Many companies are taking note of the recent surge in socially responsible investing (SRI), which is swiftly making the business case for corporate responsibility and sustainability. Essentially, socially responsible investors recognize that companies’ impacts on the environment, society and the economy are all valid components of investment decisions.
Demonstrating the power of SRI:
Chevron Corp. recently became the first major U.S. oil company to announce that it would track and report on the carbon content of its products. As a result of the decision, The Sisters of St. Dominic of Caldwell, N.J., a faith-based institutional investor, withdrew its greenhouse gas emissions shareholder resolution against the company, in addition to praising Chevron’s efforts to reduce its carbon footprint.
The Sisters of St. Dominic consists of a group of 16 investors and is a member of the Interfaith Center on Corporate Responsibility (a coalition of nearly 300 institutional investors representing over $100 billion in invested capital). The Sisters of St. Dominic filed a proposal on the carbon content of Chevron’s products earlier in 2009.
Chevron’s competitor, Exxon Mobil Corp., may now be under more pressure to reduce its own carbon footprint. The investors group criticized Exxon directors for asking their shareholders to vote against a similar proposal.
A growing market:
The SRI market currently comprises an estimated $2.71 trillion out of $25.1 trillion in the U.S. investment marketplace today. In order to capture the growing SRI market, Dow Jones, NASDAQ and S&P (among others) have all launched Sustainability Indices to show how companies compare in terms of sustainable practices.
SRI works to the financial benefit of companies that consider and address their environmental, social and economic impacts, while delivering more long-term returns to shareholders that understand the link between sustainable corporate practices and the ‘sustainability’ (read: longevity) of the companies themselves.
Patricia Kelley, an investment consultant of UBS Financial Services, Inc., stated, “We believe a solution to the current credit crunch is a greater focus on sustainability.” She explained the current credit crunch as a catalyst of the cultural paradigm shift towards sustainability and corporate responsibility.
She continued, “The fact that a burgeoning number of investors care about corporate responsibility builds the business case for companies to deepen their focus on integrating sustainability into the core of their operations.”
- Products and Services
- Strengths: companies that offer products and services that provide societal or environmental benefits.
- Concerns: companies with significant market share or revenue dependence in client prohibited products or services (i.e. tobacco, gaming, handguns or weapons).
- Environmental Impact
- Strengths: companies that conserve natural resources, reduce waste generation and proactively address major environmental challenges, such as climate change.
- Concerns: companies that have a pattern of serious or ongoing environmental problems.
- Workplace Conditions
- Strengths: companies that encourage workplace diversity and work-life balance, respect workers’ right to organize and enforce labor standards throughout their supply chains.
- Concerns: companies with poor worker safety records, or histories of serious labor or discrimination concerns.
- Community Relations
- Strengths: companies that have positive relationships with local, indigenous and underserved communities.
- Concerns: companies that show disregard for human rights or local community needs.
- Corporate Governance
- Strengths: companies with governance structures that promote board leadership and responsiveness to shareholders.
- Concerns: companies without adequate management and board accountability, transparency or public reporting.
*Still need more proof of the global increase in SRI despite the economic downturn? Click here to read about the 31% increase of signatories for The UN Principles for Responsible Investment.