Corporate Social Responsibility Press Release
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8.19.2008 - 11:59pm ET
News from:
Business for Social Responsibility
New BSR Report: Is Socially Responsible Investing Ready for the Mainstream?
(CSRwire) SAN FRANCISCO - August 20, 2008 - For more than 20 years, the use of
environmental, social and governance criteria (ESG) has gained traction
among socially responsible investors, but multiple hurdles have kept this
movement from fully entering the mainstream.
Business for Social
Responsibility (BSR) announces a new report, "Environmental,
Social and Governance: Moving to Mainstream Investing?" which examines
how mainstream financial institutions are currently incorporating ESG
criteria, the barriers that are preventing its progress - and the
potential solutions to overcoming these challenges.
"Although many studies, such as those by the United Nations Environment
Programme Finance Initiative (UNEP FI), show a positive association
between investors' use of ESG criteria and enhanced financial performance,
the data is still inconclusive, and mainstream investors remain skeptical,"
said Laura Commike Gitman, BSR Director, Advisory Services. "This report
looks beyond socially responsible investors and explores how mainstream
financial institutions can advance the use of ESG criteria to maximize
financial performance."
The report
outlines the five main barriers to mainstream integration of ESG criteria -
and offers advice for how financial institutions, global businesses and
others can overcome them:
Lack of data: Due to the scarcity of evidence linking ESG criteria to
financial returns, many investors have yet to integrate ESG criteria in
investment decisions. For those considering using ESG criteria in
valuation, there are a few promising examples to learn from, such as
Goldman Sachs' "GS Sustain Focus List," which predicts top corporate
performers by evaluating how well they integrate ESG criteria into their
businesses. This list has outperformed the world stock index MSCI by 25
percent since August 2005.
Insufficient reporting of ESG data: Because there is not yet a
standard for disclosure of ESG performance, it is difficult for investors
to compare company performance on these issues. Companies can help reduce
this challenge by increasing disclosure and employing report standards
such as the Global Reporting Initiative, which provide guidance on how
organizations can disclose their sustainability performance.
Disparity between short-term pressure and long-term investments:
Shareholder demands for strong short-term financial performance often
compete with ESG investments, which are longer term by nature. Companies
need to understand the long-term payoff, and investors need to be open to
rewarding companies who invest for the long run.
Lack of capacity among investment professionals: Investors trained in
financial analysis are not fully equipped to evaluate ESG criteria. To
overcome this challenge, several investment companies have begun training
their investment professionals on ESG criteria, some financial
institutions have hired specialists to work solely on these issues, and
some educational institutions have begun incorporating ESG issues into MBA
and CFA programs.
Cynicism toward ESG: Cynicism is one of the fundamental barriers to
mainstream acceptance of ESG criteria. In addition to the barriers
outlined above, investors and businesses need to approach ESG with a
different mindset, which may mean departing from business as usual.
Positive data will help, as investors begin to trust that using ESG
criteria to evaluate good investments pays off.
"Using the information in our report, mainstream investors and businesses
will learn how to overcome common challenges and integrate ESG criteria
into investment decisions," said Gitman. "Once this happens, more
mainstream investors will begin to analyze ESG issues as part of their
overall assessment of a company - positively impacting both financial
results and sustainability."
For more information about BSR's financial services practice, please
contact Laura
Commike Gitman at lgitman@bsr.org.
About BSR
Since 1992, Business for Social Responsibility (BSR) has been providing
socially responsible business solutions to many of the world's leading
corporations. Headquartered in San Francisco and with offices in Beijing,
Guangzhou, Hong Kong, New York and Paris, BSR is a nonprofit business
association that serves its 250 member companies and other Global 1000
enterprises. Through advisory services, convenings and research, BSR works
with corporations and concerned stakeholders of all types to create a more
just and sustainable global economy. For more information, visit www.bsr.org.
For more information please contact:
Eva Dienel, Communications ManagerBusiness for Social Responsibility415-984-3233www.bsr.org
www.bsr.org
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