we don’t need to look far for future risks on the horizon, from climate change and inequality to biodiversity loss, where many companies and investors continue to turn a blind eye to the realities presented to us by science and civil society.
I am hopeful that things can change. In my career I have seen the power of a true dugnad – bringing people, civil society, companies, investors and governments together to solve problems. In 2009, in an effort to improve the information companies provide about their sustainability practices to list on stock exchanges, Aviva helped set up the Sustainable Stock Exchange initiative, which now has 97 partner exchanges around the world all improving listing rules.
To get firms to do more to deliver on the Sustainable Development Goals (SDGs), Aviva, along with other investors and governments from the Netherlands and Sweden, established the World Benchmarking Alliance, which assesses and ranks the 2000 most influential companies in the world based on their contribution to the SDGs. The alliance now counts 150 members, from civil society organisations like Oxfam and WWF to research hubs like Stockholm Resilience Centre and investors from around the world.
To promote stronger regulation in the European Union, we sat on the EU’s High-Level Expert Group with civil society organisations and policymakers in shaping the Sustainable Finance Action Plan, which is now being rolled out across Europe. And ahead of the 26th United Nations Climate Change Conference of the Parties (COP26) in Glasgow in late 2021, we are building a coalition calling for the creation of an International Platform for Climate Finance (IPCF), which will set up a way to help track capital and inform governments of their progress towards meeting the ambition of the Paris Agreement on an annual basis.
We must also involve our customers in this dugnad. What is civil society if not the people within it? However, the investment industry has not made it easy for people to see where their money goes or empowered them to effect change. It is no wonder that less than a third of workers realise their company pension is invested.
People also find it hard to check where they are invested or get involved; despite that, 71% believe their investments can influence climate change, rising to 85% among Millennials, and 45% would increase their contribution by as much as 3% if they knew their money was going somewhere sustainable. A dugnad with our customers can help us make sure that we build a better future we all want to retire into.
There is an urgency to get on with the dugnad. Civil society is under pressure. In recent years, there has been a perceptible rise in restrictions on the fundamental freedoms of expression, association and peaceful assembly that endangers civic freedoms, not just from state apparatuses but also from powerful non-state actors, including influential businesses. As companies and investors, we need to be courageous and stand up for the value of the invaluable: our communities and civil society.
 R Almond, M Grooten & T Petersen (eds.), Living Planet Report 2020 – Bending the curve of biodiversity loss, World Wide Fund for Nature, 2020
 “Companies failing to protect millions of hectares of tropical forest”, Zoological Society of London, 17 July 2020
 “Carbon emissions of richest 1 percent more than double the emissions of the poorest half of humanity”, Oxfam, 21 September 2020
 “Aviva Investors proposes reform of sell-side research”, Aviva, 17 September 2017
 “Companies failing to protect millions of hectares of tropical forest”, Zoological Society of London, 17 July 2020
 K Makortoff, “UK black professional representation ‘has barely budged since 2014’”, The Guardian, 22 June 2020
 “Gulf: Investors representing $3tn in assets urge construction, hotel & petroleum multinationals to safeguard migrant workers”, Business & Human Rights Resource Centre, 6 August 2020
 F Nagrawala & K Springer, Point of No Returns: A ranking of 75 of the world’s largest asset managers’ approaches to responsible investment, ShareAction, March 2020
 Sustainable Finance Policy Engagement: An Analysis of Lobbying on EU Sustainable Finance Policy, InfluenceMap, September 2020
 S Dorobantu & D Flemming, “It’s Never Been More Important for Big Companies to Listen to Local Communities”, Harvard Business Review, 10 November 2017
 An externality is a cost or benefit caused by a producer that is not financially incurred or received by that producer. See T Helbling, “Externalities: Prices Do Not Capture All Costs”, International Monetary Fund, 24 February 2020
 D Thomas, “Why Won’t We Learn from the Survivors of the Rana Plaza Disaster?”, New York Times, 24 April 2018
 S Davidson, “British workers have ‘no idea’ how their pensions work as only a third realise workplace schemes are invested in the stock market”, This Is Money, 25 August 2020
 Sustainable Signals: Individual Investor Interest Driven by Impact, Conviction and Choice, Morgan Stanley, September 2019