investors who think CSR is bad for firms are the contrarians nowJanuary 2004
Strange that the City of London, one of the strongholds of socially responsible investment, also contains the greatest proportion of investors who think that managing social and environmental risks is at best a waste of time. According to Deloitte Touche Tohmatsu (see page six), a sizeable proportion of investors in the Square Mile think this type of risk management affects a company’s long term market value in a negative way.
At first sight one might expect the country with arguably the most advanced corporate social and environmental risk management systems in Europe, and the lion’s share of its €350billion (£247bn) institutional and retail SRI market, to have the lowest proportion of sceptical fund managers and analysts. But no. Deloitte found that around one in five think managing social and environmental risk depresses long term market value. In fact, among mainstream investors the figure may be even higher – half the sample worked for organizations offering SRI services of some kind. Investor scepticism in other European countries is at nothing like this level.
Looked at the other way round, the figures suggest the vast majority of fund managers and analysts think it is in companies’ long term interests to manage their social and environmental impacts. But there is nonetheless a large minority of UK investors who are not persuaded of CSR’s merits. On what grounds? Tantalisingly, the survey does not say.
Despite the rise of engagement, some may associate SRI with negative screening techniques used by ethical investors. Concerns over the costs of CSR departments, possible loss of management focus and the perception that measures such as the forthcoming requirement to produce an annual operating and financial review amount to burdensome regulation, are overplayed. But continental SRI investors focus much more on the long-term sustainability performance of firms than do their counterparts in the UK. If mainstream UK investors followed their example and focused more on the long term, they would recognize the benefits of managing a wider range of risks.
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