From The International Herald Tribune:
Asset managers are increasingly incorporating social, environmental and governance factors into their investing strategies, with institutional investors becoming more active as shareholders, pushing the boards of their core holdings to improve their practices and disclosure in order to strengthen returns over the long term.
Investors are pressing for better disclosure and performance in a number of areas, from transparency of corporate governance to the treatment of suppliers, environmental issues and other areas that have traditionally fallen under the concept of corporate social responsibility, said Colin Melvin, the director of corporate governance at Hermes Pensions Management, the London-based institutional fund manager owned by the BT Pension fund.
Active investors are looking beyond the traditional "screened" portfolios that exclude companies for bad practices, or add companies for good practices in sectors that are perceived as needing better standards.
"If you're talking specifically about investment funds with exclusionary policies, then that sector is somewhat flat," Melvin said. "But there is a lot more interest among fund managers and clients in taking more seriously the responsibility of ownership."
Reflecting the shift, Henderson Global Investors, a British fund manager, said last year that it would reorient £250 million, or $430 million, of assets away from screened portfolios into specific companies that are working toward a more sustainable future.
"In a sense the change is merely a more powerful reinterpretation of fiduciary duty," Melvin said, "leading large funds to realize that selling out holdings is not the best way to effect change."
One group that has been particularly active in pushing this agenda is the Enhanced Analytics Initiative, an international collaboration among asset owners and managers, founded in London in 2004 to encourage better investment research. With more than €700 billion, or $840 billion, under management, the group's members aim to improve long- term gains by rewarding brokerage firms that offer the broadest research into nonfinancial issues that can affect corporate performance.
The response, said David Blood, lead director of the initiative, has been resoundingly positive - so much so that the group could disband in the next two or three years, as "holistic" research becomes increasingly available. "The research community has been very constructive and aggressive," he said.
A global survey of 180 investment managers released last year by Mercer Investment Consulting found that almost 80 percent of respondents expected active ownership to be a mainstream practice within five years. while almost 40 percent expected investment screening to become mainstream in the same time frame.
Putting a total value on socially responsible fund investment is complicated by differences in definition, but the European Social Investment Forum, a pan-European network, estimates that socially responsible investments by European institutions were worth about €336 billion in 2003 and may have reached €500 billion by the end of 2005.
Matt Christensen, the forum's executive director, said that 5 percent to 10 percent of all investments in Europe could be classed as socially responsible.
A study this year by the Social Investment Forum, a U.S. trade association for the social investment industry, put total socially responsible investment assets in the United States at $2.29 trillion in 2005, up from $639 billion in 1995.
Investors are pressing for better disclosure and performance in a number of areas, from transparency of corporate governance to the treatment of suppliers, environmental issues and other areas that have traditionally fallen under the concept of corporate social responsibility, said Colin Melvin, the director of corporate governance at Hermes Pensions Management, the London-based institutional fund manager owned by the BT Pension fund.
Active investors are looking beyond the traditional "screened" portfolios that exclude companies for bad practices, or add companies for good practices in sectors that are perceived as needing better standards.
"If you're talking specifically about investment funds with exclusionary policies, then that sector is somewhat flat," Melvin said. "But there is a lot more interest among fund managers and clients in taking more seriously the responsibility of ownership."
Reflecting the shift, Henderson Global Investors, a British fund manager, said last year that it would reorient £250 million, or $430 million, of assets away from screened portfolios into specific companies that are working toward a more sustainable future.
"In a sense the change is merely a more powerful reinterpretation of fiduciary duty," Melvin said, "leading large funds to realize that selling out holdings is not the best way to effect change."
One group that has been particularly active in pushing this agenda is the Enhanced Analytics Initiative, an international collaboration among asset owners and managers, founded in London in 2004 to encourage better investment research. With more than €700 billion, or $840 billion, under management, the group's members aim to improve long- term gains by rewarding brokerage firms that offer the broadest research into nonfinancial issues that can affect corporate performance.
The response, said David Blood, lead director of the initiative, has been resoundingly positive - so much so that the group could disband in the next two or three years, as "holistic" research becomes increasingly available. "The research community has been very constructive and aggressive," he said.
A global survey of 180 investment managers released last year by Mercer Investment Consulting found that almost 80 percent of respondents expected active ownership to be a mainstream practice within five years. while almost 40 percent expected investment screening to become mainstream in the same time frame.
Putting a total value on socially responsible fund investment is complicated by differences in definition, but the European Social Investment Forum, a pan-European network, estimates that socially responsible investments by European institutions were worth about €336 billion in 2003 and may have reached €500 billion by the end of 2005.
Matt Christensen, the forum's executive director, said that 5 percent to 10 percent of all investments in Europe could be classed as socially responsible.
A study this year by the Social Investment Forum, a U.S. trade association for the social investment industry, put total socially responsible investment assets in the United States at $2.29 trillion in 2005, up from $639 billion in 1995.