Conventionally, the
investment focus is on firms that achieve desirable financial returns. Among
the two categories of investors – the long term investors and the short term
investors, the former rely on fundamental analysis for determining their
investments while the latter use technical analysis for their investments.
Seldom have investors focused
adequately on the environmental, ethical and social impact of the businesses
they invest in. Socially Responsible
Investing (SRI) is an investment strategy that attempts to focus on this area
which has been hitherto not been given the importance it rightly deserves. SRI
strives to achieve the triple bottom line of
·
Monetary returns
·
Social welfare
and
·
Environmental
sustainability
Although currently small in number in India,
investors are increasingly focusing on aligning their investing philosophy with
their internal ethics and value systems. At present, SRI is driven more by
religious diktats than by an enlightened consciousness of ethics and
sustainability. For instance a ‘Shariah compliant fund’ desist from investing
in firms that are involved in tobacco products, manufacture and sale of
explosives and weaponry, sale of pork, making money from the interest paid on
loans. In India, ‘Taurus Ethical Fund’ is the first actively managed Equity
Oriented Shariah compliant fund that focuses on negative screening of
investments.
Globally, there are funds with clear focus on
investing in sustainable and ethical ventures. Increasingly Investors are
focusing their investments not only to make profits but also on the firms that
focus on sustainable development.
The awareness about the investing in companies that
are ethically and environmentally sustainable is prevalent among the educated
investors. But then educating and raising awareness among different sections of
investors requires the concerted efforts from the three entities.
The first one is the government through their
regulatory bodies and appropriate policies should enforce the compliance to
ethical, social and environmental sustainability.
The second entity is the investing population. This
could be Private Equity players who could divert their investments towards
companies that are Environmental, social and Governance compliance – like
investment towards renewable energy, alternate fuels, and clean development
mechanism, energy saving equipment, green technologies, carbon finance,
societal development through microfinance and the like. Mutual fund schemes which
have the theme surrounding the ‘ethical investing and environmental
sustainability’ improves and forces the companies to comply with the acceptable
standards. For investors who would not have access for the information about
the companies regarding their compliance to ethical and environmental
sustainability, Standard & Poor's, CRISIL, and KLD Research & Analytics
(the social and environmental research firm), early in 2008 together has
announced the launch of the S&PESG India Index -the first index of
companies whose business strategies and performance demonstrate a high level of
commitment to meeting Environmental, social and Governance (ESG) standards.
The third and the most important of all are the
companies themselves. The companies should have their values and policies that
enhance the environmental sustainability, societal and community development.
Tata Steel is one such company that proves the companies can do this with their
extensive societal and community development initiatives taken up at
Jamshedpur. Thus the companies can now have their attention towards investing
not only to make money or sustainability but money and sustainability.
Socially responsible investing would en-route our
country towards sustainable development along with good financial returns.
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