The FT has reported this morning that:
A group of the world's biggest investors, which controls more than $30tn, has called on companies to be more open about non-financial assets.
You would have thought I should be pleased. I am not. As the FT continues:
Fund managers including BlackRock, Vanguard, Amundi and Schroders, together with several of the largest pension funds, have signed up to the Embankment Project for Inclusive Capitalism (Epic). Epic will push companies to disclose hard-to-quantify items such as staffing, governance and innovation, as well as their effect on society and the environment.
So I looked at Epic, which appears to be an EY project. Their press release, out today makes clear who is behind this:
They say of the project:
The Coalition for Inclusive Capitalism is a global not-for-profit organization that was founded in 2014 by Lynn Forester de Rothschild, the Chairman of E.L. Rothschild LLC. The organization was established to engage leaders across business, government and civil society in their efforts to make capitalism more equitable, sustainable, and inclusive. The Coalition develops practical thought leadership and convenes the Conference on Inclusive Capitalism to bring together renowned leaders from the world's largest and most influential asset owners, asset managers and corporations to positively influence the future of capitalism. The organization works with other like-minded groups through our Allied Efforts program and extensive public outreach.
Note those words 'and civil society'. I checked their website. There is no hint of a single civil society organisation involved.
Nor is there a hint of discussion on tax.
Or country-by-country reporting.
And look at the issues of concern:
Where is the environment?
Where are union rights?
Where are gender issues?
This is not the answer to non-financial reporting. In fact, it is an attempt to close down such reporting. That is clear from a comment in the FT report that says:
Lady Lynn Forester de Rothschild, whose Coalition for Inclusive Capitalism worked with EY to create Epic, said companies and investors needed common reporting guidelines for non-financial assets.
She said: “If we can come up with a standard set of metrics, then companies will not be deluged with dozens of questions about societal and workforce issues. An increasing number of portfolio managers want this information but it comes in so many varieties. This is solving their problem as well.”
She hoped that the Epic metrics would be used in the way that the generally accepted accounting principles have become an accepted standard.
In other words, they want control to ensure that there is no effective reporting.
The time for civil society to campaign on accounting really has arrived. So far it has failed to do so. That can no longer be the case.
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Agreed and well said Richard. This is more along the lines of ‘accounts are prepared to provide information for investors’ – the fundamental crack that you have pointed out so trenchantly over the years. And lets look at the ‘behaviour’ of these investors like Black Rock or Private Equity – their focus is purely on financial returns and they are the core engines of modern day ‘financialisation’ which Nick Shaxson’s book proves so eloquently as a Finance Curse, making us all poorer in the process. And a Big 4 firm is at the middle of it all – so we should not be surprised!
Indeed not Atul
Arf, arf. O to be a functionary of wealth. Pass the hemlock, the only blessing of the examined life!
interesting. well spotted.
This is a rearguard action by the forces that have woken up to the fact that their model is threatened ( finished ) so if they garner a few choice words – we all know them ‘ stakeholder ‘ , ‘ sustainable ‘ et al – then everyone who is unconscious, but still able to read will agree and say ‘ yes ‘ . It’s utter BS . You don’t have to be any sort of collectivist to appreciate that some sort of balance has to be struck between what we agree to do collectively and what we do individually and any kind of ‘ sustainable ‘ future has discover where that balance is. That is what a democratic society is about , or it isn’t about anything at all. The greatest industrial development of the industrial revolution which ultimately brought about a different kind of world from that of preceding centuries was the coming of the railways . It took all of a hundred years ( 1830 to 1923 ) to work out that what had developed in a free market ( laissez-faire ) economy couldn’t serve the greater good and the amalgamations
of 1923 were a landmark of not just regulation, but common sense . This report is the opposite of that . It is saying ‘ s..t we’d better say something that sounds like we care about the greater good even if we don’t give a. …..’
This report is unadulterated BS . It is a rearguard action against the disparate forces that perceive that ‘ laissez faire ‘ doesn’t cut it and have done for a hundred years ( think the Railways Act 1921 ) such that some balance has to be struck between the individual and the collective . The neoliberal model has been the pretence, the sham, that no such balance had to be struck and so these faux private enterprises – PPI, the internal market and the like – were created to pretend that private was better, more efficient etc – than public. This sham is collapsing and the writers and supporters of this report sense this and so , in an effort to maintain the sham have come up with this nonsense. The issue is, so far as I can tell, is that we have all been drawn into this pretence and so by labelling us all customers – HMRC, NHS etc – we have imbibed the message completely, and it remains to be seen if there can be any reinvention of the greater good as common sense.
Richard,
You ask where is the environment? The EPIC report mentions it 96 times along with climate change.
And sustainability includes caring for the environment:
https://www.principalpeople.co.uk/blog/2016/03/what-does-a-sustainability-manager-do
Indeed, many MSc Sustainability and Environmental Management course titles are tautologous.
On a related theme, Private Eye’s latest podcast on the laundering of corrupt Russian money with the aid of prominent accountancy and law firms is worth a listen
Is it Richard Brooks?
I will look it out
Yes – its Richard Brooks
Its also possible that this initiative has been driven by pension fund trustees demanding that fund managers look at wider performance besides profit, and there is a big shortage of data so the fund managers need it to justify their own existence. Whilst appearing to be kind and caring for the planet, the real motives may be more commercial.