October 12, 2005
Divining the Future of Socially Responsible Investing
by William Baue
A study commissioned by Vancity Credit Union surveys 42 SRI thought leaders to identify trends,
opportunities, and obstacles, as well as potential developments that defy prediction.
The act of investing is inherently forward-looking--an examination of present patterns emerging
from past performance to divine future trends. Socially responsible investing (SRI) addresses not
just financial but also social and environmental performance, so predicting future SRI trends, as a
recent study does, encompasses all
three of these realms.
Earlier this year, Canadian SRI pioneer Vancity Credit Union commissioned sustainability consultancy Strandberg Consulting to conduct the
study. In March and May 2005, consultancy principal and former Vancity board chair Coro Strandberg
gathered the opinions of 42 SRI thought leaders via half-hour interviews and wove them into the
study, entitled The Future of Socially Responsible Investment: Thought Leader Study.
"The thought leaders were a fairly homogenous group in their views of the future of SRI, with
most predicting a positive future, at least in terms of growth and awareness," writes Ms.
Strandberg in the study. "What we will witness over the decade, predict some of the thought
leaders, is a gradual shift from SRI as an instrument of moral philosophy for moral investors to
SRI as an instrument for mainstream investors who are not interested in morality itself but
recognize that immoral behavior of companies will hurt their investments."
coined the term "moral warming" to describe this trend toward the "mainstreaming" of SRI, whereby
traditional investors increasingly assess "moral" (or social, environmental, and ethical) issues in
their fundamental analysis, according to the study.
"One view held that far-sighted
mainstream firms will abandon their niche SRI products because to have values-based products
implies they have other products that are non values-based," the study states. "Instead, these
leading firms will have commitments to ensure their entire portfolio of investments is
responsible--they will be investing long-term in companies and because of this will be factoring in
long-term sustainability issues."
"Integration" is the term the UK Social Investment Forum
(UKSIF) uses to describe how the mainstream
investment community is adopting tools developed by the SRI community, according to the study.
Alongside this external appropriation of SRI strategies, growth is expected to continue within the
SRI field, with demand for values-based SRI products from social investors continuing to fill this
The increasing demand for SRI is expected to lead to increasing innovation.
For example, one "hoped-for" development is a shift to "open source" valuation processes and
methodologies to broaden access to SRI research. Another potential innovation concerns the
development of metrics to quantify the impacts of shareowner engagement.
shareowner engagement represents another main focal point of the study, which predicts trends
toward growing collaboration between SRI shareowner activists and other stakeholders such as
nongovernmental organizations (NGOs).
"SRI is an ancillary operation to many other social
change movements," the study states. "Where SRI has and will succeed best is by helping others to
achieve their ends, largely through making shareholder action and social research available to
civil society--applying their tool box in collaboration with others--and through the use of the
rights of shareholders to 'open the boardroom door' for groups and ideas traditionally not
Looking further at shareowner action, the thought leaders expect to
see more collaboration with companies, as opposed to confrontation. They also expect to see a
blossoming "cottage industry" of SRI firms specializing in shareowner action and "engagement only"
"Some investors will be outsourcing their engagement activities including proxy
voting, proxy voting analysis, and engagement resulting in more competitors in the shareholder
engagement market," Ms. Strandberg writes. "It is predicted that, for example, pension funds will
be pooling their assets on particular shareholder strategies, and, rather than leave implementation
to the fund managers, will be engaging external managers to coordinate campaigns across fund
Finally, the study also identifies the potential for significant growth in
community investing--"predictions range from a hundred-fold growth to a tripling of assets, likely
even outstripping the growth of other SRI niche funds," the study states. As with shareowner
action, metrics to measure the impact of community investment will develop.
degree, for example, does micro-finance invest in micro-entrepreneurs who are involved in
environmentally destructive activity?" the study asks.
The study ends by identifying
developments in the broader culture that promise "a more transformative future for SRI."
"Additional scandals and economic meltdowns will trigger immense soul-searching post-mortems
that result in more rigorous controls and regulatory action, further driving SRI value-sets into
the investment process," the study states. "Similarly, catastrophes linked to environmental
malfeasance can wipe a lot of value off investor balance sheets, not to mention the human toll."
"These developments will serve to further concentrate minds on SRI considerations," Ms.