Mainstream activists: socially responsible investing

If it is true that ‘money talks’, then something of a shout roared out of page fifty-six of the June 4 edition of The Sydney Morning Herald. There the business journalist, Leon Gettler, reported that:

A recent survey of 190 regional investment management organisations by Mercer Investment Consulting found that fund managers in Australia, Asia, the US, Canada and Europe – managing more [than] $US30.5 trillion in assets [my highlighting] – were tipping that socially responsible investing will become part of the mainstream over the next ten years.

An astonishing nine out of ten (89%) predicted that active ownership, where investors seek to influence a company’s behaviour through activism and proxy voting, would soon be the norm. It has 73% forecasting social and environmental performance indicators would shift from the fringes to the mainstream during this period.

When it comes to their stewardship of investments, fund managers are not known for their sentimental attachment to ... anything. Rather, they are cool calculators of value. So, it is interesting to find that they are now thinking seriously about values as well.

However, what reason might there be to think that people are going to make ethical choices about the things that they buy or invest in? After all, the evidence to date suggests that relatively few will pay much extra for the sake of their scruples.

There are two reasons for thinking that the fund managers may be correct in their assessment. First, there is recent evidence that the capacity to manage the complexities of corporate responsibility is a reliable indicator of superior management ability as a whole, especially in the area of risk management. Furthermore, one of the best ways to attract and retain talented employees is to develop a company for which people can feel proud to work. Given what has come to be a fairly natural (if unwarranted) scepticism about the relationship between the image of companies and the underlying reality, companies wanting to win the ‘war for talent’ must ensure that they ‘walk the talk’ across the full span of corporate relationships. There is much more that could be said about this first reason – all of which would amount to an argument about ‘enlightened self-interest’.

The second reason for the change in popular sentiment may have less to do with ‘opportunity’ and more to do with ‘hope’. In recent years, social researchers, like Hugh Mackay, have noted a progressive withdrawal of public engagement with the ‘big issues’ of life: war, poverty, oppression, terrorism and so on. Instead, Australians, along with many other peoples, have turned inwards. So, instead of tuning into news and current affairs, we apparently prefer information about how to renovate our kitchens. When asked to explain this change in focus, the most typical response is to point to the overwhelming size of the problems faced by the world. People say: “I know that I can’t make much of a difference when it comes to global poverty – but I can at least look after my immediate family”.

The community’s response to the tragedy of the Boxing Day tsunami may come to be seen as a turning point. The scale of the devastation should have been overwhelming. But it was not. Rather than remaining disengaged, Australians of all types suddenly found that they could effect massive change – one dollar at a time. Even children discovered that they could help by donating pocket money. In these circumstances, nearly everybody could be part of the national response.

What might this have to do with corporate responsibility? Well, it is just possible that the community has found for itself a new, winning formula for effecting change in a complex world. Rather than joining political parties or supporting campaigning organisations, we might instead adopt the tactic of shaping the world through our purchase and investment decisions. It is an idea that might catch on.

Organisations that offer something good (as well as useful) will be able to tap into the power of a market in which every person can make a difference – even if only one dollar at a time. As things stand, companies have at least 30.5 trillion reasons to explore this possibility. And that is just the beginning.

This article was first published in Living Ethics, St James Ethics Centre, issue 60, winter 2005.