Presentation looking at the past present and future of sustainable and responsible investing

1. Corporate
responsibility/sustainability and
investors
March 18th 2015
Lecturer: Tobias Webb
Tobiaswebb.blogspot.com

2. A quick history of Socially Responsible Investment. Now
called Sustainable and Responsible Investing
or ESG (Environmental, Social and Governance) investing
• Origins of socially responsible investing (SRI) date
back to the Religious Society of Friends (Quakers)
• 1758: Quaker Philadelphia Yearly Meeting prohibited
members from participating in the slave trade
• Socially responsible investors promote corporate
practices that promote environmental stewardship,
consumer protection, human rights, and diversity
Useful historical summary here.

3. • Early adopter: John Wesley
(1703–1791), one of the
founders of Methodism
• Wesley's sermon "The Use of
Money" outlined basic tenets of
social investing: Be a good
neighbour and avoid practices
which put workers at risk
• Modern SRI evolved in 1960s:
Martin Luther King’s
Montgomery Bus Boycott and
Operation Breadbasket Project
in Chicago were motivating
factors
• King combined dialogue with
boycotts and direct action
targeting specific corporations

4. • Early 1970’s: Concerns about
the Vietnam War were
incorporated by some social
investors
• Outrage against Dow
Chemical (napalm) Protests
across the country against
Dow and other companies
profiting from Vietnam
• Social investors
increasingly looked to
address equality for women,
civil rights, and labour

5. • 1970s: SRI activism gave increasing
attention to nuclear power and automobile
emissions control
• 1970s to the early 1990s, large
institutions avoided investment in South
Africa under apartheid
• 1971, Reverend Leon Sullivan (board
member for General Motors) created a code
of conduct for practicing business in South
Africa: The Sullivan Principles.
• Negative flow of investment dollars
eventually forced a group of businesses,
representing 75% of South African
employers, to draft a charter calling for an
end to apartheid

6. Today it’s very different: Many more
issues on the table
This Review of 2014 is worth reading. As is this.
Some investors are concerned about:
• Climate risk and ‘stranded assets’
• Human rights and state repression
• Community protection and company activity
• Biodiversity and environmental impacts
• Social investing: social impact bonds etc

7. Some key institutions
CERES
UN PRI: 1,325 signatories
globally, represents $45trn
(£29.2trn) of assets under
management.
Aviva
F&C
BlackRock Impact Investing
First State Asset
Management

8. ESG investing: Four strategies
1) Negative Screening excludes certain securities from
investment consideration based on social and/or
environmental criteria
2) Divesting is the act of removing stocks from a portfolio
based on mainly ethical, non-financial objections to
certain business activities of a corporation
3) Shareholder activism efforts attempt to positively
influence corporate behaviour
4) Positive / Impact investing is the new generation of
socially responsible investing making investments in
activities and companies believed to have a positive social
impact

9. More information
UNPRI website
US SIF Foundation Reports
UK Sustainable Investment and Finance
Association
ShareAction
CDP
Eurosif
Norway’s Sovereign Wealth Fund

10. Useful videos
Environmental, social, and governance (ESG)
data: Can it enhance returns and reduce risks?
Claudia Kruse (APG) - talking about ESG as an
investment belief
ESG risks and opportunities by Nordea Funds

11. Challenges for sustainable and
responsible investing
• Scale: 30 trillion under management in UN PRI
sounds like a lot. But compared to global assets
under management it’s not huge
• There are many legitimate concerns about how
seriously UN PRI signatories take sustainability
• Lots of state owned firms/banks doing very little
by comparison to Western pension funds etc
• Big investors (Norway) can ‘go backwards’ and
begin investing again in fossil fuels (oil and gas)

12. Future outlook?
• Drivers for sustainability SEEM strong but are v long
term
• The business case (see lecture two slides) is still not
understood or believed by many
• Many still believe they have a legal “fiduciary duty’ to
maximise returns on the money they manage
• Some investors may think longer term than hedge
funds, day traders or pension funds but still not long
term enough for climate change and human impacts
on the environment
• Sustainable investing ‘Market’ seem set to grow, but
many are concerned just not happening fast enough

13. Latest Harvard research suggests
“firms with good performance on material
sustainability issues significantly outperform
firms with poor performance on these issues,
suggesting that investments in sustainability
issues are shareholder-value enhancing”
More here. The work of the Sustainability
Accounting Standards Board is likely to become
highly significant.