Financing the Future: The Case for Sustainable Investing
Winter 2012 Institute of the Environment and Sustainability Corporate Partners Program Workshop
With the purpose of increasing profits while benefiting the environment, executives and UCLA faculty met on February 16 to discuss sustainable investing strategies.
The Institute’s Corporate Partner Program brings together executives and academics to discuss research in corporate sustainability and feature talks by leading practitioners in the field. This event was co-sponsored by the UCLA Center for Corporate Environmental Performance and Net Impact.
With nearly $50 trillion ($50,000,000,000,000) invested worldwide in public companies, socially responsible investing represents a tremendous opportunity to improve the health of our planet. In addition to financial returns, a significant number of shareholders are beginning to demand that their investments reward and promote improved social and environmental performance.
The workshop addressed major themes in sustainable investing. Viewed from a business perspective, good ratings from sustainable investors can enhance share value while bad ratings can damage firm reputation. It is thus imperative for businesses to understand how they are evaluated by the Socially Responsible Investing (“SRI”) community in order to prioritize investment in social and environmental improvements.
At this meeting, leaders in sustainable investing from Morgan Stanley, Calvert Investments, the Angeleno Group, and Oracle Capital discussed how their approach to investing balances economic, social, and environmental goals. Professor Magali Delmas, who is affiliated with both the IoES and UCLA Anderson School of Management, presented her recent research examining the relationship between firm value and several major corporate sustainability rating systems commonly used by the SRI community to screen companies.
The workshop started with Jeanine Perkins, Regional Vice President at Calvert Investments. Calvert is a leader in SRI, offering a range of SRI strategies for investors who want to meet their financial goals and impact corporate responsibility and sustainability practices. She described seven broad areas of concern covered by Calvert: Governance and Ethics, Workplace, Environment, Product Safety and Impact, International Operations and Human Rights, Indigenous Peoples’ Rights, and Community Relations.
Elana Pianko, a Financial Advisor at Morgan Stanley, discussed SRI as an investment strategy that seeks to maximize both financial return and social good by integrating environmental, social, and corporate governance criteria into financial analysis. She said that an increasing number of clients are adopting SRI strategies – because such investments allow for a more comprehensive performance assessment that delivers returns comparable, if not superior, to those of more conventional investments.
Professor Delmas emphasized the significant impact of socially responsible investors on corporate reputation and the ability to attract capital. She presented her research – co-authored with Dror Etzion from McGill University and Nicholas Nairn-Birch from UCLA – which suggests that the adoption of green practices is positively linked to improved financial performance. However, her research also revealed that green practices don’t necessarily translate to reduced environmental damage. She stressed the need for better transparency from corporate social raters to allow corporations to adjust their social practices and benefit from better ratings.
Shifting the focus from publically traded firms to private equity, Anil Tammineedi, Vice President of the Angeleno Group – one of the largest dedicated energy growth equity funds in the U.S. – described his company’s strategy for clean energy investments and their active management approach that provides start-ups with socially and environmentally responsible governance systems at an early stage.
Finally, Ian Gardner, Vice President in the cleantech practice at Oracle Capital, described the overall process of screening inchoate companies in the clean technology sector that meet selective criteria, balancing performance prospects with social and environmental concerns.
Published: Wednesday, February 29, 2012