Thursday, July 9, 2009

Responsible versus sustainable

There’s been a subtle semantic shift over the past few years in the SRI movement, as more companies and industry leaders choose to talk about sustainable investing, rather than socially responsible or responsible investing.

It may seem unimportant on the surface, after all, what’s in a name?, but it’s an issue many people take very seriously.

In a recent article posted on Responsible Investor, philanthropist and writer Stephen Viederman stated that “confusion over terminology describing an investment approach that considers environmental, social and governance (ESG) factors obscures the point of our work linking investing and corporate change.”

Viederman concedes that socially responsible investing, responsible investing and sustainable investing share a common goal: achieving long-term shareowner returns and corporate change, but he insists that the approaches are different.

Viederman believes SRI is about investing with personal values while sustainable investing (SI) is about investing for shareowner value using ESG to assess a company. “SRI employs positive and negative screens to identify good or bad companies across economic sectors; SI ranks the best and worst companies within economic sectors. Thus, relatively few integrated oil and gas companies will likely appear in an SRI portfolio, while the best of these companies will appear in SI portfolios.”

Viederman’s support of SRI or responsible investing is shared by KLD founder and SRI pioneer Amy Domini. In an interview with Responsible Investor earlier this year, Domini expressed concern about the use of the term sustainability. “It’s a bit of a marketing term; a comfort word,” Domini said. “Companies like Boeing have been talking about sustainability for a long time, even if the person repeating the mantra was then disgraced. Personally I like SRI or responsible investment. People say well are you then accusing other investors of being ‘irresponsible’? My answer is, yes, that is what we are saying!”

What do you think? Is there a difference between SRI and sustainable investing? Do names matter? Please share your thoughts with SRI Monitor.


  1. It has struck me over the last couple of years how the SRI community is much more likely than the CSR sector to become embrolied in a debate over intention. Usually it's mainstream investors accusing ethical investors of wielding a political agenda through investor action. But, as is the case here, there are also social change investors accusing the mainstream of lacking concern with the moral aspects of urgent social and environmental issues. It seems to me that it would be wise for us in the SRI industry to take a lesson from our colleagues in the CSR world who are much more inclined to argue that corporate social responsibility is both an ethical imperative and a prudent business practice. People like Ray Anderson of Interface argue strongly that CSR is both the right thing to do and the smart thing. We in the SRI industry would benefit from this wisdom.

  2. Any discussion of SRI should involve a contextualization of the impact of the industry (SRI) on actual social/environmental change, positive or negative. In 2004 Paul Hawken, under the banner of the Natural Capital Institute, released an analysis revealing the woeful inadequacies of the investment 'approach', such as failing to apply meaningful or stringent enough screens, discrepancies between stated intentions and actual investment patterns, and a deficit of clarity and transparency as to what SRI actually means. He compared a major SRI fund portfolio (or an aggregate, I don't recall) with a list of the top grossing companies in the world and came up with pretty much the exact same names. I contacted the Institute to see if they had done any follow up work on this study or to see if their recommendations had been adopted or considered by any industry or government players but no such follow up has been done. (Perhaps a worthwhile PhD for someone?) Something in the same vein is the Monitor Institute report published in January of this year analysing the state of and challenges for 'Social and Environmental Impact Investing' as they call it. Very interesting with some clear implications for those of us in the industry moving forward. I can share a summary analysis of the report with anyone interested; I also plan to publish my analysis somewhere online soon.

    Definitely a timely topic.