Following the Turnbull and Myners reports in the UK and a change to the 1995 Pensions Act, institutional investors are increasingly interested in corporate governance relating to social, ethical and environment (SEE) issues. As a result, the Association of British Insurers introduced new guidelines relating to governance and management of risks and opportunities from SEE factors.

In 2001 SustainAbility conducted a short research study, Governance, Risk and Corporate Social Responsibility, with institutional investor Friends Ivory & Sime (now F&C Asset Management) to investigate the quality and extent of companies’ governance systems with regard to SEE issues, with a particular focus on the management of SEE related risks and opportunities.

The study found that:

1. Most companies consider that risks arising from SEE issues are significant for their business.
2. Most companies have established reasonably systematic approaches to risk management in line with Turnbull requirements, but few have yet developed specific systems for identifying, evaluating and managing SEE risks.
3. Where companies do have specific systems to address risks arising from SEE issues, they are frequently not adequately integrated into their systems of internal control or risk management.
4. A small number of leading companies are in the process of pioneering impressive and fully integrated systems for managing SEE risks
5. The emerging elements of best practice are: board leadership and accountability; integration of SEE issues into core risk identification processes; understanding of stakeholder perceptions and expectations; publication of detailed policies setting expectations and objectives with regard to SEE issues; SEE risk management systems that are full integrated into line management objective-setting and performance management systems; disclosure.