In addition to meeting with a large number of companies to discuss environmental, social and corporate governance (ESG) issues over 2007, Morley also took part in a number of broader engagement activities.

Engagement overview

G8 Summit

Our chairman, Philip Scott, co-signed a letter to the G8 heads of state regarding climate change, which was sent ahead of the G8 Heiligendamm Summit on 06 and 07 June. The letter was an initiative of the Institutional Investors Group on Climate Change (which Morley helped establish). It argued that an early agreement on the policy framework replacing the Kyoto protocol on climate change in 2012 would help companies and their investors plan their response to climate change risks and opportunities. It also highlighted that investors consider credible and effective climate change policy to be critical for protecting and enhancing the long-term value of our investments. We believe some political progress on our key requests at the summit, but there is considerably more yet to be done.

UN Climate Change conference

Morley was also among a number of leading global investors that called for the negotiators at the UN Climate Change conference in Bali to make substantial progress on a post-2012 climate treaty. In a letter sent to Heads of State of major economies and the Heads of Delegations in Bali, we argued via the Institutional Investors Group on Climate Change that credible and effective climate policy is critical for protecting and enhancing the value of investments. We asked that the post-2012 framework include:

• agreement on a target for the stabilisation of temperatures or of greenhouse gas concentrations in the atmosphere to avoid dangerous climate change
• ambitious absolute emission reduction targets for industrialised countries
• an expanded global carbon market.

ACCA UK Awards for Sustainability Reporting

It is important to Morley that the quality of sustainability reporting continues to improve since it plays such an important part in our research and investment process. In support of this Peter Michaelis, Head of SRI, participated as a judge of the ACCA UK Awards for Sustainability Reporting. Vodafone’s was the winning report out of 87 entries.

United Nations human rights consultation

Morley responded to a United Nations consultation on human rights and the financial sector. Our submission stated that the United Nations norms for business and human rights provided a useful framework for investors to assess corporate management’s mitigation of human rights risk. We argued that the role of business and the finance sector extends to promoting an enabling environment for the effective governance of human rights issues at both at company and national level.

UN Principles for Responsible Investment

Morley was highlighted in a review of global practice against the UN Principles for Responsible Investment. The review commended our proactive voting policy on social and environmental issues. Our policy is that we expect all FTSE 350 and FTSE EuroFirst 300 Index companies to disclose sufficient information on their exposure to and management of key environmental and social risks. On this basis, in 2002 we withheld our support from 31 companies. Some three years later, we were able to support 97% of these companies’ reports and accounts. While this indicates our voting practices are effective, we also recognise considerable improvements in narrative reporting would likely have taken place without our voting.

Carbon Disclosure Project

Morley is a founding member of the Carbon Disclosure Project (CDP). In 2007, we engaged with 29 companies that had persistently failed to respond to the CDP. We targeted companies based on the potential impact of climate change on their businesses, as well as the potential for their businesses to impact on climate change. We said that if the company did not respond to the CDP, then Morley may withhold support for the report and accounts at future AGMs. Over half the companies we engaged with provided a full answer to the CDP for the first time.

Securities and Exchange Commission

We also engaged with the US Securities and Exchange Commission in relation to advisory resolutions at US companies. We wrote to the SEC’s Chairman expressing our concern regarding rumours of their intention to restrict investors’ abilities to file advisory resolutions. We believe this would reduce company accountability on social and environmental issues, as resolutions on these issues are routinely advisory. Subsequently, the SEC invited public comment on a release that confirmed it was considering permitting individual companies or their shareholders to determine the rules and procedures governing the submission of advisory proposals. We worked with 46 other signatories from 10 countries, led by Domini Social Investments LLC, to put together a response to that release.

United Nations Global Compact

Morley is leading a collaborative engagement project proposing that signatories to the UN Principles for Responsible Investment (PRI) engage with a sample of the companies that have signed up to the UN Global Compact. The UN Global Compact is the largest voluntary corporate citizenship initiative in the world. It requires commitments by chief executives to implement 10 principles in the areas of human rights, labour standards, the environment and anti-corruption, and to communicate on progress annually.

Our proposal was to engage with chief executives, via a jointly signed letter, in order to either welcome particularly good practice or challenge non-conforming companies to regain full participant status, as appropriate. The engagement exercise will be conducted in 2008.

Access to Medicine Index

The Access to Medicine Index (AtMI) is a multi-stakeholder project that aims to provide an annual overview of the extent to which the world’s leading pharmaceutical companies are addressing the issue of access to medicine. One in three people on the planet is lacking access to the drugs that he or she urgently needs.

AtMI invited Morley to sign an investors’ statement endorsing the project, thereby encouraging disclosure on the subject by pharmaceutical companies. We discussed the initiative with others in the SRI industry as well as pharmaceutical sector experts and agreed to lend our support, subject to AtMI agreeing to strengthen the statement.