Platform aims to link big business with SRI
The people behind a new research platform, the European Centre for Corporate Engagement (ECCE), want the SRI community to benefit from closer involvement with large financial institutions.
ECCE claims to be different from SRI research bodies already in existence due to its connections with big financial institutions, and the quantitative finance background of its researchers.
Its founders intend it to become the international source of innovative information on corporate SRI and sustainable investment for both academics and practitioners.
Kees Koedijk, professor of financial management at Erasmus University’s Rotterdam School of Management, who founded ECCE together with Professor Rob Bauer and assistant professor Jeroen Derwall from the University of Maastricht, says: “We initiated ECCE firstly because we believe the SRI agenda with all its definitions and movements towards ESG - environmental, social and governance - sectors needs clarification on where it is heading. And secondly, because we believe SRI could benefit from a much closer involvement with big financial institutions such as pension funds, banks and insurers. We still feel that such institutions are missing from the sustainability debate.”
He adds: “To put SRI in a closer financial context with such institutions, much clearer and more focused research is needed. Closer co-operation with rating agencies and research bureaux will also be beneficial to the design of more focused sustainable investment products.”
Koedijk’s advice is first to define sustainability and determine the area of activity. ECCE distinguishes between environmental, social and governance factors. Within each category, the platform then tries to build portfolios that are closest to the criteria given by the rating bureau.
Koedijk believes building a portfolio from scratch with the help of the rating agencies should be favoured to having a conventional portfolio and simply adding or deleting companies in positive and negative screening.
He adds: “We think a platform like ours is not available yet. First of all, because we take a hard, quantitative look at SRI through our research and secondly, because we have access to an enormous database, which allows us to look at SRI from a very different angle and enables us to build new portfolios much closer to the criteria the parties believe in. And the interest and support of the Dutch pension fund ABP and international financial services provider Fortis gives us the opportunity to build closer links with financial institutions. We want to show them what we are doing but at the same time also want to learn from them and find out what kind of directions they are
Pension funds can profit from ECCE, Koedijk believes, because the platform will focus the SRI debate and explain to what extent governance is included. Funds will also benefit from better-defined products and extra-financial information that has direct or indirect financial consequences for
Koedijk calls it a win-win situation because it allows pension funds to do something they and their stakeholders believe in, but also offers them the chance for a good return.
Fortis supports ECCE initiative through the funding of a sustainable finance chair at Rotterdam’s Erasmus University.
The firm’s support for ECCE stems from its ambition to improve its performance in the area of corporate social responsibility and sustainable development.
It sees ample opportunity to develop its position from a social but also from a CSR and business point of view. Given the specific SRI funds offered through its investment management arm, Fortis Investments, the company is also interested in developing and even contributing to the academic thinking around the investment models. Eric Bouwmeester, head of the CSR team at Fortis, believes it possible that Fortis will commission studies in the near future as he expects these to help develop the company’s view on business opportunities.
He adds: “We think a dedicated sustainable finance chair in the academic world rather than in a commercially based enterprise can help us develop Fortis’ expertise in the area. I’m sure there are various projects and topics to be covered for our mutual benefit. We initially signed the Fortis part of the chair for a two-year period in 2007-2008 but it may be continued after this.”
ECCE was aunched in late January with the start of its website but will be developed further over the coming months with conferences, analysts’ surveys and quarterly research.