Jason Nissé: The City's Jo'burg principles are well-meaning, woolly - and won't work

According to Christian Aid, it costs about £12.50 to feed a family in Africa for a month. This means that for the $32m (£20m) that Citigroup gave WorldCom analyst Jack Grubman so that he would leave the Wall Street bank quietly, you could feed 133,000 families for a year.

Why is this relevant? Well, ahead of the Earth Summit in Johannesburg at the end of this week, the big guns of finance (and there are few bigger than Citigroup) have been moving into position. The debate may be on how to save the planet and feed the starving, but in the City and on Wall Street the debate is being steered towards what is meant by the great buzzwords of the moment, "sustainable development".

The lobby groups on aid and the environment have made a series of demands over recent years – forgive Third World debt, stop testing GM foods and cut back on the exploitation of oil fields in Alaska are just three recent examples. We can all debate about the merits of individual issues, but business says it would rather do this through a framework where it knows the limits of acceptable behaviour.

Accordingly, Judith Mayhew, the de facto chief executive of the Corporation of London, brought together some 80 institutions to draw up guidelines for responsible investment. The "London Principles", published on Friday, are well-meaning but woolly. As a top lawyer, Ms Mayhew could drive a coach and horses through them, if she wanted to. To be fair, I don't think that was the intention. The principles are there to create a platform for responsible behaviour. But will this work?

There are quite a few organisations paying more than lip service to the concept of socially responsible investment – Friends Ivory & Sime and Co-operative Insurance spring to mind. But for others, I wonder if the adherence to a set of loosely constructed principles is anything more than a convenient wrapper to market "socially responsible" products to an audience increasingly worried about development issues.

Meanwhile the organisations can carry on as before – investing in Burma, backing environmentally questionable projects and paying their executives excessive amounts, not least when, like Jack Grubman, they have overstepped the mark and need to be sent on their way.

Globalisation by accident

If ever there was a law that fell victim to the law of unintended consequences, then the Sarbanes-Oxley Act looks like being just that law. The act, which required nearly 1,000 US companies to certify their accounts with a sworn statement, was a knee-jerk reaction to the crisis of confidence caused by the scandals at Enron, WorldCom and the like. And as such, it appears to be achieving its primary objective, that of restoring confidence in the sanctity of US financial statements. Those who could not certify – AOL Time Warner, for example – were punished while those who did – Walt Disney, by contrast – were feted.

It is well known that Americans care little for what goes on east of Bangor, Maine. So Messrs Sarbanes and Oxley will not lose votes for the knock-on effect of their act on European corporations with US listings.

The early part of this week was characterised by some frantic phoning of lawyers to check on the legal position of BP or Novartis, while the middle of the week was occupied by smug operators like WPP who volunteered a certification, no doubt as a marketing tool to embarrass their accounting-challenged rivals Omnicom and Interpublic. And the end of the week brought dire predictions of a flight from the US by European corporations.

What rot! Anyone who thinks that groups like AstraZeneca or ABN Amro, who look to the US for business and investment, will turn their back on the world's largest capital market because of compliance difficulties, is not living in the real world. What is occurring is a globalisation of financial regulation and standards – the rules of the SEC, the FSA and the European Commissions will gradually dovetail, while international accounting standards will be the norm by the middle of this decade. The investment market is becoming increasingly global and anyone who shuns the accepted norms will be themselves shunned by the investment community.

America's reaction to its domestic problems was a domestically focused solution. Its unintended consequence is to make the American market less insular.

j.nisse@independent.co.uk