November 11, 2003
Net Impact Breakout Session: Socially Responsible Investing Gains
Impact
by Erica Grieder
"The biggest trend right now in socially responsible investing," said Faris Natour, a Social Research Analyst at Calvert, "is that interest in it is so huge."
Natour was one of four panelists who spoke on the topic of “Trends in Socially Responsible Investing” at a breakout session held on Friday, November 7, as part of the 11th Annual Net Impact Conference at the McCombs School of Business.
Socially responsible investing (SRI) offers investors an opportunity to integrate their personal values with their investment strategies. A socially responsible investor, in addition to considering a company’s numbers, screens the company on a variety of additional criteria to determine its corporate governance, labor relations and stance on a host of social policy issues.
According to Natour, this conscientious style of investing is currently enjoying a higher-than-ever profile.
His co-panelists—David Corbin, the President and CIO of Corbin & Company, Joan Deneher, the Associate Director of Quantitative Research at TIAA-CREF, and Suzanne Fallender, the Vice President and Managing Director of Institutional Shareholder Services (ISS)—agreed. Fallender recalled that when she joined ISS in 1995, "absolutely no one knew what corporate governance was" and when she tried to explain her work, she was met with "blank stares."
Deneher cited increased client interest in how their money is spent as the driving force for the shift: "People have had to make choices with their investments, and so they're demanding more information," she said.
Corbin agreed that more clients are seeing their investment portfolios as a viable arena in which to express their positions on various issues. He noted that not all socially conscious investors appear in the stereotypical guise of a liberal.
"A lot of my SRI clients are actually fairly conservative people, who have conservative issues," Corbin said.
Pigeonholing socially responsible investors is difficult because their concerns sensitive to current events. Several years ago, the hot-button issues among these investors were social in nature: the environment, treatment of employees, and the rights of indigenous people, for example. In the wake of a number of high-profile corporate scandals, "now people care about corporate governance," said Fallender.
However, for socially conscious investors across the political spectrum, SRI has at least one distinct advantage over direct action on the part of consumers, such as picketing an objectionable company.
"A lot of industries don't even have consumers" in the traditional sense, Natour pointed out. Particularly for companies that lack storefronts, "money is the best way to influence [them]."
The panel was part of the 11th annual Net Impact Conference, held this weekend from November 6-9 at The University of Texas at Austin and sponsored by the McCombs School of Business. Throughout the weekend, business leaders and students spoke on topics including the conservation and alternative energy sources, mentoring and education, strategic philanthropy and pro-bono work.
Influencing corporations to “do the right thing” was a clear goal of Net Impact 2003, and many speakers emphasized that social responsibility and success in business are not mutually exclusive.
The behavior of socially responsible investors, for example, follows a pattern that seems to make their investing style appealing for practical reasons. "Socially responsible investors tend to have a longer-term, bigger-picture outlook, particularly because they have a lot more confidence” in the corporations in which they invest, observed Corbin.
As a result, they are calmer in times of market turmoil. As Deneher put it, there are "no knee-jerk reactions, no switching from fund to fund."
An interesting ramification of this quality is that socially responsible investors may actually enjoy greater returns, in a strictly economic sense, than their less-consistent peers. As reported in McCombs Weekly last April, a study by McCombs finance professor Keith Brown and Fidelity Investments executive W. V. Harlow showed that investment funds that maintained a consistent style over a ten-year period enjoyed greater returns than those that did not.
Panel:
Trends in Socially Responsible Investing
Participants:
Joan Deneher, Assoc. Director, Quantitative Research, TIAA-CREF
Suzanne Fallender, VP and Managing Director, Institutional
Shareholder Services (ISS)
Sandy Leeds, Lecturer, McCombs School of Business (moderator)
Faris Natour, Social Research Analyst, Calvert
David Corbin, President and CIO, Corbin and Company
For more information, contact Misty Alejo, conference co-chair, at 512-471-4867, or Kay Randall, Public Affairs, at 512-232-3910.
For information on specific programs at the McCombs School, consult our contacts page. For media information, contact the Communications Director by phone at 512-471-3314 or by email at CommunicationsDirector@mccombs.utexas.edu.
