Yet the move by the world’s largest asset manager is part of a broader movement – one that will see London-listed companies forced to comply with tightened regulations on environmental, social and governance issues (ESG).
It’s been argued that benchmarking in this way brings with it expensive additional regulation.
But as Ashna Yarashi, portfolio manager at Royal Bank of Canada, pointed out: “Companies that actually focus on ESG factors tend to have much higher and more sustainable returns.”
Her research showed ESG allows firms to position themselves to deal with challenges, whether it is complying with workplace safety standards or emission caps.
In the eyes of an investor, there is long-term value in determining financial risks against external factors, she added.
Here in the UK, a firm called Tortoise Media helped compile a Responsibility Index assessing just how well the UK’s top 100 listed firms are meeting challenges such as climate change and diversity.
Based on the study, there is room for improvement.
Tortoise ranked the blue chips against the UN Sustainable Development Goals by consulting publicly available reports, but many players could not score high due to lack of data.
The fashion industry scored a mixed performance.
Women are underrepresented, as they are 51% of the UK population, but only 33% of FTSE 100 boardrooms, 27% of its senior managers and 38% of the workforce.
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The companies are at loss, as gender diverse firms tend to outperform their less diverse peers globally, according to Morgan Stanley.
Ethnic minorities performed slightly better, being 14% of the population and 10% of senior managers in the index for 15% of the total workforce.
The pollution issue was a big one, shining a dark light on many sectors.
Tesco PLC (LON:TSCO), Wm Morrison Supermarkets PLC (LON:MRW), J Sainsbury PLC (LON:SBRY) and Ocado Group PLC (LON:OCDO) ranked in the bottom half because in 2018 their combined food waste reached 96,624 tonnes.
“Shell… committed 10% of its research budget to renewable energy and around a quarter of development spending on low-carbon initiatives,” Russ Mould, investment director at AJ Bell, told Proactive
“Admittedly this means that 90% of research & development is still focused on non-renewables but it is certain that the firm will continue to look at areas such as carbon capture and storage and fuel efficiency.”
For a behemoth like Shell, the question is whether shareholders will remain faithful.
“Investors are actively reconsidering the thesis of Milton Friedman that the primary purpose of a company is to create profit and shareholder value and taking a broader view, with the views of stakeholders – employees and customers – becoming a far greater area of focus,” Mould concluded.