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When the Corporate Responsibility Exchange was launched by the London Stock Exchange in September 2004, it was said to be an important part of the solution to the questionnaire fatigue afflicting CSR executives, who had long complained of the duplication of effort involved in providing broadly similar information on their companies’ social and environmental performance to multiple enquirers. Nearly two years on, the CRE itself is looking a little tired. Might what many hoped would be a silver bullet in fact turn out to be a blank? (see page one)
Only a handful of investors have signed up to access the data and some of the UK’s largest companies have proved reluctant to provide the information that is the exchange’s lifeblood. The dedicated in-house team responsible for driving the service forward has been broken up. Things have gone quiet.
So what is going on? The biggest single challenge in the SRI research market is to structure the information in a way that takes account of the particular circumstances of individual companies. No two businesses are quite the same and in this market more than most, one size does not fit all. That explains why several big companies that seemed natural candidates for inclusion on the exchange proved reluctant to become involved, despite the strength of the LSE brand. Worse, many investors felt the same. As with any investor research, everyone prizes most highly something the other fellow has not got. A centralized collection point is always going to struggle to provide that.
More fundamentally, the business model of the CRE has so far failed to deliver. Complaints about questionnaire fatigue were coming from companies, yet investors were being asked to stump up much of the cash. The City is more accustomed to a diet of ‘free’ research linked to commission arrangements than to paying third party suppliers. Throw in the post-launch software glitches and persistent salesmen, and it becomes clearer why this niche market has proved tough to crack.
Make no mistake: a central repository of information of this sort for investors remains a good idea. But good ideas for which there is no market are legion. Is the CRE one of them? We may not have a chance to find out. It does rather look as if the project is a victim of cost-cutting in preparation for any eventual sale of the LSE. As a peripheral activity, the CRE is an obvious candidate for the chop. Nasdaq, the US exchange, already owns a large chunk of the LSE’s shares, and other parties have shown interest. Any eventual takeover may further throw into question the CRE’s existence. Things have not gone to plan. But if a renowned body like the LSE cannot make such a service live up to its early promise, who can? It would be a shame if the CRE were quietly to fade away.
Only a handful of investors have signed up to access the data and some of the UK’s largest companies have proved reluctant to provide the information that is the exchange’s lifeblood. The dedicated in-house team responsible for driving the service forward has been broken up. Things have gone quiet.
So what is going on? The biggest single challenge in the SRI research market is to structure the information in a way that takes account of the particular circumstances of individual companies. No two businesses are quite the same and in this market more than most, one size does not fit all. That explains why several big companies that seemed natural candidates for inclusion on the exchange proved reluctant to become involved, despite the strength of the LSE brand. Worse, many investors felt the same. As with any investor research, everyone prizes most highly something the other fellow has not got. A centralized collection point is always going to struggle to provide that.
More fundamentally, the business model of the CRE has so far failed to deliver. Complaints about questionnaire fatigue were coming from companies, yet investors were being asked to stump up much of the cash. The City is more accustomed to a diet of ‘free’ research linked to commission arrangements than to paying third party suppliers. Throw in the post-launch software glitches and persistent salesmen, and it becomes clearer why this niche market has proved tough to crack.
Make no mistake: a central repository of information of this sort for investors remains a good idea. But good ideas for which there is no market are legion. Is the CRE one of them? We may not have a chance to find out. It does rather look as if the project is a victim of cost-cutting in preparation for any eventual sale of the LSE. As a peripheral activity, the CRE is an obvious candidate for the chop. Nasdaq, the US exchange, already owns a large chunk of the LSE’s shares, and other parties have shown interest. Any eventual takeover may further throw into question the CRE’s existence. Things have not gone to plan. But if a renowned body like the LSE cannot make such a service live up to its early promise, who can? It would be a shame if the CRE were quietly to fade away.
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