Socially Responsible Investing – Exclude or engage?

The idea of socially responsible investing (SRI) has been around at least since the 18th century when, in the US, the Quakers prohibited members from investing in the slave trade. Other religious leaders discouraged the ownership of shares in industries that either harmed their workers or were perceived as immoral – tobacco, alcohol, firearms.

In more recent times, worries about climate change have added a whole new swathe of sectors – high carbon ones – to the list of potential ‘unethical’ investments. And we have seen the birth of a new type of SRI investor: the pragmatist who believes companies that adopt good environmental, social and corporate governance (ESG) practices will tend to do better in the long term. For whatever reason, interest in money managed according to these principles has been growing non-stop. To discuss the latest implications for both investors and product providers of this trend, we gathered some top fund buyers and fund managers specialising in this area and a highly-regarded consultant in one of the most SRI-focused countries in the world: Sweden.

It is the same for AP1, one of the five buffer funds in the Swedish national pension system. AP1 managers have been looking at SRI issues for 15 years, according to Nadine Viel Lamare, head of sustainable value creation. Last year, they formulated an overall sustainability strategy. “We want to focus on resource efficiency, and that defines responsible ways to use natural resources, human capital and financial capital,” says Viel Lamare. “I am responsible for pushing our internal managers but we also have 40% external managers, so I am pushing them. And then I engage with companies, so I try to push them also. I am the great pusher.”“SRI is becoming more and more important,” says SEB head of fund selection Mikael Haglund. “Pressure is coming from both the retail and institutional sides – we see growing interest in both those channels for SRI and climate change as well – and that is something we respond to.”

Tove Bångstad is currently head of Nordics for Amundi Asset Management but earlier in her career she was responsibly for setting up the first ethical funds for institutional clients at SEB. Before that, she was chief financial officer of the Swedish Heart and Lung Foundation, where ESG is a high priority.“What I can see is that institutional investors now focus much more on ESG, says Bångstad. “If I look back 10 years there were just a couple of our clients that looked into ESG but today it is almost everyone – both institutional investors and wholesale fund selectors.” As a result, Amundi made the decision to incorporate SRI and ESG throughout its investment management process. “Active managers cannot invest incompanies that have the lowest ratings,” she explains.

Dylan Emery

Dylan Emery is the group editorial director of Last Word. He is one of the founders of the company and he created International Adviser, Portfolio Adviser and Expert Investor. His primary responsibilities...

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