Socially Responsible Investing: A Global Perspective
Globally, socially responsible investing is flourishing. Almost as importantly, it means the same thing around the world. I begin with some recent quotes, which I noted over the past few weeks:
- Datuk Muhamad Umar Swift, CEO of Bursa Malaysia, “As a frontline regulator and market operator, we want to provide an environment that encourages sustainable practices among our market participants.”
- Shenzhen-based Ping An has developed an ESG ratings framework it says is “suited to China” that “builds on the ESG compliance disclosure requirements of the Hong Kong Stock Exchange (HKEX) and the Shanghai Stock Exchange, as well as international guidelines.”
- Saudi Arabia’s stock exchange, TADAWUL aims to launch an ESG index by the beginning of 2021.
- “I perceive a sense of urgency on mainstreaming sustainable finance,” said Marcos Ayerra, chairman of the Securities and Exchange Commission of Argentina
- The New Zealand Government has announced bold new plans to prevent default providers of its ‘opt-in’ retirement provision, KiwiSavers, from investing in fossil fuels.
During a fairly recent visit to the Serengeti, I would visit the gift shops at the safari camps we stayed at and marvel at the tags: “made by a women’s cooperative that supports education for Maasai girls,” “fair trade chocolate for dignity” were among them. Younger readers may not realize that this is new. Until at least the 1980s, such items were sold to tourists as much less expensive than American counterparts. Selling for cheap and not selling for purpose was the messaging. The world has shifted. Significant numbers of consumers make purchase decisions by a desire to support. Would this have come about without socially responsible investors? Perhaps, but probably not. Years of advocacy raised awareness.
Beyond a purchase decision, the acceptance and even mandating of responsible investment practices has begun to harness and use financial asset management systems for good. By influencing these financial systems to consider the need for a healthy planet with healthy citizens, the responsible investment field has done what no single government (nor the United Nations) has been able to accomplish. The old model of profit-at-any-cost, including the planet, has a counterweight.
It was not an accident nor a natural outcome of the past. Cultural anthropologist Margaret Mead’s famous observation “Never doubt that a small group of thoughtful, committed, citizens can change the world. Indeed, it is the only thing that ever has” is proving true through this concept we alternate between calling responsible and impact investing. Forty years ago there were a relatively few of us working to help the public to connect the dots. We wanted investors involved in the efforts others had begun to ensure the twin goals of universal human dignity and ecological sustainability. Tim Smith was then the Executive Director of Interfaith Center on Corporate Responsibility, motivating a global investor focus on South Africa, through the use of shareholder resolutions. Chuck Matthai was a veritable Johnny Appleseed of community development lending. Joan Bavaria had just launched the Valdez principals, which grew into a global environmental accounting movement. Joshua Mailman advocated for financing businesses that through their practices would achieve these goals. Each of these people did more than what they did. They shared strategy, respect and efforts. They built networks. There was no discussion of the best way. All ways were needed.
Early on activists focused on three approaches:
- Set both ecological and human standards for what one would buy,
- Engage with companies as an investor, and
- Find ways to incubate and build grassroots economies that could alleviate poverty and bring more people into the mainstream.
After my book, Socially Responsible Investing, was translated into Japanese, Korean and Chinese, I travelled to financial centers in each of those countries and spoke out for this way of investing. In each location I followed the commitments early members of the then-named Social Investment Forum had made to each other. These standards included some simple ideas. One was that we would not play a game of which of our three core strategies was “better” since only when all three were used did we see the results we needed to see. Another was to remember the Southern hemisphere and to use it in examples and to support it in our work. A resolve not to use the word “black” to mean bad was agreed to. Recognition that a focus on the role of government was important to our work was acknowledged.
By agreeing to discuss the same issues in much the same way, a small group of committed individuals was able to appeal to investors from around the world and to make a relatively new and somewhat wobbly idea into the powerhouse it is today. Now we see that global impact investors practicing in a manner which is culturally appropriate but utilizing the three approaches is widespread and approaching seamless.
This all matters because we have a purpose. We are not advocating for our field because we think it might help you make better investment decisions, though it might. We are advocating for this approach because we believe that only an engaged investor class can prevent complete collapse of the fragile ecology of our planet, and provide universal dignity to all people. We recognize that global stock markets alone are as large as global GDP. We know that when you consider bond markets, currency markets, derivatives markets, and so on, the world of finance dwarfs the real world’s financial resources. We recognize that finance is sophisticated, interconnected, immediately reactive and limitlessly resourced. It is a magnificent tool for good or for evil. Building a vast investor class that places responsibility for the future squarely into every value proposition is our purpose. The trends in global SRI give us hope.
Article by Amy Domini, Founder and Chair of Domini Impact Investments.
She is widely recognized as the leading voice for socially responsible investing. In 2005, Time magazine named her to the Time 100 list of the world’s most influential people. In 2006, she was awarded an honorary Doctor of Business Administration degree from Northeastern University College of Law. Yale University’s Berkeley Divinity School presented Ms. Domini with an honorary doctorate in 2007. In 2008, Ms. Domini was named to Directorship magazine’s Directorship 100, the magazine’s listing of the most influential people on corporate governance and in the boardroom.
Ms. Domini is a past board member of the Church Pension Fund of the Episcopal Church in America; the National Association of Community Development Loan Funds, an organization whose members work to create funds for grassroots economic development loans; and the Interfaith Center on Corporate Responsibility, the major sponsor of shareholder actions.
Ms. Domini holds a B.A. in international and comparative studies from Boston University, and holds the Chartered Financial Analyst designation.