Few companies big up their environmental, social and governance credentials quite like Legal & General. “Inclusive capitalism” is the mantra of the insurer’s boss Nigel Wilson, always keen to remind everyone that the group’s “purpose is to improve the lives of customers, build a better society for the long term and create value” for investors.
And more than many bosses, Wilson walks the talk, using the £1.3 trillion of funds managed by L&G’s investment management (LGIM) wing to invest in affordable homes and clean energy — £30 billion of spending in Britain alone. It’s not altruism, either. He’d sooner make the money work in the real world, generating decent returns, than load up with gilts earning a pitiful 0.5 per cent a year. L&G’s 22 per cent return on equity at the half-year is partly testimony to that.
Yet every now and then along comes a proper ESG test case. The latest? The £927 million agreed cash deal to sell respiratory drug maker Vectura to Marlboro-owner Philip Morris at 150p a share. It’s caused a furore, with lung cancer, asthma and medical bodies outraged at a circular transaction that could see Big Tobacco profit twice by doing in customers with one product and treating them with another.
As America’s COPD Foundation put it: “A company that profits from the sale of products that cause chronic obstructive pulmonary disease should not benefit from the sale of products that treat COPD. It stretches the boundaries of corporate morality.”
L&G is a top ten holder of Vectura with a 3.7 per cent stake. To boot, as Wilson point outs, L&G’s rated the “No1 life & health insurer” by ShareAction: an investor body that says: “We exist to make investment a force for good.” So is L&G going to vote in favour of selling Vectura to a fag outfit?
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Ask Wilson and here’s his response: “It’s not something I’m called upon to opine on in my daily job.” He says the decision is LGIM’s alone. He portrays it as a principled stance on the investment wing’s “independence”, saying it cast more than “50,000 stewardship votes” in the past six months and he can’t “interfere” in individual ones. But for the group’s boss it’s a cop-out. How can he trumpet L&G’s ESG credentials if it doesn’t know how the investment wing is voting?
Anyway, ask LGIM how it’ll vote on Vectura and it comes back with “no comment”. So, too, does fourth biggest investor BlackRock, with 4.6 per cent, whose boss Larry Fink issues an annual homily on the need for “purposeful” companies. Like LGIM, BlackRock says it owns Vectura via tracker funds. But so what? Doesn’t it have a view on Philip Morris using the inhaler tech successfully developed by Vectura’s 250 scientists to deliver addictive nicotine faster to vaping customers? Or the risk that the deal could hurt Vectura, with health providers and pharma partners refusing to have any truck with a tobacco company?
Perhaps they’ll claim that selling up to a ciggies group isn’t the same as investing in them. But that’d be a pathetic try-on. And who knows, maybe they’ll be saved the problem via a higher offer from rival bidder Carlyle, the private equity firm whose extension of the bid deadline kept Vectura shares at an above-bid 154p. But either way the likes of Wilson should get off the fence and say how their company will vote. Or is he happy to see L&G’s ESG credentials go up in smoke?
Provident precedent
Proof hardball works. Provident Financial boss Malcolm Le May set a miserly £50 million limit on the compo he’d fork out for four million customers, going back to 2007, mis-sold pricey loans by the group’s doorstep lending wing.
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And when the Financial Conduct Authority objected, he simply rammed the message home. Le May declared that if the court threw out the Provi’s bullying scheme of arrangement to cap liabilities, he’d dump the 141-year-old doorstep business into insolvency and customers would get nothing: a point he then reinforced by winding down the operation.
It amounted to a “take it or leave it” deal, as even the FCA spotted. So what did the regulator do to fight the corner of some of the poorest borrowers around, fleeced with loans of up to 1,557.7 per cent APRs? Answer: jack all, apart from penning a 12-page letter, saying it had “serious concerns” about the rip-off scheme but wouldn’t be doing anything about it (report, page 39). Pretty rich, too, when Provident’s valued at £750 million and could easily afford to pay more.
The upshot? The High Court has approved the scheme, with the judge pointedly noting the FCA’s failure to turn up in court — as it had over Amigo Holdings’ similar scheme that got blocked — and saying its “curious” letter was “not as helpful” as the regulator probably thought. And Provident shares, up a third in six weeks, rose 1 per cent to 297¼p, with Shore Capital saying the market would “welcome” the ruling.
Even better, the FCA has allowed Provident to set a pretty precedent. Any company done for mis-selling will now try to cap redress via a scheme and take their chance in court. Just think: it might’ve saved the banks a £50 billion PPI bill.
Boys in the Hood
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Forget Maid Marian, Robinhood has a new flame: the Reddit crew that must have forgiven the US brokerage for the trading curbs that halted their GameStop moonshot. Floated at $38 a share last week, valuing the business at $32 billion, the Hood arrowed up by as much as 82 per cent in a day before closing at around $70.
As one Wallstreetbets poster put it: “Robinhood f***ed me on GME and I moved all of my funds” but “I like the simple uppies and downies graphs designed for retards”.
Call it the stock market equivalent of Boyz n the Hood.
