Our statement on Kingspan Group and the Grenfell Tower fire

This article was edited on 4th December 2020 after one of the funds within Ayres Punchard’s Key To The Future model investment service informed us that they have recently divested from Kingspan Group.

Kingspan Group has come under scrutiny by the Grenfell Tower Inquiry for its involvement in the 2017 fire. The company’s Kooltherm K15 insulation was installed on Grenfell Tower in 2016, alongside insulating materials from the company’s main competitor Celotex.

The company’s former technical project manager Ivor Meredith told the hearing on 23rd November it was ‘common knowledge’ at the firm that the K15 insulation used a test report from a previous version of the product which never made it to market.

The test was carried out in 2005 on a version of the insulation referred to by Kingspan as ‘old technology’ K15. The insulation’s formulation was subsequently changed in 2006. When tested in 2007, the result was allegedly described as ‘a raging inferno’ in internal Kingspan documents.

As recently as 2018, Kingspan was still using the 2005 test data in marketing material such as the company’s Annual Report, which notes on page 28 that the K15 insulation was ‘successfully tested’ in 2005 to the technical specifications of the British Standards Institution’s ‘BS 8414 external cladding test’ standard.

In October 2020, the company asked the Building Research Establishment, which conducted the tests on behalf of Kingspan, to withdraw the 2005 test reports because the test ‘was not representative of the K15 product’. Richard Millett QC told the Grenfell Tower Inquiry that the insulation used in the test ‘was essentially a different product to what was being sold’.

Millett, counsel to the inquiry, said that ‘questions as to why these reports continue to be relied upon, why they were not withdrawn earlier, as a precautionary measure, and the timing of this letter are matters we will have to explore in the evidence’.

The Grenfell Tower Inquiry also heard that a Kingspan manager said professionals raising fire concerns could ‘go f*ck themselves’. In addition to the inquiry’s revelations, there is also reason to suspect potential corruption among Kingspan executives.

In September and October 2020, three company executives sold share options for a combined profit of £6.7m. The sales took place prior to the news of Kingspan’s involvement in the Grenfell Tower Inquiry, and thus were not affected by the firm’s share price fall after 5th November 2020.

What we are asking of fund managers is for full disclosure of their knowledge regarding Kingspan’s involvement in the Grenfell Tower fire. Kingspan Group is currently held in four funds within Ayres Punchard’s Key To The Future model portfolio service.

Chris Welsford, managing director at Ayres Punchard said: 

“We are currently reviewing Kingspan following the revelations of the Grenfell inquiry and will be engaging with fund managers on the issues around what may amount to possibly corrupt practices and potentially misleading actions, incompatible with the Key to the Future’s impact investment strategy.

“We already had concerns about Kingspan but those were focused on data that may suggest the company is failing to adequately report its contribution to global warming. Our Key To The Future Impact Research Project uses Arabesque’s data for its primary screening, and that shows a temperature score for Kingspan of 3°C of global warming by 2100, a score which Arabesque gives ‘to companies with insufficient emissions disclosure’.

“These concerns may be dwarfed by what we are learning from the Grenfell inquiry. As responsible investors we have a duty to dig deeper and ask more searching questions of our investee companies. It is insufficient to rely on ESG scoring and companies’ own assurances about their sustainable profile and business ethics. 

“We have to be far more investigative in our research and really drill down to find the truth before the truth finds us, as it has done in this case.

“That’s precisely why we set up the Impact Research Project: to drill down and uncover the controversial aspects of our investee company activities. It is very challenging and not always easy to achieve, particularly if sophisticated SEO activity is employed by companies seeking to bury the facts. Due to our investment in Kingspan, via five funds in Ayres Punchard’s Key To The Future model portfolio service, we will be encouraging fund managers to report on their knowledge of Kingspan’s involvement in the Grenfell Tower fire. 

“We think analysis of what was known will help funds to do better in the future in being more enquiring of their investee companies. In the past, we have heard fund managers claim that they were lied to by senior managers. Conviviality PLC comes to mind. Ultimately fund managers cannot claim that they carry out extensive due diligence, qualitative research, analysis and engagement in order to get close to companies and better understand their culture and risk profile, and then get surprised when it all goes horribly wrong, particularly when the investment is one of the biggest in your portfolio. Investors deserve better than that, particularly in our sustainable impact driven world.”