Context

Morley's Magic Matrix
Context lunch - 21 June, 2002

Our guests:
Deborah Allen - BAE SYSTEMS
Toby Belsom - Morley
John Groom - Anglo American
Belinda Howel - Business in the Environment
Helen Keep - Unilever
Dermot Kirk - BP
Alison Maitland - Financial Times
Peter Mason - Ethical Performance
Frank Rose - ICI

The publication of Morley Fund Management‚s Sustainability Matrix - their selection method for their socially responsible investment products - caused sufficient controversy for us to decide to host a lunch about it.

It was dubbed the Dunces‚ Lunch because - by sheer coincidence of course - many of our clients fall outside Morley's selection criteria. The matrix ranks the FTSE100 companies on a dual scale of A-E for "product sustainability" and 1-5 for "management vision and practice". The FTSE100 companies represented at the lunch were Anglo American (D4), BP (D2), BAE SYSTEMS (trailing at E3), ICI (D2) and Unilever (leading the field at C2, and the only company of the four to qualify for Morley's SRI funds).

Toby Belsom, an SRI analyst at Morley, defended the matrix with some vigour.

There was no shortage of opinions and we found it difficult to come to a conclusion, other than to agree to differ. One of the main difficulties was the perennial issue: how to define a sustainable business.

The four "dunces" present produce goods that are arguably essential to society - chemicals, defence, energy and minerals. While socially responsible investors may be trying to nudge industry in a sustainable direction, there seems to be a fundamental disagreement on what sustainable means.

Some argued strongly that companies merely respond to social needs and the emphasis should perhaps be on how they meet those needs, not which particular needs they fulfil.

Defence could be seen as one of the most sustainable industries because there will always be a need for arms. Some felt that instead of excluding "bad" companies, there is more to be gained by encouraging companies to operate as responsibly as possible.

The discussion emphasised two different world views: one that thought any legal business could be responsible (and therefore sustainable), and the other that saw certain businesses as inherently unsustainable. It is difficult to get unity on these dramatically differing views.

However, everyone agreed on one point: the food was good and we thank our chef, Kevin Francis Gray, for bringing a certain amount of unity to our table.

[Please make contact if you would like to join us for lunch].