There’s investors and then there’s *investors*

Posted: February 21, 2012 in Responsible business
Tags: , , , ,
An assortment of United States coins, includin...

Image via Wikipedia

The jury still seems to be out on whether socially responsible investment (SRI) pays for itself or not. I’ve seen articles indicating both; it seems to depend how exactly you ask the question.

If a person wants to know that they will do ‘at least as well’ in choosing SRI it kinda suggests that they are asking the wrong question. How are you being ‘socially responsible’ if your principal concern is maximum profit? Should profit dip below expectations, what will you do? Encourage the companies in which you invest to just drop their strategies for environmental and social sustainability? It’s to approach the whole subject from the wrong angle.

Now here is the interesting thing: How many such investors are private individuals (households) and how many are institutional investors?

Individuals making such choices are not really investors in the pure sense, they are more like “investment product consumers”, making the decision to make what they consider to be an ethical purchase. No harm in that.

However ethical retail investment is not the main game and it appears to be regarded as a non-priority in the current climate, with two investment houses, Henderson Global Investors (UK) and UniCredit (Italy), retrenching their SRI research teams late last year.

If you were to list ethical choice-of-investment in order of impact, next up the list would be institutional investors divesting from ethically suspect companies and at the top would be governmental procurement policies.

Institutional-level divestment

The Government pension fund of Norway is the world’s largest fund of its kind (it is not strictly a pension, but a ‘future fund’ which holds and invests the profits of the state-run oil company). It has a policy that it will not invest money in companies that:

directly or indirectly contribute to killing, torture, deprivation of freedom or other violations of human rights in conflict situations or wars

Unlike many such policies, this one is actually implemented, by an overseeing Ethics Council. Companies from which the fund has divested money include:

The reason for this could well be the non-option for citizens to move their money elsewhere; the only outlet for concern was to push for divestment. The amount withdrawn totals about $2 billion. Suppose that change was brought about by fifty committed Norwegians; they have had a net impact of about $40 million each – considerably more than if they had each quietly switched their own investment options.

Similarly in 2007 a number of institutions, many of them church-affiliated, divested from companies doing business in Sudan.

Government procurement

Another solution is to run a campaign that governments implement a living-wage procurement policy. As the biggest purchaser, that has a huge impact. Many American city governments have implemented living wage policies though the intended beneficiaries are local Americans working in low-wage occupations. There is also a rule at the Federal level that the US Government not purchase cocoa from the Ivory Coast or cotton from Uzbekistan, lest they be supporting child labour. That list could easily be broadened…

Related posts

  1. […] proxies, the accountants and bankers? I’ve previously looked at strategies of regulation, corporations bound by charter and consumer pressure to bring corporate behaviour under control in situations where union […]

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s