Comment by Marlon Fihosy for October / November CCB 114
The concept of Socially Responsible Investment (SRI) has been at the bedrock of sustainable economic progress for many years. The provision and use of finance to generate economic returns, while facilitating social and environmental benefits, is rightly seen as an important mechanism for embedding corporate responsibility in shareholder capitalism.
Not surprisingly, SRI was an important element in the UK Government’s recent Comprehensive Spending Review with £1bn of government spending being provided for green investments. However, this is just one small step in the right direction – it is estimated that £4bn to £6bn needs to be raised from a combination of public and private sources to fund the Green Investment Bank.
This potential boost to the further growth of SRI cannot be ignored. One response has come from the UK’s Financial Reporting Council, which has been proactive in launching the UK’s first formalised code of shareholder responsibility. The 68 companies already signed up will act as a catalyst for more responsible companies practicing better corporate governance. The launch of this code in the UK is an example which it is hoped will inspire imitation in other markets.
Other countries are actively doing their bit to further the development of SRI. For example, Italy recently launched its first responsible investment index series. Mexico’s stock exchange is also developing a new Sustainability Index to enhance corporate transparency and performance on sustainability issues.
In today’s free market economy it is assumed that anything which creates more choice is good. Activities in the SRI arena that are able to combine more choice with corporate responsibility can be considered great.
Marlon is an intern at Corporate Citizenship. Prior to this he founded a Social Enterprise.
SRI investment reaches €5 trillion
The European socially responsible investment sector (SRI) has almost doubled over the last two years to reach €5 trillion according to a survey by Eurosif. This highlights the increasing union between investors’ social conscience and interest in investment returns. The sustainable investment forum’s European SRI Market Study 2010 report revealed that assets under management in Europe have risen from €2.7 trillion in December 2007 to €5 trillion in December 2009, a growth of about 87% over two years. Institutional investors remain the main drivers of the SRI Market with a share of 92% of the total AuM, although the share of retail investors has also slightly increased since 2008, particularly in Austria, Belgium, France and Germany.
As part of the Comprehensive Spending Review, the Government announced on 20 October that it will provide £1 billion of investment for a UK-wide Green Investment Bank. George Osborne stated that he hoped that much more would be raised by private sector investment and the future sale of Government Assets. He also announced that up to £1 billion of funding would go towards building one of the first power stations in the world using carbon capture and storage technology (CCS). The announcement came as E.ON revealed that it will not proceed to the next stage of the Government’s CCS competition for its Kingsnorth project, one of the two projects that were shortlisted. The Department of Energy and Climate Change said there would be a second round of CCS projects, with up to four more schemes given the go-ahead.
On 19 October The UK’s independent regulator for promoting high quality corporate governance and reporting to foster investment, the Financial Reporting Council (FRC), announced the names of the investors who have signed up to the Stewardship Code. 68 investors have published statements of support for it, including 48 asset managers, 12 asset owners and 8 service providers. The Code was launched on 2 July and aims to promote more discussion between company boards and investors as a basis for improving the quality of corporate governance and long-term performance. Business Secretary Vince Cable highlighted his support for the Code and stated “Increasing effective shareholder engagement is central to rebuilding trust in the corporate sector and will encourage long-term planning for growth. I would encourage more investors to pledge their support and adhere to these best practice principles”.
Mexican Stock Exchange hires EIRIS to develop new Sustainability Index
The Mexican Stock Exchange (BMV) is working with the responsible investment research specialists EIRIS to develop a new sustainability index which will be launched at the United Nations Climate Change Conference in Cancun, Mexico at the end of November 2010. BMV’s index will assess organisations against a range of social and environmental criteria which are designed to reflect internationally recognised standards for corporate social responsibility. EIRIS is using a local research company in Mexico, Ecobanca, to advise BMV on how to improve corporate transparency and performance on sustainability issues amongst Mexican companies, and is working with BMV to develop listing criteria and assessment methodology for the new index.
COMMENTS