(July 19, 2012) — Socially responsible investing will generate positive social and environmental outcomes as well as attractive financial returns, yet only a handful of funds worldwide seem to be doing it well, a report by the United Nations-backed Principles for Responsible Investment Initiative (UNPRI) notes.
Others include Denmark’s PKA pension fund, PGGM — a Dutch pension fund service provider — and Obviam, an independent investment advisor that offers a range of investors access to impact investing in emerging and frontier markets, the report shows.
“We apply what we would call ethical and responsible investment across the whole portfolio,” Christian Super’s Chief Investment Officer Tim Macready told aiCIO earlier this year. “We don’t invest in alcohol or tobacco. Instead, we have made investments in renewable energy, technology, social infrastructure, and sustainable agriculture.”
According to the UNPRI report, most of those interviewed for the publication were clear that government policies which help to mitigate investment risk are key to making the allocations.
“Christian Super’s members invest in the fund partly because of its values – they hope to make a positive social contribution to society as well as earning a commercial financial return for their retirement. In order to fulfill this mandate, Christian Super has made a number of investments creating a positive social and environmental impact. Moreover, these investments help Christian Super fulfill its fiduciary duty by providing ways to gain diversification to improve the risk/return profile of the fund,” Macready added.
The scheme also lends money to microfinance initiatives oversees and supports community finance efforts by helping nonprofits in Australia, which are engaging directly with companies on social and environmental issues.
Meanwhile, UNPRI’s report notes that CalPERS is also a leader in socially responsible investment. “CalPERS views sustainability, in its simplest form, as the ability to continue. For a long-term investor like CalPERS, sustainability considerations underpin investment decisions in order to achieve long-term risk adjusted returns consistent with fiduciary duty,” the report noted.
The report continued: “By trialling the diversification and performance benefits of these investments, CalPERS hopes that they are sending a signal to the market.”
So what is the solution to ESG barriers that still permeate the environment among institutional investors? “The failure to look at investments on a long-term horizon is a barrier to ESG,” Macready asserted. “Investors need to change the perception that ESG costs money—that it focuses on negative screening as opposed to profit-making. That’s false.”