Thursday, March 5, 2009

Book Review - Investing for Change

Investing for Change by Augustin Landier and Vinay B. Nair

This recently published book on SRI is a helpful overview for investors, a good introductory volume for SRI professionals, and it’s available in the public library system. In a quick read, the authors cover the history of SRI, issues around screening and engagement, and performance. While there is a notable absence of Canadian content, they address the growth of SRI around the world, including tidbits about the UN PRI, the GRI and sovereign funds.

However, in trying to cover it all, they perhaps have overreached themselves. The calculations on subjects like the cost of capital will be too detailed for most investors, while the gimmicky nature of dividing socially responsible investors into groups of yellow, blue and red and providing little stories about them may irritate SRI professionals.

Landier and Nair believe that SRI has arrived at the tipping point for a number of interesting but not entirely convincing reasons. Based on Maslow’s Hierarchy of Needs they suggest that as the world gets richer, a shift is taking place from materialist values to post materialist values which emphasize self expression and quality-of-life concerns. While this may be happening to some extent in North America, there’s a lot of material catch up to be done in countries like China and India before they move to post materialistic concerns. Landier and Nair also view institutional capital as an early adopter of SRI and a harbinger of things to come. They present 9 trends that reinforce their assertion of ‘The Oncoming Big Wave’. These are: the boom in retail SRI, new SRI products cost less so more people join, standardization of information, peer effects in 401(K) choices – the viral propagation of SRI, sovereign funds, the UN PRI, responsible firms want to offer responsible savings, toward responsible alternative investments and the professional rise of women.

Investing for Change does make two important points. First, it recognizes the importance of achieving change. For the values based investor, the ability to make a difference is paramount, and we acknowledge this in our shift in emphasis from negative screening to shareholder engagement. Secondly, while I may disagree with the authors’ categorizations, the book recognizes that there is not one SRI investor. People, and entities, are attracted to SRI for different reasons and if the industry wants to continue to grow we must work to clarify and address this multiplicity of views.

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