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GreenMoney Journal - publishing since 1992
Fall 2010 issue
Socially Responsible Investing – Better Companies, Better Communities
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THE DIFFERENCE A DECADE CAN MAKE
Barbara Krumsiek
It is a challenge to look to 2012 to visualize the world and the world of socially responsible
investing. Lately, it seems difficult to visualize the world in the next 10 days! The
interconnectedness, the fabric, of global society is being illuminated in new and dramatic fashion
in our post-September 11th world. This halogen beam of illumination also exposes the extraordinary
fragility of current systems, and the risks such fragility presents to global society.
But
social investing has addressed this fragility for decades, and in that respect, I am confident we
are contributing to solutions, not adding to the turmoil. Human dignity, the right to a fair
workplace, and environmental performance have long been at the root of social investing. Calvert's
social investment policies have addressed them for over 20 years.
So what themes will
unfold in the coming decade?
Higher awareness of corporate
responsibility
Following the Enron bankruptcy, corporate accounting and business
practices have come under intense media scrutiny. I expect this scrutiny to continue, much like the
perpetual post-Watergate media focus on politics and money. As a result, I think we'll see ongoing
attention to corporate responsibility.
Media scrutiny to date has focused on the failure
of the "external" in the Enron debacle - the role of regulators, auditors, boards of directors.
This seems like a reasonable focus at first blush, and will lead to a near-term emphasis on
strengthening disclosure, assuring auditor and board
independence, and a rise in the level of
shareholder activism to assure that these measures are followed.
But I believe we will
also see a shift towards evaluating the failure of the "internal" - the collapse of ethics and
values that must have occurred for a debacle of such magnitude to take place.
Significant growth in assets and influence
Between 1982 - the year
Calvert Social Investment Fund led mutual funds' stand against apartheid - and now, the percentage
of US mutual fund assets in socially invested funds has risen to roughly 2 percent. I anticipate
more significant growth over the next decade. By 2012, SRI assets could account for 10% of US
mutual fund value.
My estimate is this optimistic for two reasons. First, access to SRI
in retirement plans has increased substantially in the past few years. The number of major 401(k)
platforms offering at least one screened fund has risen from one in ten to nine in ten, and this
access will logically translate into usage as more corporations add SRI options to their plans, and
more individuals direct their 401(k) contributions there.
By 2012, increased SRI assets
will mean increased visibility and press coverage, hence more clout on the investment stage.
More community investment
Community investing has had a boost with
the Social Investment Forum's 2001 kickoff of the "1% in Community" program. I anticipate that more
SRI funds will adopt this policy as have Calvert and others, investing at least one percent of
managed assets in communities underserved by traditional financial institutions. If only two
percent of the mutual fund industry adopted this program, we would see over $1 billion of new money
available to our communities by the end of the decade.
Explosive global
growth
Outside the U.S., SRI is more commonly known as "investing for
sustainability," reflecting the fact that environmental concerns have been the key driver of
investment screens. Now, as the UN has published its Global Compact - "pillars required to sustain
the new global economy and make globalization work for all the world's people" - pressure is
building for broadened social screening. The Compact's array of nine human rights, labor, and
environmental standards could provide the basis for this screening. I expect rapid growth in social
investment policies around the world, especially in Europe and Asia. As this occurs, it's logical
to expect adoption of the Global Compact by many of the world's multinational institutions.
The "either/or" myth dispelled
Perhaps the greatest impediment to SRI
has been the myth that social and financial performances are mutually exclusive. Our experience is,
of course, to the contrary. At the core of social investing is the conviction that companies in
fact prosper because they pursue sound financial practices and operate with integrity toward their
employees, their communities, and the environment.
As investment publications name social
investment companies on their "top ten" lists, we'll have more evidence that it's not necessary to
sacrifice returns in support of social responsibility. I think we'll see more competitive
performance and growing acknowledgment that SRI is "mainstream" investing over the next decade.
There's work ahead
I do not believe that in 10 years, or 20, or
50, the issues that launched social investing will disappear. Poverty, injustice, and tyranny have
been with us since the beginning, after all. And, as we experience globalization, we become aware
of how wide and deep these problems are.
But as social firms continue to demonstrate that
corporate performance and responsibility are compatible, our influence should grow. In a decade,
social investing should be much more widely recognized and embraced as a problem-solving tool. As
my children reach young adulthood, they will live in a world in which corporate behavior influenced
by SRI will be far more instrumental in positive global development.
Article by Barbara
Krumsiek, CEO, Calvert Group.
For more information go to- http://www.calvert.com
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