The Seven Drivers of Responsible Investment

Thomas Croft, Executive Director of the Steel Valley Authority and co-founder of Heartland Capital Strategies, shares his thoughts on the seven drivers of responsible investment.

A new wave of responsible investors is mobilising capital for smart buildings and affordable housing, civic infrastructure projects, wind and solar energy, and high-speed rail, hybrid buses and electric cars. They are sustainably rebuilding cities, renewing the industrial commons, growing the clean economy and fighting to make the ‘boss’ more accountable.  Continue reading

Responsible Investment in the 21st Century

The fact that the Principles for Responsible Investment (PRI) now has almost fifteen hundred signatories including over three hundred asset owners and nearly one thousand asset managers provides evidence that responsible investment is increasingly seen as a standard part of mainstream investment practice. Over the past decade, PRI signatories have encouraged improvements in the environmental, social and governance performance of the companies in which they are invested, and they have made significant investments in areas such as renewable energy.
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Adapt or Die: Understanding Stakeholder Pressure as an Opportunity for Purposeful Growth

By Dr. Kathy Miller Perkins

Note: this article is part of The Transatlantic Debate Blog series, which forms a conversation between Dr. Katrin Muff and Dr. Kathy Miller Perkins on business sustainability. Read the previous post here.

Have you ever thought about how many formerly great companies are no longer around? For example, whatever happened to previously iconic companies like Compaq, Standard Oil, and Polaroid? And who can overlook the gradual demise of Blackberry?  Of course it is difficult to say whether these failures could have been predicted much less prevented.  Continue reading

David Grayson on embedding sustainability

David Grayson

“We’re working towards a green, inclusive, responsible economy that will satisfy the needs of 9 billion people by mid-century” – Professor David Grayson, CBE

Last week on the Greenleaf blog Nadya Zhexembayeva explained the merits of embedded as opposed to bolt-on sustainability. Now Professor David Grayson of Cranfield School of Management writes about the initiatives of Unilever, and how they have taken steps towards embedding sustainability through “Brand Imprints” and employee engagement:
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Why Small Businesses Should Be Adding More Green Jobs

Chris LaszloThe U.S. economy is now the same size that it was before the 2007 recession, and yet we have 7 million fewer jobs. The latest data from the Department of Labor suggests that zero job growth is here to stay well into 2012. As conversations across the nation shift from how to create economic growth to how to create more jobs, many are asking: what should be done? To answer this question, we have to consider in which sectors America can achieve competitive advantage relative to emerging powerhouses such as China and India.
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Previous applicants need not apply: Is ‘Chief Resiliency Officer’ the dream job of tomorrow?

If in 2007 you were to tell someone that just 4 years later we would live in a world where banks are nationalised (to bailout a failed economic system), nature is privatised (to generate new wealth from ecosystem services) and the Middle East was the centre of the universe for democratic revolution (following the Arab Spring), at best you would have been laughed at.
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Fixing the Nine Flaws of ESG Analysis: From the Deep Water to Horizon

A year ago the explosion on Deepwater Horizon unleashed the worst environmental disaster in US history. For those who subscribe to the idea that environmental, social and governance (ESG) analysis makes for enhanced risk analysis, it was a costly blow, as BP had been rated well by many ESG analysts, and the stock took a dive after the disaster. For those who believe that ESG analysis leads to meaningful engagement by responsible investors to improve a firm’s social or environmental performance, the evidence that many investors had asked BP about their poor safety record over the past decade, to little effect, also presented a conundrum.

Although the responsible investment community now comprises over 20 trillion Assets Under Management, and along with it some new ESG millionaires, overall we are not seeing effective pressure on firms to be more responsible. Instead, we hear CEOs blaming the financial markets for short-termism limiting their investment in CSR, the ESG analysts blaming investors for not paying enough for better research, and the SRI heads in financial institutions blaming regulators for not empowering them or quietly admitting that their efforts are dwarfed by their colleagues’ exuberance for exotic derivatives, dark pools, high-frequency trades and other shenanigans that most of us get lost on.

Repeating the mantras that ESG analysis is good for returns or good for society won’t make them true, just like spraying detergent on oil won’t make the toxicity disappear. Instead, the flaws of ESG analysis and ratings need fixing, as part of a new attempt to make socially responsible investment funds, and self-proclaimed responsible investment institutions, deliver more for society, and for those citizen-savers among us who don’t want our nest-eggs to trash the planet. Today, The Journal of Corporate Citizenship publishes an analysis of the flaws of mainstream ESG analysis, some reasons for this situation persisting, and some ideas on how to begin fixing it.

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Relative or absolute values?

When reporting on their corporate responsibility performance, companies generally provide both absolute (e.g. total greenhouse gas emissions, total quantities of resources consumed) and relative performance data (e.g. greenhouse gas emissions per unit of turnover, energy consumed per unit of shopping floor area). However, they tend to focus their narrative on relative performance data for various reasons: these data provide a measure of operational efficiency, they can provide evidence of the effectiveness of management action and they can generally be relied on to show year-on-year improvements.

There are four reasons why stakeholders should be wary of relying on relative performance measures.
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