DELSUS - Specialists in emerging market sustainable investment and finance

Socially Responsible Investing (SRI) is most often associated with European developed markets, but Limestone Investment Management and GES Investment Services are convinced that it is time to widen the perspective.

"The markets of Eastern Europe now offer a new opportunity for investors who want to maintain their ethical standards" says Veronika Juchnewitsch, Head of SRI Investments in Limestone Investment Management. "We see in our home market a fertile ground for corporate social responsibility to flourish - structural reforms, required or expected compliance with EU regulations and improved access to capital through socially responsible thinking, are significant drivers for the growth of more sustainable business practises in Eastern European companies."

"Since we established our Research Centre in Poland in 2004, we have been anticipating this development for quite some time. We have increased its resources significantly during the last year and it will now play a strategic role in GES' further expansion on this market", says Magnus Furugård, President and Managing Director of GES Investment Services

According to Limestone, investors are increasingly recognizing these new opportunities and the fund Limestone New Europe SRI has been developed in direct response to client demand. It will be launched in June as the first Eastern Europe ex Russia equity fund following the SRI principles. The fund will comprise of companies that are based in, conduct business or production operations in, or are in any other way related to Eastern European countries of former socialist block and other former member states of the Soviet Union, including but not limiting to: Czech Republic, Hungary, Estonia, Latvia, Lithuania, Poland, Slovakia, Slovenia, Bulgaria, Romania, Croatia, Albania, Bosnia and Herzegovina, Macedonia, Serbia, Montenegro. The size of the investment universe is approximately 250 companies.

The fund will seek to avoid investing in equities of companies that receive significant revenues from producing alcoholic beverages, tobacco, military weapons or are involved in the gambling business. However, other negative qualitative screens will not be applied, as the fund seeks to engage with companies to improve poor environmental and social risk ratings rather than eliminate future potential investment targets. "We believe that forward thinking responsible companies will gain competitive advantage, since they are better placed for growth, and have better access to capital and we think that they will therefore deliver above-average returns to investors. Through detailed analysis and by actively engaging with companies to promote social responsibility, Limestone will not only be able to be a successful investor in the region, but also will be the initiator of change towards moving to a more sustainable Eastern Europe", says Veronika Juchnewitsch.

For further information, please contact:

Magnus Furugård, President and Managing Director, GES Investment Services

Reported by: GES Investment Services

Launched in August 2006, Lazard's Korea Corporate Governance Fund was the first SRI fund that focused on the corporate governance issues in Korea. The fund has been aiming to build better corporate governance and raise corporate value, investing in undervalued Korean firms due to a weak governance structure. Many agreed that the fund has helped improve corporate governance and set up a new model for an SRI fund in Korea. The fund's total assets under management are estimated to be about US$200 million as of end-2007.

The Lazard fund has been actively pursuing shareholder engagement strategy, using its rights as a shareholder to push for changes in how small- to mid-size South Korean companies are managed, including the appointment of outside directors, reorganization into holding-company structures and correction of mal-business practices. The Lazard fund's holdings include Daehan Synthetic Fiber Co. (a yarn and fabric maker), its parent Taekwang Industrial Co., Dongwon Development Co. (a homebuilder), and Hwa Sung Ind. (a retailer).

CalPERS’s investment is particularly regarded as crucial at this stage and expected to create a long-term positive impact in the market. Although problems in Korean corporate governance have long been a main cause for concern for foreign investors, their voices have not been clearly heard in the market and delivered to corporate management in an effective way.

One positive development was that the National Pension Service (NPS), Korea’s biggest government pension fund, has started focusing on establishing explicit investment guidelines such as proxy voting guidelines, and began exercising voting rights based on the guidelines from last year. This move was followed by private asset management firms.

The new Index rates and ranks LAC companies based on their performance and positioning on critical OM issues. The project, commissioned by the IDB in June 2007, is a logical extension of Innovest's previous work creating indexes based on companies' performance on other "sustainability" issues such as climate change, eco-efficiency and community investment.

"For LAC companies, the issues related to meeting the needs of the majority in the region represent one of the most difficult management challenges they face", said Matthew Kiernan, Innovest's CEO. "We fully expect that our investor clients will pay close attention to this new Index as a way to gain a fuller understanding of the overall quality of management of the various companies which are in – and not in – the new Index. This new OM Index could become a real game-changer."

Over 70% of the population of the LAC region lives on less than $3,260 a year. This 'majority' of the population is both deprived of access to opportunities for wealth creation and underserved by the products and services that effective markets provide. Throughout the region, moreover, the wealthy have benefited more from the economic growth of the past decade than have the poor.

Responding to this reality, the IDB launched the Opportunities for the Majority program, to engage the private sector in addressing the needs of this Majority. Studies conducted on behalf of the IDB suggest that the Majority represents a stable and substantial market for companies willing to engage in it responsibly and with commitment and creativity. It is also a market where national companies enjoy significant advantages of proximity and market knowledge. By addressing this market responsibly, the private sector can become part of the solution to the challenge of poverty facing the LAC region.

The OM framework, developed by Innovest, focuses on key evaluation criteria, whose relative importance were established after stakeholder engagement with academics and experts on Base of the Pyramid theory and practice from around the globe. Seventy-five (75) national and multinational companies operating in the LAC region were interviewed and then analyzed within the OM framework to benchmark their performance. This baseline list of 75 companies and the conceptual model which underpins it provide an excellent framework to assess accurately and predict the out-performance of firms based on their ability to capture opportunities within the Majority.

The top performing firms constitute the 2007 OM Leadership Index and are presented below.

2007 OM Leadership Index - top performing firms

2007 OM Leadership Index - top performing firms

The OM Leadership Index marks the beginning of the OM story, not its end. We expect that both its constituents and the underlying selection criteria will evolve and improve going forward, but the creation of the initial Index is an important first step. It is to anticipated that its very existence will stimulate improved awareness of OM possibilities, both for the Index companies themselves and, perhaps even more importantly, for their peers.

For the Index to achieve maximum impact "on the ground," it will need to influence the actual investment choices and behavior of major investors – giving more favorable consideration to companies more heavily rated in the Index. The ideal scenario in this regard would be to create an investable OM Index, which would maximize investment flows to superior performers while simultaneously incentivizing laggards. An investable OM Index could prove extremely attractive to institutional investors already strongly interested in emerging markets and seeking an "information edge" and differentiated approach. Innovest and the IADB are currently planning this next phase.

Ratings and research reports from Innovest Strategic Advisors analyzing the environmental, social and governance performance of over 1,750 companies and their industries, including the Global 100 Most Sustainable Corporations, is available through Innovest's partner CSRwire at www.csrwire.com/reports/independent

Reported by www.csrwire.com

Industrial Fund Management last week received government approval for the fund, but was forced to scale back its expected size and delayed its launch to the end of the month because investors were wary of committing their money into an equity fund while stock prices are falling, the Shanghai-based company said.

The fund will invest between 65 to 95 per cent of its money in equity, and up to 30 per cent in bonds. After a spectacular bull run, China’s domestic A-share market peaked last October. Since then, the Shanghai composite index has fallen more than 30 per cent.

“There has been a lot of interest [in the fund] and a lot of our clients are calling us to ask about it, but they are just too concerned about the market’s recent fall,” the company said. It said the fund’s target size would be at least Rmb100m (£6.9m, $14m, €9m).

Industrial Fund Management said it decided to set up the fund last year after noticing that many Chinese companies were, for the first time, issuing corporate social responsibility reports in addition to their annual financial results.

It said the fund would not be restricted to a specific area of social responsibility as it was the first such fund in China.
Reported by www.ft.com

In a speech given at the index signing ceremony in December, TEDA Holding Company chairman Lui Huiwen said the index would allow domestic and foreign investors to track the performance of Chinese companies with proven records of energy conservation and environmental responsibility, against mainstream indexes.

Shenzhen Stock Exchange general manager Zhou Mingfu linked the index to Chinese President Hu Jintao’s “scientific concept of development”, and said the index would encourage investment in environmentally responsible enterprises. In this way, he said, the index would further both capital investment in environmentally friendly enterprises and China’s plans to build a conservation-oriented society.

An official with Shenzhen Securities Information, an exchange subsidiary, said the index was not currently being traded, but added that, depending on the interest of investment institutions, products tracking the index may be launched later this year.

The index was named after TEDA Holding Company, which manages the assets of Tianjin Economic Technological Development Area (TEDA), an “environmental” industrial and free-market zone outside the city of Tianjin.

An investor sign-on statement is being sent out to emerging market companies urging them to improve their sustainability disclosure. Although the coalition currently has the backing of $199bn in assets, it is unclear how many of these investors actually invest in emerging markets, or would do so it corporate ESG disclosure improved. A 2003 IFC study commissioned by Delsus director Dan Siddy indicated that US SRI funds held less than 0.1% of their assets in emerging market stocks.

The investor sign-on campaign follows a related study issued by SIRAN indicates that almost nine out of ten firms (87%) do now offer at least some sustainability disclosure. The research, conducted by KLD Research and Analytics, said South Africa emerged as overall leader in sustainability reporting with six companies meeting all five criteria, accounting for 75% of the country sample. China was the laggard on sustainability reporting with three companies meeting none of the five criteria, and only 25% of Chinese companies surveyed meeting all criteria. The study examined sustainability reporting in 75 emerging market companies, focusing on seven countries: Brazil, china, India, Russia, South Africa, South Korea and Taiwan, with a specific focus on three industries: energy, metals and mining and telecommunications. KLD examined disclosure in five areas: transparency on sustainability issues, a dedicated sustainability area within the website or annual report, existence of a stand-alone sustainability report, reference to the GRI framework for the sustainability report, and the existence of sustainability goals and benchmarks. The full report can be found at: www.siran.org/emd

The index provides investors with an instrument to incorporate sustainability measures into their investment decisions and will provide a model for the launch of similar indices in other emerging markets. This pioneering Index comprises 50 Indian companies that meet certain ESG criteria and have been drawn from the largest 500 companies listed on the National Stock Exchange of India through a two-stage screening process. A detailed methodology and factsheet on the S&P ESG India Index is available at www.standardandpoors.com/indices.

Dr. Subir Gokarn, Chief Economist, Standard & Poor’s Asia Pacific, observed: “As the private sector becomes more important in the growth and development of emerging economies, the profit motive needs to be brought into alignment with public interest. The scope of regulation, though critical, is limited without a commitment by investors to reward strategic behaviour that creates long-term value by balancing the interests of all stakeholders.” Dr. Gokarn has been associated with the project from its inception, including in his earlier capacity as Chief Economist at CRISIL.

Ms. Rachel Kyte, Director of IFC’s Environment and Social Development Department, added, “With growing pressure on investors to seek diversification and returns by entering markets such as India and with more and more investors keen to invest in responsible firms, IFC hopes that the launch of this index will be another important attempt to ensure that good performance is rewarded in the market and that ‘the best in class’ Indian companies can access capital that is aligned with their success.”

Ms. Michelle Lapolla, managing director of consulting services at KLD, explained: “We have been conducting in-depth, qualitative ESG analysis on companies for 20 years. In this project, we have tailored our approach far more precisely to the Indian context, taking into account disclosure and reporting standards prevalent amongst Indian companies.”

Ms. Alka Banerjee, Vice President of Index Services, Standard & Poor’s, said: “The S&P ESG India Index is unique because it links a company’s ESG score to its index weightings so that companies with higher scores carry higher weightings. While the 50 companies that have been included in the index are largely familiar names, their performance on ESG parameters assures investors that their portfolio is consciously balancing the interests of all stakeholders and, thereby, creating a platform for strong long-term performance.”

IFC launched the ‘Capturing Value’ grant competition, which initiated this project, to provide emerging markets investors with better information on companies’ environmental, social and governmental performances. The creation of this landmark ESG index is the result of a pioneering collaboration. It draws upon S&P’s expertise in governance metrics and indices, KLD’s experience and reputation on screening companies across all three dimensions using public information, and CRISIL’s strong understanding of the Indian business and regulatory context.

The S&P ESG India Index will be maintained by India Index Services Ltd., a joint venture between CRISIL and the National Stock Exchange of India, which also manages the flagship S&P CNX NIFTY index of India’s largest and most liquid companies.

Launched at Institutional Investor Events’ 2nd Annual Forum on Responsible Investing, the SIRAN report also found that among the seven countries in the study, South Africa emerged as the overall leader in sustainability reporting, with six companies meeting all five criteria, accounting for 75 percent of the country sample. Sustainability reporting is designed to provide information on an entity's environmental, social, and governance performance and impacts and their initiatives for improving their performance in these areas.

China was the laggard on sustainability reporting with three companies meeting none of the five criteria, and only 25 percent of Chinese companies surveyed meeting all criteria.

In a clear sign of room for improvement in reporting by emerging market companies, only 27 percent of the surveyed firms made use of the Global Reporting Initiative (GRI) reporting framework, a widely recognized standard for environmental, social and governance (ESG) reporting, in their report. The full report along with an on-line company tracking database can be found at www.siran.org/emd.

In addition to the release of the report, SIRAN, working in partnership with the International Working Group (IWG) of SIF, also announced the formation of a new international coalition of NGOs, investment managers, and institutional asset owners to push for improved disclosure in emerging market countries.

The coalition has the support of a broad range of organizations including the GRI, the PRI in Emerging Markets and Developing Countries unit of the United Nations Environment Programme’s Principles for Responsible Investment, Ceres, and the Association for Sustainable and Responsible Investment in Asia (ASrIA).

The coalition has already attracted signatories representing $199 billion in assets under management for an investor sign-on statement asking emerging market companies for improved sustainability disclosure. Coalition members will use the statement along with company meetings as part of an advocacy campaign that will work to move the needle in time for the next report update.

SIRAN representative Paul Hilton, Director of Advanced Equities Research, Calvert, said: “We are encouraged that companies in emerging markets are getting the message: analysts need information about environmental, social, and governance performance in order to identify the best companies in which to invest. Companies that are transparent will be rewarded by the market.”

Noel Friedman, managing director of Research Products, KLD cautioned: “Although the results are encouraging, it is important to emphasize that a company can produce a high quality sustainability report and still fail to achieve sustainability in the areas relevant to its sector, such as climate change for utilities or human rights and the environment for mining companies. At the same time, a sustainability report provides an important tool for stakeholders to communicate with companies about a range of issues, and allows companies to publicly establish goals and benchmarks for improvement.”

The SIRAN study examined the state of sustainability reporting at 75 emerging market companies, focusing on seven countries: Brazil, China, India, Russia, South Africa, South Korea and Taiwan; with a specific focus on three industries: Energy - Oil and Natural Gas (21 companies), Materials - Metals and Mining (28 companies), and Telecommunications (26 companies).

For the SIRAN report KLD examined disclosure in five areas: public disclosure of sustainability issues; a dedicated sustainability area within the website or annual report; existence of a stand-alone sustainability report; reference to the Global Reporting Initiative (GRI) framework for the sustainability report; and the existence of sustainability goals and benchmarks.

Other key findings included: About four out of five (81 percent) of the companies maintained a separate section on their website or in their annual report to address sustainability issues, while just over half (51 percent) publish a sustainability report.

The fund has also added four companies to its investment exclusions list over involvement in the production of controversial weapons. It has divested €25,000 from US-based EDO for involvement in nuclear weapon production and €204,000 from US-based Goodrich Corporation for links to the manufacture of nuclear weapons and cluster bombs.

The fund also withdrew €87,000 from Hanwha, the South Korean chemicals company, over its links to the making of anti-personnel landmines and cluster bombs. Hanwha was earlier this month was placed on a similar blacklist by the €250bn Norwegian Government Pension Fund.

US-based company McDermott International was also put on PGGM’s blacklist for links to nuclear weapon production although the fund is not invested with the company. A spokesman for PGGM said the fund’s exclusion list also pre-empted companies in which it should not invest. Since the beginning of the year, PGGM has taken on the legal status of administrator and asset manager to Pensioenfonds Zorg en Welzijn, the pension fund formerly known as PGGM.

In a statement, the manager said: “The pressure exerted on PetroChina on behalf of Pensioenfonds Zorg en Welzijn to improve the practices of this company has failed to have the desired result. In such situations, PGGM excludes companies from investment. Companies are excluded immediately if they are involved in trading or production of weapons of mass destruction or weapons that continue to cause civilian injury or death after a military conflict has ended.

The fund said that CNPC, PetroChina’s parent company was a major financer of the Sudanese government: “CNPC has not taken adequate steps to avoid involvement in these human rights violations or to contribute to resolving human rights issues in that country.” PGGM has one of the comprehensive environmental, social and governance policies amongst European pension schemes.

Last year, Dutch pension giants ABP and PGGM announced they would stop investing in companies making landmines and cluster bombs after coming under fire in a Dutch current affairs programme that prompted thousands of complaints from pension scheme members.

Trucost’s report provides the first comprehensive review of greenhouse gas emissions by Asian companies by analysing the carbon intensity of the MSCI Asia ex-Japan index and 90 individual investment funds in Asia.

The study found that the MSCI Asia ex-Japan index is more carbon intensive than the MSCI All World Developed, S&P 500 and MSCI Europe indices. Investors in carbon-intensive companies in the utilities, basic resources and industrial goods & services sectors could be most at risk from the introduction of a price for carbon and shifts in demand to low-carbon, more resource efficient suppliers.

The research established the carbon footprint of 90 individual investment funds, which together have more than US$ 127 billion under management. Over half of these funds have an even larger footprint than the MSCI Asia ex-Japan index. While this is partly due to sector allocation bets, the main driver is the fact that investors in the funds select companies which are more carbon-intensive than sector averages.

Fund managers can adjust their holdings to reduce exposure to potential liabilities from carbon-intensive companies without sacrificing returns. A carbon-optimised tracker portfolio created for this study matched the financial performance of the MSCI Asia ex-Japan while reducing the carbon intensity by 31%.

Simon Thomas, Chief Executive of Trucost, said: “This the first time that a review of the carbon intensity of Asian listed companies has been undertaken and the research provides invaluable insights for investors. As government policies increasingly constrain greenhouse gas emissions and introduce a price for carbon, investors are increasingly looking to take emissions into account in their investment strategies while maintaining the financial performance of their portfolios.”

Rachel Kyte, IFC Director of Environment and Social Development, said: “IFC believes that the private sector has a powerful role to play in climate change mitigation, at a minimum because the financial implications of climate change can increasingly be quantified as risk and because that risk can be turned into business opportunity. By creating the data which highlights this risk, we are enabling investors and companies to adapt their behaviour. In a carbon constrained world, this is smart sustainable investing and sustainable business.”

Key findings include:

• The carbon footprint of the MSCI Asia ex-Japan index is 620.99 tonnes of greenhouse gas emissions per US$ million invested.
• The 90 funds analysed had at least 90% their holdings by value located in China, Hong Kong, India, Indonesia, Malaysia, Pakistan, South Korea, Singapore, Taiwan, The Philippines or Thailand. The funds are responsible for annual emissions of over 40.6 million tonnes of greenhouse gases, measured as their carbon dioxide-equivalent (CO2-e).
• The carbon footprint of the consolidated group of 90 funds was 823.34 tonnes of greenhouse gases emitted per US$ million. Fifty-four out of 90 funds of Asian companies analysed have a greater carbon footprint than the MSCI Asia ex-Japan index.
• More than 8,950 tonnes of greenhouse gases are emitted per US$ million in the fund with the biggest carbon footprint. The smallest carbon footprint of a fund which invests in all major sectors was over 90 times smaller, at 29 tonnes of CO2-e /$US million.

Trucost has optimised the MSCI Asia ex-Japan index. The Trucost Carbon Optimised Tracker Portfolio matches the financial performance of MSCI Asia ex-Japan while increasing carbon-efficiency by an average of 31%. Investment strategies can similarly be adjusted to reduce carbon impacts without returns deviating from those of the chosen benchmark.

The research aims to facilitate investments in sustainability-conscious emerging market funds and to signal to fund managers the growing worldwide demand for sustainable investment products. The survey will include a list of fund managers identified and information on their capacity to integrate ESG factors.

The survey results will be made publicly available and communicated to investment communities throughout the major developed and emerging markets on completion of the project.

Mercer's Head of Responsible Investment for Asia Pacific, Helga Birgden, said, "The survey will enable Mercer to integrate ESG analysis within fundamental manager research, sending a message to the market that this integration is both important and relevant.

"We are proud to partner with IFC, and looking forward to the opportunity to provide institutional investors ESG research on emerging market managers," she said.

Cecilia Bjerborn, IFC Project Manager said, "While investments in emerging markets are surging, so is the demand for fund managers capable of integrating ESG factors into their emerging market investments. However, an Economist Intelligence Unit study, commissioned by IFC, shows that 65% of asset owners are not able to find such investment managers.

"We expect that this survey will provide asset owners with a greater understanding of the trends and competitive forces around ESG factors in emerging markets. We are very pleased to be working with Mercer, a proven leader in responsible investment," she said.

The project will run for approximately 12 months and has three major components. Firstly, Mercer will undertake a global survey of equity managers operating in emerging markets, including those based in developed countries, to review their approaches to ESG factors.

The second component will consist of an in-depth review of mainstream equity managers in Brazil, China, India and South Korea to assess the extent to which they are currently assessing ESG risks or opportunities.

Thirdly, the project will assess the range of "sustainable investment" branded funds that now offer emerging market products, and the total assets that these funds have garnered to date.

Garry Hawker, Mercer's Business Leader for Investment Consulting in Asia ex-Japan, said that while Asia is a highly fragmented market with multiple borders, laws, languages and regulations, having one vision of what constitutes responsible investment is something to uphold and embrace.

"Research we've undertaken in the past on managers in Asia indicates governance is a focus of many equity managers. However, the other ESG aspects are probably not as widely considered given the focus of many investors to date in Asia has been on growth rather than on sustainable growth.

"Given the focus of many investors globally towards Asian markets, having the right principles and process in place will enable us to maximize our longer-term returns for our clients looking to invest in the region," he said.

Seema Arora, Principal Counsellor & Head of the CII-ITC Centre of Excellence for Sustainable Development, describing the responses provided by to the CDP questionnaire said, “Given that the CDP has been introduced for the first time in India, the results were positive, with companies like Essar Oil, Infosys, JSW Steel and Tata Steel being among those who responded comprehensively. 35 percent of the companies responded to the questionnaire, of which 33 percent of the responding companies have set Green House Gases (GHG) emission reduction targets for themselves and have taken steps towards voluntarily offsetting these emissions”.

Describing the concept of carbon disclosure and its importance, Paul Simpson, Chief Operating Officer of the CDP said: “CDP has been working for over five years to help investors and corporations better understand the risks and opportunities from climate change. As a result investors are increasingly viewing view good carbon management as a sign of good corporate management. We are delighted to have expanded CDP’s work to India this year and are pleased that some leading companies have demonstrated they are already addressing the issue and able to provide their investors with information on what climate change means for their business. Given the increasing importance of India in the global economy and climate change awareness we expect to see more Indian companies report to CDP next year.”

The questionnaire solicited information on opportunities and risks from climate change, direct and indirect greenhouse gas (GHG) emissions, emission-reduction strategies and corporate-level climate change management and governance from these companies.

A large number of the responding companies (46%) are considering emission trading opportunities and 21 percent have Clean Development Mechanism (CDM) projects in the pipeline. 38 percent of the responding companies have even allocated board or upper management level responsibilities for climate change issues.

Ravi Singh, Secretary General and CEO, WWF-India, speaking to the press at the release noted, “The results from this first-ever CDP India project represent a positive start and we are pleased to have worked with Indian corporations measuring, reporting and managing greenhouse gas emission”. He added, “that this is a contribution of a conservation organisation to bring to fore accounting of GHG emission and voluntary disclosure thereof by the Business and Industry”.

He added, “However, the response of 35 % (39) companies is heartening in the first year, but it also clear that lot of work needs to be done in coordination with our existing partners and with Business & Industry and Financial sector till the level of informing and action to integrate risk and mitigating measures in business plans and investment decision are undertaken.” He added, that CDP in future will be a harbinger of new process of disclosure both internally and externally.

The ministry has also decided to exclude Vedanta's two listed subsidiaries, Sterlite Industries Ltd and Madras Aluminium Co, from the investment universe.

The exclusion was based on a recommendation from the fund's Council on Ethics, which said the fund could contribute to severe environmental damages and serious or systematic violations of human rights by investing in the company.

Vedanta, owned by Anil Agarwal, is a London stock Exchange-listed metals and mining company with major interests in mining and production of copper, aluminium and zinc in India.

"We cannot hold shares in such a company," said Norway's Minister of Finance Kristin Halvorsen in a statement released in Oslo.

Responding to the exclusion, Vedanta's official spokesperson Tarun Jain said in an email to IANS: "We follow world-class standards for environment and safety practices at all our plants. Vedanta Resources absolutely rejects any suggestion of causing damage to people and the environment.”

"At Vedanta Resources, we believe in sustainable development and are committed to effective management of health, safety, environment and community development as an integral part of our business. The impact of our investment in some of the world's poorest regions has been remarkable and acknowledged," Jain said.

The Council on Ethics examined four Vedanta subsidiaries that operate in India: Sterlite Industries, Madras Aluminium Co, Bharat Aluminium Co and Vedanta Alumina. Vedanta holds a majority share in all these companies.

According to the council's assessment, "The allegations levelled at the company regarding environmental damage and complicity in human rights violations, including abuse and forced eviction of tribal peoples, are well founded."

In the council's view the company seemed to be lacking the interest and will to do anything about the severe and lasting damage that its activities inflict on people and the environment.

The council's recommendation was based on surveys and investigations conducted or commissioned by Indian authorities, reports from national and international NGOs, articles in Indian and international newspapers, and documentary films.

In addition, the council commissioned its own studies by Norwegian, British and Indian consultants.

Vedanta shares were down 0.9 percent to 2,095 pence (€30.09; US$43.67) on the London Stock Exchange.

The move is part of PGGM's commitment to seek long-term investment opportunities that recognise ESG factors as key value drivers of the overall investment process. The mandate will primarily be seeking Global Emerging Market Equity strategies, although regional strategies and single country strategies may also be considered.

Emma Hunt, European leader of responsible investment at Mercer, said: "As far as we are aware, this is the first major emerging market equity mandate that explicitly places environmental, social and corporate governance factors at the heart of the mandate. Within this search, we expect to see a number of innovative processes and products as investment managers begin to respond to increasing demand in this area."

Ms Hunt continued: "The academic and empirical evidence linking environmental, social and corporate governance factors to investment performance is growing rapidly. The nature of these linkages is being better understood, better quality data and analysis is now being produced, and investment managers are starting to evolve their investment processes and strategies to reflect this."

The move is in line with PGGM's commitment to, and role as founding signatory of, the UN Principles of Responsible Investment (PRI). Responsible investment is both a part of PGGM’s identity, and its fiduciary duty to its members. The PRI is an investor-led initiative, supported by around 100 end asset owners and 100 fund managers, representing around $10 trillion. The signatories believe that ESG issues can affect the performance of investment portfolios to varying degrees across companies, sectors, regions, asset classes and through time.

Marcel Jeucken, head of responsible investment at PGGM, explained: "We believe environmental, social and corporate governance factors will add value to the financial performance of our investments. We expect to find compelling opportunities in emerging markets and therefore think it is crucial that managers start developing strategies that place such factors at the core of their investment strategies. This is why we are conducting a wide search on existing and new products in this area."

PGGM is the Dutch pension fund for the health care and social work sector and is one of the largest pension funds in the world.