Last year, companies focused on avoiding errors that led to the 2008 crisis, but 2010 also saw a bigger focus on the less obvious outcome of the crisis - the need for socially responsible investing, said F&C Investments.

F&C today launched its 2010 Responsible Investment Report, which looked at how companies include consideration of risks such as climate change, water stress, corruption, safety and human rights abuses into their governance. F&C said that these non-financial risks have the potential to impact companies’ bottom lines, particularly when they manifest as floods, droughts and fires, escalating food and commodity prices, and the recent unrest in the Middle East.

After several incidents, including the explosion of BP’s oil rig in the Gulf of Mexico, health and safety issues have moved higher up the agenda. Environmental and social issues are rarely put to a shareholder vote, but F&C said it had participated actively through its votes on over 1,100 shareholder proposals, covering the full range of corporate governance, environmental and social concerns.

For 2011, F&C hopes to build further on the UK Stewardship Code, in an attempt to drive regulatory reform. The company will also focus on how businesses can prepare for tougher climate regulation and how to learn from recent major disasters. Apart from that, food security remains an important issue and global food brands need to have resilient supply chains against the physical effects of climate change, including the critical issue of water stress.

Commenting on the outlook for this year, Karina Litvack, head of governance & sustainable investment at F&C, said: “If the 2008 crisis taught us one lesson, it is that a passive focus on a narrow set of short-term value drivers carries an unacceptable price. Investors have a critical role to play in “re-setting” our business culture – understanding what drives the long-term sustainability of companies and ensuring that they manage their businesses accordingly.”

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