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July 26, 2005
Ethical Investment Research Service Follows Socially Responsible Investing Growth around the Globe
    by William Baue

Spawned by the anti-apartheid movement seeking information on companies operating in South Africa, EIRIS has since grown astride with the expansion of SRI.

In 1983, long before globalization became a catchword, the Ethical Investment Research Service (EIRIS) was founded as a socially responsible investment (SRI) research house with a purview extending beyond its national boundaries in the United Kingdom. Since then, EIRIS has expanded its reach to the far ends of the Earth while staying true to its roots.

"EIRIS was first established by a group of British churches and charities who needed information to put their principles into practice regarding their investments," said Stephen Hine, EIRIS' head of international relations. These churches and charities included the Church of England Board of Social Responsibility, the Joseph Rowntree Trusts, Oxfam, and the Society of Friends (Quakers). "At that time, they were particularly keen on understanding more about what British companies were doing to alleviate the situation in apartheid South Africa."

It was EIRIS that provided the necessary SRI research when Friends Provident, the financial arm of British Quakers, launched the first ethical fund in the UK in 1984. Thereafter, EIRIS promoted the growth and expansion of SRI at home and abroad, helping found the UK Social Investment Forum (UKSIF), the European Social Investment Forum (Eurosif), and the Association for Sustainable & Responsible Investment in Asia (ASrIA).

"Recognizing that SRI was expanding across Europe and indeed beyond, we have increased our research and then client base in the rest of Europe so that now a third of our 90 clients are overseas," Mr. Hine told "EIRIS began to go global when the Norwegian Petroleum Fund contracted us to research the environmental policies and reporting of all the constituents of the FTSE All World Developed Index, and since then many other government pension funds have been inspired by the Norwegians."

"Then we were brought in by FTSE when they set up the FTSE4Good Index to do the research for them and to help develop on an ongoing basis their ever-expanding and tightening criteria," Mr. Hine added. The FTSE Group, a global index provider jointly owned by the London Stock Exchange and the Financial Times, launched FTSE4Good series of SRI indexes in 2001. "FTSE4Good has greatly increased the awareness of corporate social responsibility amongst companies globally."

EIRIS recently increased capacity for global research of SRI issues, specifically bolstering coverage of the North American and Asian Pacific markets.

"EIRIS now has a representative office in Tokyo and one staff person--Karen Kerins--in our Boston office as well as a team of six analysts dedicated to researching US and Japanese companies from our head office in London," said Mr. Hine. "Whilst EIRIS had done this research through partners in the past, we felt it would be better to have a presence on the ground in such a key SRI market as the US--and our clients were keen on this as well."

EIRIS clients range from big banks such as ABN Amro and ING to church fund managers in Germany and Ireland such as Invesco and Setanta to sustainable investors in France and Belgium such as Federis Gestion and Fortis to Asian groups like Nomura in Japan. Of course the bulk of its clientele hail from the UK, such as Henderson Global Investors, Insight Investment, and F&C Asset Management.

"Furthermore, there is a growing subset of clients--many of whom might be labeled 'mainstream'--who want information on the key environmental, social, and governance issues that are most 'material' to a company," said Mr. Hine. "The key determinants of 'materiality' are the clients and what their needs are."

EIRIS has structured its research department to meet clients' diverse needs by dividing it into four teams. Besides the US and Japan team, there are a social team, an environmental team, and a governance team. These teams research 2,800 companies globally, covering 350 distinct indicators under 50 research areas (such as board practice, environmental reporting, human rights). EIRIS communicates its research primarily through its analytical software tool, Ethical Portfolio Manager (EPM).

"We do not give over-all ratings to companies, rather we allow clients to use the wealth of data we provide to take their own approach," explained Mr. Hine. Client approaches to SRI encompass shareholder engagement, negative screening, and best-in-class screening. "Gradings are provided on particular sets of criteria indicating whether, for example, environmental management systems or performance are inadequate, weak, moderate, good, or exceptional."

"EIRIS publishes its research methodology on Ethical Portfolio Manager so clients can understand how individual companies have been assessed," he added.

EIRIS has been active in the formation of the Association for Independent Corporate Sustainable and Responsible Research (AI CSRR), which seeks to improve transparency and accountability of SRI research groups through the Voluntary Quality Standard (VQS).

"We prefer full disclosure and avoidance of the 'Black Box'--the VQS process will help develop a level playing field so that all SRI research groups can feel comfortable in being more open," concluded Mr. Hine. "Some EIRIS clients such as the Co-operative Bank have audited our research processes in the past as part of their own audits--the VQS will allow EIRIS to be audited against its standard in 2006."


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