 Socially responsible investment has great potential to align individual values and community aspirations for a sustainable economy, with business activity. However it is suffering from a lack of credibility due to greenwash and inconsistent practices, resulting in a loss of investor confidence in the capacity of business to genuinely advance sustainability.
Background
The ethical investment movement has been around for many years but to date has been at the margin. Things may be changing with major insurance and superannuation institutions now assessing company carbon risks and VicSuper has decided to allocate 10% of funds towards sustainability in all asset classes. Mercer recently surveyed 200 investment managers and found 70% believed that the integration of environmental, social and governance factors into investment analysis would be mainstream within three to ten years. Is this really likely or are there major barriers still to overcome?
Corporate Sustainability - an Investor Perspective (Mays Report)
The Debate
The investment community has developed a wide range of 'green' funds largely based on filters that vet industries for their environmental and social impacts. NGOs say these are inconsistent and can often allow exceptions. Also investment analysts are still centrally focussed on short term returns, when sustainability returns are usually longer term, creating a conflict between conventional views about fiduciary responsibility and claimed concern for the environment. Some in the finance industry also resist government regulation to bring about clear standards for transparent decision making and reporting. The new development of individual and institutional shareholder activism, whereby investors choose to invest in companies with bad practices, in order to pressure them to change - is uncomfortable for company directors.
TEC Position
One of Green Capital's first events was on sustainable finance which produced a critique of the industry - Ethical?Investment. It found a confusing picture with too much self regulation leading to a general lack of credibility.
TEC has now joined with the Key Centre for Ethics, Law, Justice and Governance to review the industry and make recommendations.
Key Centre SRI Project website |
