April 9, 2008 — Is corporate social responsibility mostly a public relations ploy, or are corporations genuinely becoming more well-intentioned? Is the whole corporate social responsibility movement — along with the attendant push for socially responsible investing — just a passing fad, or is it here to stay? And what does "socially responsible investing" really mean, anyway?
These were just some of the questions posed to a panel of experts during "Valuing Change: The New Challenges and Opportunities of Socially Responsible Investing," a forum held April 8 at the McIntire School of Commerce. The panel featured socially responsible investing superstars Rob Berridge, program manager of the Investor Programs at Ceres; Justin Conway, relationship officer at the Calvert Foundation; Julie Gorte, senior vice president for sustainable investing at Pax World Management; and Paul Hilton, director of advanced equities research at the Calvert Group.
The forum was organized by the Socially Responsible Investment Organization, a student group formed this year by fourth-year Commerce student Ashby Taylor. Taylor put together the forum as his capstone project for the UVA LEAD Program, with help from classmates Stephanie Hobart and Peter Elbaor. He also served as a forum moderator, along with classmates Meera Deepak, Ed Gengler and Keller Hardy.
"I was thrilled to be able to bring together such an outstanding group of SRI professionals," Taylor said. "SRI is a global phenomenon, and it's growing at an incredible rate—it certainly merits this sort of thoughtful discussion and consideration."
That was then, this is now
In the old days, explained Hilton, "socially responsible investing meant screening out companies that engaged in activities that didn't jibe with an investor's particular set of values — things like weapons manufacturers, oil or tobacco companies, or companies that were known to be big polluters." But over the past decade — and especially during the past few years — strategies for SRI have become a whole lot more sophisticated.
"Now it's about which companies you want to own," Hilton said. These days, socially responsible investing falls into three primary categories: social research (seeking to invest in companies that engage in socially responsible behaviors); shareholder advocacy (using your position as a shareholder to get a company to change its unsavory ways); and community investing (helping people in a more immediate, local way, with the aim of alleviating global poverty). Moreover, SRI hasn't just grown up — it's also become a major player in the world of investment. Some $2.7 trillion, or one of every $10 invested in the United States, is now invested according to socially responsible principles.
So why has socially responsible investing suddenly become the phenomenon that it has? The answers, the panelists reported, are numerous — and serious. "Climate change is driving a lot of this," Pax's Gorte said. "People are realizing that the climate really is changing — and that that's going to have a huge financial impact." The result? "Green" companies, whether they're new or established, are attracting savvy investors.
The tragedy in the Sudan, the panelists said, has also helped to raise the public's awareness of the need to divest from companies associated with malignant regimes, as well as of the absolute poverty of the Third World. The fact that Muhammad Yunus was awarded the 2006 Nobel Peace Prize for his work in microloans (extending credit to the very poor) likewise helped to raise the profile of community investing, Conway pointed out. Ceres' Berridge also noted that there tends to be domino effect in the marketplace: "If Home Depot decides to stop selling wood from old-growth forests, Lowe's has to do it too," he explained. Said Gorte, "If companies let their reputation go down the tubes, they can become shark bait in a hot minute."
But is it profitable?
The panelists rejected the notion that socially responsible investments, as a group, produce sub-par returns. "There's absolutely no reason why companies that are sustainable should perform worse than other companies," Gorte said, pointing out that treating employees well, monitoring waste and pollution, and investing in local communities are often the hallmarks of well-managed — and profitable — companies.
In a more direct way, Hilton pointed out, companies that are careful about pollution and emissions often face fewer fines and lawsuits and lower waste disposal costs.
"It's not about a special way of investing," Gorte said. "We use the same metrics as everyone else.
The panelists pointed out that numerous academic studies have shown that socially responsible investment funds often outperform their more traditional counterparts.
Where we go from here
Is socially responsible investing just a passing fancy? The answer from the panelists was, not surprisingly, an unequivocal "no." The issues that precipitated the movement — climate change, looming water and energy shortages, poverty and social injustice — aren't going away any time soon. So pressing are these issues, said Hilton, that all investing is going to have to clean up its act. "In 10 years," he said, "there shouldn't be any difference between socially responsible investing and regular investing."