Historically, those who wished to be “responsible” as investors did so by divesting from companies of whose activities they disapproved. During the 1990’s there was a realization of the limitations of this approach and a move to use the powers conferred on the owners of company shares to encourage better company behaviour.
It is this global movement with which David is particularly associated. It observes that since the majority of shares are owned by pension and other collective investments representing many hundreds of millions of people, that financial and broader economic and societal considerations will all be issues of importance to shareholders.
His views are summed up in his book, The New Capitalists, and are best represented in his work at Hermes. Hermes was already a pioneer in Responsible Investment when David joined in 1999. The Focus Fund, which David joined and later led, was the first ethical shareholder activist fund in Europe. It remains the only such fund to have been sponsored by a major financial institution. Its many interventions in British companies, include the Mirror Group (board change), Six Continents (portfolio management), Premier Oil (investments in Burma), Vodafone (acquisition programme). Their performance was the subject of a landmark study by Professors Julian Franks, Colin Mayer et al)
Encouraging positive changes in companies benefits all shareholders, and often requires investor coordination. David has therefore been closely involved in initiatives to achieve this. For example he helped negotiate the text of the Principles for Responsible Investment sponsored by the UN. The PRI is now the premier global body coordinating investor action. Its members control over $50 trillion of investments.
While there has been a huge growth in responsible investment activity over the last generation, it still has a very long way to go. (Those with a particular interest might read Chapter 4 of The New Capitalists).
David continues to be active in the field. He chairs the Advisory Board for Sarasin’s Climate Active Fund. He advises Aviva Investors on responsible investment. And he is Chair of Ownership Capital the pioneering Dutch fund manager.