Ethical Performance
inside intelligence for responsible business


end is nigh for ‘simplistic’ SRI questionnaire culture

May 2003

Over-reliance on ‘naive’ questionnaires that gather information about the ethical performance of companies is undermining the credibility of the socially responsible investment community, according to forthcoming research.

Draft conclusions of a study by the consultancy firm Arthur D Little suggest that the way SRI questionnaires are drawn up and analyzed ‘is often based on naive, simplistic interpretations of corporate responsibility’.

As a result the SRI community ‘risks losing credibility’ among the corporate sector and analysts. ‘Our work indicates that urgent action is needed to avert this loss of credibility,’ it says.

The research, carried out with the UK Social Investment Forum and Business in the Community, sought the views of 40 SRI asset managers, research and ratings agencies and investor relations staff in companies.

It says asset managers and agencies ‘need to be more transparent on why they ask questions and what they will do with the responses’, and to be more sophisticated when they interpret the data. This will encourage companies ‘to be more transparent’.

The conclusions mirror a survey, released last month by the Investor Relations Society, that found 64 per cent of 202 of its members thought CSR questionnaire fatigue was a ‘real problem’ for investor relations departments.

Mike Tyrrell, SRI analyst at HSBC Investment Bank, said questionnaires were already on the wane because companies were reporting in more detail on their social and environmental performance, and because SRI specialists in any case now preferred to engage in dialogue with boards.

‘SRI questionnaires will die over the next 18 months,’ he said. ‘Serious ratings agencies and investment managers aren’t using them any more because they’re already going to company websites and sustainability reports for the information. The future will be based on briefings on sustainability reports.’

Tyrrell claimed the trend also reflected the weakness of questionnaires as a tool for collecting information on the social and environmental performance of companies. ‘The questionnaire is a terrible procedure, and I speak as someone who has probably sent out more of them than anybody else,’ he said. ‘I have now given up on the process.’

Innovest Strategic Value Advisors analyst Jay Kantaria said questionnaires were a blunt tool and ‘interviewing senior executives is a better way of getting quality information.’

Gareth Llewellyn, head of corporate responsibility at National Grid Transco, said: ‘The most important thing is that questionnaires are backed up with dialogue, because the information in them does not contain the whole story.’

However, the FTSE Group, which relies on questionnaires to decide which companies to include in the FTSE4Good indices, warned this way of collecting information was unlikely to disappear in the near future because too few companies were publishing data of sufficient quality.


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