FaithWorld

from Global Investing:

How socially responsible is your investing?

Is your investment ethically sound and socially responsible?

A new survey by consulting firm Mercer finds that only 9% of more than 5,000 investment strategies achieve the highest environmental, social and governance (ESG) ratings.

Socially responsible investing (SRI) involves buying shares in companies that manage ESG risks. For example, firms that make clean technologies are favoured, while businesses which pollute the environment, are complicit in human rights abuses or nuclear arms production are shunned. All this sounds good, but the performance of such investments has been somewhat mixed -- meaning being good doesn't always mean doing well. But the SRI industry is hoping that greater involvement of funds, especially long-term ones such as pension funds and sovereign wealth funds -- may generate flows into the sector and lead to better performance.

Of the 5,175 strategies assigned ESG ratings, 57% are in listed equities, 20% fixed income and the remaining 23% across real estate, private equity, hedge funds and others.

Private equity has the highest proportion of highly rated ESG strategies, while hedge funds and fixed income had the fewest. From a geographic perspective, emerging markets and Asia-Pacific have the highest proportion of top ratings, while Canada -- and this may come as a surprise to some -- has the least.

“There is still much work to be done by the investment community to fully integrate responsible investment practices. We would expect the number of highly rated strategies to increase over the next few years as more and more investment professionals come to recognise the sound investment and competitive reasons for active ownership," said Andrew Kirton, Mercer’s global chief investment officer.

from MacroScope:

SWFs and ethical investing: serving multitude of objectives

Sovereign wealth funds, eager to be accepted in the West, are increasingly interested in showing the world that they care about environment and governance by investing in socially responsible firms.

It all sounds good, but the biggest shortfall of Socially Responsible Investing (SRI) is that it lacks convincing performance details. Therefore, SRI or ethical investing for SWFs is not just about returns: It allows them to combine a multitude of objectives, such as portfolio diversification, enhancing transparency, meeting social goals and gaining acceptance even among critics who suspect they operate politically.

SRI, already a $2.71 trillion industry in the US, involves buying shares in companies that manage environmental, social and governance risks. For example, firms which make clean technologies are in, while businesses that pollute the environment, abuse human rights or produce nuclear arms are out.