GLOBAL - The outcomes of the G8 Summit, the meeting of the world's most powerful leaders, will have a direct impact on investors, F&C Asset Management predicts.
This week, George W. Bush, Tony Blair, Jacques Chirac and others are holding talks in Gleneagles, in Scotland, to discuss issues such as climate change and alleviating poverty in Africa.
And Karina Litvack, head of governance and socially responsible investment at F&C, believes that addressing issues such as bribery, corruption and the spread of HIV/AIDS in Africa is crucial for the financial self-interest of investors.
Litvack also commented that asset managers and companies, and not only governments, should be proactive in tackling these issues.
She said: “The African continent faces real challenges, including the spread of HIV/AIDS, the need to preserve complex eco-systems that are threatened by climate change and, undoubtedly, poor governance both at the state level and also in terms of entrenched business practices.”
Recently, a large focus has been placed on examples of large scale corruption amongst African political leaders in the constant debate over debt relief.
But Litvack argues that in many developing countries there is an embedded culture of giving bribes that is stifling to the development of healthy, transparent economies.
Litvack explained: “We believe that transparency can play a pivotal role in developing a healthier climate in which to do business which is why we have focused so heavily on the extractives industries in recent years.
“Oil and mining companies are significant employers in many African states and are often the largest sector of the national economy.”
Over the last two years, F&C has assembled a coalition of over 60 global financial institutions - behind a statement encouraging extractive companies to disclose details of the payments they make to governments in respect of mining and oil-drilling rights.
Whilst legal, such payments are frequently highly secretive, leading to political concerns that substantial monies and assets end up not benefiting the wider populations.
In the last decade, this has often inadvertently associated companies with corruption.
Litvack commented: “Investors have played a crucial role on this issue, working with both governments and companies.
“We can already point to some significant and tangible achievements, such as in São Tomé Principe, which in January 2005 signed its first-ever contract with Chevron and ExxonMobil that will fully publish government oil revenues.
“Other examples are in the Republic of Congo, where audited figures of oil revenues have begun to appear, and the continent?s largest oil & gas producer, Nigeria, which has announced its first audited reports due in 2006.”
F&C has also been actively working with companies and sell-side analysts on the issue of climate change and the financial impact of HIV/AIDS on companies, topics that are central to the G8 summit.
Litvack added: “Rather than wait for governments to address problems such as growing HIV/Aids infection rates, through public health systems, companies have a financial interest in providing health education, and in many cases even medical care.”
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