What are the origins of the concept of responsible investment?

AdW: "Ethical" investment began with the aspirations of a minority who were anxious to invest according to their personal and/or religious convictions. In the 1960s, this meant excluding controversial businesses such as weapons and tobacco from the investment universe. In the 1990s, interest focused on the question of sustainable development, bringing a wind of change as investors began to incorporate environmental, economic and social aspects into their selection criteria. The ESG (Environmental Social Governance) funds that came on-stream in the new millennium are the direct descendants of sustainable development funds. All these approaches have now converged under the label of responsible investment.

How "aware" are today's investors?

AdW: We are seeing steadily increasing awareness of the growing impact of ESG issues on financial performance. There are many examples of incidents and scandals that have tarnished companies' reputations and weakened them financially and because of this, extra-financial considerations can no longer be ignored by investors focusing on the long term. I could cite the example of the serious risks and consequences relating to the issue of limiting carbon emissions, but also the opportunities that this opens up for individual companies. Nevertheless, the demand for investment return remains a key factor. At present, even though the experts have far from exhausted the subject in their discussions, the theory that SRI (Socially Responsible Investment) funds underperform traditional funds has been largely refuted and revisited.

What are the challenges for the professionals?

AdW: Although SRI is now seeing unprecedented success, it is still a difficult area for certain investors who need readily accessible and accurate data, commonly accepted standards and valuation criteria, and widely circulated information. However, they are starting to find reliable and efficient intermediaries in the field, including a handful of internationally recognised extra-financial rating agencies. Even though there is still a degree of disparity, it is true to say that the analytical tools have been refined and the investment processes have become more sophisticated.

Development of SRI in the financial markets: the convergence of internal factors

(1) Conser Invest SA is an independent consultancy and support agency on Socially Responsible Investment (SRI) issues for investment professionals