SRI set to change, says SVM
EUROPE - Socially responsible investment (SRI) will evolve more towards investors wanting to engage in companies rather than disinvest from them, SVM Asset Management is convinced.
"The market is changing to a more integrated approach and less box-ticking," Melville Bucher, head of institutional clients at Edinburgh-based boutique SVM, told IPE.
An approach in which companies are simply excluded according to certain criteria affects performance negatively, he said.
SVM's socially responsible investment fund is to only exclude tobacco, pornography and armaments-related investments and, in total, these only make up 3% of equities in the European market.
Environmental and human rights issues are included in the criteria for evaluating whether a company will outperform.
"If they are observing working conditions they will have a more efficient workforce and companies looking at environmental issues are less likely to have leaking pipes," Bucher said.
"The general approach of the fund is much more about engagement as shareholder. We rather influence companies than sit on the sidelines."
He is convinced the market will develop in that direction as decision makers like trustees begin to understand more about SRI.
SVM said they are looking at companies that are undervalued and under-researched, which are mostly to be found in the mid-cap sector.
"If the companies are willing to have a dialogue we will invest. If after 12 months there is no willingness for change we will disinvest," Bucher explained.
He suggested smaller companies are often not aware of the positive effects the application of socially responsible principles can have on the business management.
"We are not a coach but in effect we sometimes act as one," Bucher said of SVM's approach to companies they want to invest in.
SVM has £700m (€1bn) in assets under management both for institutions and retail clients.
For the launch of the SRI fund last year, SVM appointed Hugh Cuthbert, Neil Veitch and Craig Jeruzal from Kempen Capital Management, where they managed the Dutch merchant bank's Orange Sense SRI fund.