Active dialogue comes to fore
Gradually, socially responsible investment (SRI) is becoming more ingrained in the way that participants in the market do business.
A survey by Mercer Investment Consulting in April concluded that SRI practices were becoming mainstream among investment managers.
Within 10 years, it said, SRI would become a common component of mainstream investment processes.
The firm surveyed 190 asset managers in Asia, Australia, Canada, pan-Europe and the US, and asked
for their predictions about active ownership (shareholder engagement/activism, proxy voting), positive or negative screening for social and/or environmental factors, and the integration of social and/or environmental corporate performance indicators.
Mercer said that 89% predicts that active ownership will be a mainstream practice within 10 years, while 73% said social and/or environmental corporate performance indictors will become mainstream within 10 years, and 65% expected screening would be mainstream within 10 years.
Tim Gardener, global leader of Mercer IC, says: “In the past, it was just a small group of organisations that were interested in SRI, but there are a growing number of
mainstream investors who believe these issues can have an impact on long-term investment performance. Investment managers’ views are clearly changing.”
European managers predicted thaty the most short-term activity would “be seen in relation to the integration of social and/or environmental criteria, and positive and negative screening”. US managers were the most sceptical, but Asian and Australian managers were more positive.
Magnus Furugård, managing director of GES Investment Services in Stockholm, notes two particular developments in the way socially responsible investing is being approached in Europe.
“I think we see two distinct trends at work in Scandinavia, and increasingly in the rest of Europe,” Furugård says. “The first is to rely on norms, such as the Global Compact, but also engagement – active dialogue and not simply excluding companies.”
In taking responsibility in this way, big investors can have a real impact, he says. Plus there is a potential benefit to investment, he adds.
Using international norms to base ethical judgements on has the advantage of removing some possible pitfalls. “Relying on international norms means it is not in conflict with anything in Europe,” says Furugård. “It is more comfortable for them.
“Engagement, also, doesn’t disturb their investment process too much, but it is taking responsibility and having a better effect.”