Corporate social responsibility (CSR) has already found a permanent place in the civilization of democracies with market economies. Companies in such countries generally declare adherence to principles of sustainability, respect for the environment, employee growth and betterment of local communities, and compliance with best practice in corporate governance. For nearly a decade, CSR has been joined by SRI—socially responsible investment (aka sustainable and responsible investment).
While CSR generally is associated with companies, SRI primarily affects institutional investors: brokerages, investment and pension funds, and asset management companies. The main principle behind SRI is to reflect in investment analysis and decision-making not only hard financial data, but, equally, ESG (environmental, social and governance) factors.
Funds whose investing rules call for inclusion of ESG criteria, or focusing on investing in shares of companies perceived as socially responsible, are often referred to as “ethical funds.” As shown in the table below, the value of responsible investment in Europe, the global leader in SRI, in 2013 was 2.7 times greater than in 2009.
But in Poland this remains a marginal phenomenon. According to a study carried out in November 2012 by Deloitte and the Warsaw Stock Exchange, 78% of respondents from institutional investors said that their firm’s strategy of taking ESG factors into account had a positive impact on the company’s financial results. But paradoxically, 87% of those surveyed said that they do not take these factors into account when making investment decisions.
SRI strategy | EUROPE (14 countries) | POLAND | |||||
| 2009 | 2011 | 2013 | change | 2009 | 2011 | 2013 |
Sustainability-themed investment | 25,361 | 48,046 | 58,961 | 232.5% | 0 | 0 | 0 |
Best-in-class | 132,956 | 283,081 | 353,355 | 265.8% | 0 | 13 | 3 |
Norm-based screening | 988,756 | 2,132,394 | 3,633,794 | 367.5% | 2 | 13 | 733 |
Exclusions | 1,749,432 | 3,584,498 | 6,853,654 | 391.8% | 1,076 | 612 | 1,060 |
Integration of ESG factors | 3,204,107 | 3,164,066 | 7,132,160 | 222.6% | 0 | 0 | 0 |
Stakeholder engagement/voting | 1,668,473 | 1,762,687 | 3,275,930 | 196.3% | 0 | 0 | 578 |
TOTAL | 7,769,085 | 10,974,772 | 21,307,854 | 274.3% | 1,078 | 638 | 2,374 |
Overview of SRI strategies
- Sustainability-themed investment:investment analysis primarily based on ESG factors
- Best-in-class: selecting the most promising investment options, e.g. within a given industry, and analysing them according to ESG factors
- Norm-based screening: analysing investment options for their degree of compliance with international environmental, social, and corporate governance criteria
- Exclusion: ruling out investment options in certain industries, countries or companies regarded as unethical, e.g. the tobacco or arms industry, or pharmaceutical companies using animal testing
- Integration of ESG factors in financial analysis: expressly including ESG factors within classic financial analysis
- Engagement and voting on sustainability: evaluation of the level of engagement of corporate boards and shareholders in promoting ESG-based strategies
