How to advocate for social responsibility as an investor ...


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How to advocate for social responsibility as an investor ...

  1. 1. THE TRIPLE BOTTOM LINE - DEFINING CORPORATE SOCIAL RESPONSIBILITY How to advocate for social responsibility as an investor, consumer and employee FEBRUARY 5, 2008 Investment Management - Global Social & Community Investment Amy Muska O’Brien, Director
  2. 2. Disclosure <ul><li>This material is prepared by TIAA -CREF Asset Management and represents the views of TIAA -CREF ’s Global Social & Community Investing. </li></ul><ul><li>These views may change in response to changing economic and market conditions. Past performance is not indicative of future results. The material is for informational purposes only and should not be regarded as a recommendation or an offer to buy or sell any product or service to which this information may relate. Certain products and services may not be available to all entities or persons. </li></ul><ul><li>Because social screens may exclude some investments, socially responsible investing may not be able to take advantage of the same opportunities or market trends as investment strategies that do not use such criteria. </li></ul><ul><li>TIAA-CREF Asset Management is a division of Teachers Advisors, Inc., a registered investment advisor and wholly owned subsidiary of Teachers Insurance and Annuity Association (TIAA). TIAA-CREF® personnel in its investment management area provide investment advice and portfolio management services through the following entities: Teachers Advisors, Inc., TIAA-CREF Investment Management, LLC, and Teachers Insurance and Annuity Association® (TIAA®). TIAA, TIAA-CREF, Teachers Insurance and Annuity Association, TIAA-CREF Asset Management and FINANCIAL SERVICES FOR THE GREATER GOOD are registered trademarks of Teachers Insurance and Annuity Association. </li></ul><ul><li>© 2008 Teachers Insurance and Annuity Association-College Retirement Equities Fund, New York, NY. 10017 </li></ul><ul><li>c40731 </li></ul>
  3. 3. QUESTIONS FOR TODAY What is Corporate Social Responsibility (CSR)? What is Socially Responsible Investing (SRI)? What is the intersection between CSR and SRI? How do companies demonstrate their commitment to CSR? How do investors use CSR information?
  4. 4. CORPORATE SOCIAL RESPONSIBILITY <ul><li>A variety of terms are used - sometimes interchangeably -- to talk about corporate social responsibility (CSR): business ethics, corporate citizenship, corporate accountability, sustainability. </li></ul><ul><li>CSR typically includes issues related to: business ethics, community investment, environment, governance, human rights, marketplace and workplace. </li></ul><ul><li>“ Achieving commercial success in ways that honor ethical values and respect people, communities, and the natural environment. CSR means addressing the legal, ethical, commercial and other expectations society has for business, and making decisions that fairly balance the claims of all key stakeholders. In its simplest terms it is: what you do, how you do it, and when and what you say.” </li></ul><ul><li>Source: Business for Social Responsibility ( ) </li></ul>
  5. 5. CORPORATE SOCIAL RESPONSIBILITY, cont. <ul><li>A growing body of data -- quantitative and qualitative -- demonstrates the bottom-line benefits of socially responsible corporate performance. </li></ul><ul><li>Reasons why a company undertakes CSR </li></ul><ul><ul><li>Enhanced Brand Image and Reputation </li></ul></ul><ul><ul><li>Increased Sales and Customer Loyalty </li></ul></ul><ul><ul><li>Increased Ability to Attract and Retain Employees </li></ul></ul><ul><ul><li>Improved Financial Performance </li></ul></ul><ul><ul><li>Reduced Operating Costs </li></ul></ul><ul><ul><li>Access to Capital </li></ul></ul><ul><ul><li>Source: Business for Social Responsibility ( ) </li></ul></ul>
  6. 6. SOCIALLY RESPONSIBLE INVESTING <ul><li>Socially Responsible Investing (SRI) is a broad-based approach to investing that now encompasses an estimated $2.3 trillion out of $24 trillion in the U.S. investment marketplace in 2005. SRI recognizes that corporate responsibility and societal concerns are valid parts of investment decisions. SRI considers both the investor's financial needs and an investment’s impact on society. SRI investors encourage corporations to improve their practices on environmental, social, and governance issues. SRI-like approaches to investing are also referred to as mission investing, responsible investing, double or triple bottom line investing, ethical investing, sustainable investing, or green investing. </li></ul><ul><li>Three core strategies: Screening , Community Investing , and Shareholder Advocacy / Corporate Engagement </li></ul><ul><li>Source: Social Investment Forum – </li></ul>
  7. 7. TIAA-CREF’s View on SRI TRENDS <ul><li>Individual and institutional investor interest in SRI is growing </li></ul><ul><li>Faculty and employees expect more SRI fund options in their retirement plans </li></ul><ul><li>Alumni and major donors are placing SRI conditions on endowments gifts </li></ul><ul><li>Faculty and student activism surrounding the social and environmental impacts of investments is rising </li></ul><ul><ul><li>Sudan </li></ul></ul><ul><ul><li>Environment (Global Warming/Climate Change) </li></ul></ul><ul><li>Increasing state legislation across the country linking retirement plan assets to social and environmental concerns </li></ul>
  8. 8. HOW COMPANIES DEMONSTRATE THEIR COMMITMENT TO CSR <ul><li>Top-level involvement (CEO, Board of Directors) </li></ul><ul><li>Policy statements </li></ul><ul><li>Programs </li></ul><ul><li>Staffing resources </li></ul><ul><li>Signatories to voluntary standards </li></ul><ul><ul><li>Principles (UN Global Compact – ; Ceres Principles – ; SA8000 – ) </li></ul></ul><ul><ul><li>Reporting (Global Reporting Initiative – ) </li></ul></ul>
  9. 9. EVALUATING A COMPANY’S RESPONSE TO CLIMATE CHANGE <ul><li>Board Oversight : Is the company’s Board of Directors actively engaged in climate change policy? </li></ul><ul><li>Management Execution : Has the company’s Chairman/CEO assumed a leadership role in articulating and executing climate change policy? Are the executive officers’ compensation linked to the attainment of environmental goals and GHG targets? </li></ul><ul><li>Public Disclosure : Has the company reported to the public on material risks and opportunities posed by climate change? </li></ul><ul><li>Emissions Accounting : Has the company calculated conducted an annual inventory of GHG emissions? </li></ul><ul><li>Strategic Planning : Has the company set absolute GHG reduction targets for facilities, energy use, business travel and other operations? Does the company pursue business strategies to minimize risk as well as maximize opportunities? </li></ul><ul><li>Source: Corporate Governance and Climate Change: The Banking Sector, Ceres – </li></ul>
  10. 10. EVALUATING A COMPANY’S WORKPLACE CODE OF CONDUCT <ul><li>Background : Increased media, consumer and investor attention on overseas labor and environmental practices, a sustained and growing anti-sweatshop movement, debate over the impact on labor of the globalization of the economy and free trade agreements have propelled supply chain issues into the spotlight over the past decade. As a result, a wide range of stakeholder groups are encouraging the adoption and enforcement of codes of conduct. </li></ul><ul><li>Codes generally incorporate the core provisions of the International Labour Organization ( ), or at least the Fundamental Principles and Rights at Work: </li></ul><ul><ul><li>freedom of association and the right to collective bargaining </li></ul></ul><ul><ul><li>elimination of forced or compulsory labor </li></ul></ul><ul><ul><li>abolition of child labor and </li></ul></ul><ul><ul><li>elimination of discrimination </li></ul></ul><ul><li>Other factors to consider: communication, training, auditing and monitoring, technical assistance and enforcement </li></ul><ul><ul><li>Sources: Business for Social Responsibility ( ) and Interfaith Center on Corporate Responsibility ( ) </li></ul></ul>
  11. 11. SOCIAL SCREENING <ul><li>Definition: Including or excluding companies from portfolios based on environmental, social and governance criteria </li></ul><ul><li>Traditional exclusionary screens </li></ul><ul><ul><li>Tobacco ----Defense/Weapons </li></ul></ul><ul><ul><li>Alcohol ----Nuclear Power </li></ul></ul><ul><ul><li>Gambling ----Animal Testing </li></ul></ul><ul><li>Environmental, social and governance (ESG) screens - based on overall company performance and sector-specific indicators </li></ul><ul><ul><li>Environmental: Alternative Energy, Climate Change, Liabilities, Management Systems and Regulatory Problems </li></ul></ul><ul><ul><li>Social: Community Relations, Workforce Diversity, Employee Relations, Human Rights and Product Quality & Innovation </li></ul></ul><ul><ul><li>Governance: Accounting, Executive Compensation, Political Accountability, Transparency and Ownership </li></ul></ul><ul><ul><li>Sources: Social Investment Forum – </li></ul></ul>