December 17, 2007
Socially Responsible Investing Branches Out Over Asset Classes
by Anne Moore Odell
A handbook published by Boston College's Institute for Responsible Investment outlines how managers
can diversify socially responsible investments.
Institutional and high net worth investors have many different options for placing their money in
socially responsible investments, outside of just buying screened stocks in publicly traded
companies. A handbook recently published by Boston College's Institute for Responsible Investment
(IRI) helps mission-driven
organizations to make investments that have positive societal ramifications across seven different
"The Handbook on Responsible Investment Across Asset Classes,"
written by David Wood and Belinda Hoff, was funded by the F.B. Heron Foundation in collaboration
with Eurosif and the Social Investment Forum. It provides a broad overview on how foundations,
pension funds, mutual funds and others can achieve a double-bottom line of increasing financial
wealth while supporting social goals.
The Institute for Responsible Investment (IRI) is
affiliated with the Boston College Center for Corporate Citizenship and funded in part by the
Brooks Family Foundation. According to its web site, it "works with investors, corporations, public
sector organizations, and research institutes to coordinate thinking and actions around issues of
strategic importance to long-term wealth creation for shareholders and society."
Wood, Director of the IRI explained the Handbook's goal "was to examine how responsible investment,
understood as investment that combines rigorous financial analysis with the incorporation of
environmental, social, and governance criteria into the investment decision-making process, might
be applied across asset classes."
Wood sees an increase in responsible investing and
evidence that the field may grow substantially in coming years. He separates SRI investors as two
broad groups: investors who think responsible investment offers tools for long-term success by
identifying good performing companies, and big trends, for example, climate risk; and investors
with a social mission who increasingly believe there are opportunities for risk-adjusted market
rates of return that also advance important social and/or environmental goals.
Handbook is divided into seven chapters, each exploring an asset class: cash equivalents, public
equities, fixed-income, real estate, private equity, hedge funds, and commodities.
chapter outlines what a responsible investment strategy for the asset class might look like and how
investors can become actively engaged within the context of the specific asset class.
drew on interviews with practitioners, and the many and various publications listed in the further
reading section," said Wood. "The aim was to gather together current thinking in each asset class
into one place, highlighting the different types of opportunities in each asset class, and the
different ways that the discipline of responsible investment applies across the spectrum of asset
The Handbook is designed for both newcomers to socially responsible investing
and practitioners looking at new asset classes. Another use for the Handbook, Wood suggests, is to
help frame discussions between asset owners, managers, and consultants who are putting together
responsible investment strategies across portfolios.
One of the strengths of the Handbook
is the real world examples it provides in each asset class. The examples also include
web-addresses for the organizations named.
Although the Handbook has an informative
chapter on public equities, a.k.a. stocks and mutual funds, the chapters focused on the
lesser-known assets for socially responsible investors are especially enlightening.
points to the work of the Institute for Responsible Investment as part of an active project in real
estate. There are a number of asset owners, managers, and developers who take into account double-
and triple-bottom line returns who are not typically associated with the SRI movement.
"There's a lot in real estate that offers tangible impact, that creates real opportunities for
returns, and that shows signs of growing into a substantial field of 'responsible property
investing,'" said Wood.
In the fixed-income or cash equivalents asset class, the Handbook
directs the reader to how the community investment movement is pioneering ways to create public
goods while achieving market rates of return. The cash equivalents class, aka the bank sector, is
also helping develop environmentally focused products.
Other asset classes, for example
hedge funds, are in the early stages of developing responsible investment strategies. The
commodities asset class is full of possibilities for socially responsible investors to get involved
and help shape the future of the commodities market.
"In all cases, we think the key
insight of responsible investment -- that there are opportunities for market-rate investments that
also create some social and/or environmental good -- are potentially applicable," concluded Wood.
"We also think that different asset classes lend themselves to different varieties of triple-bottom
line returns -- and require different sorts of expertise to enhance returns and impact."
The Handbook ends on the role of socially responsible investing in emerging markets, which its
authors define as referring to "those countries and regions with a relatively low median per capita
income level." Although emerging markets are not an asset class, emerging markets do offer many
opportunities for responsible investors to generate positive environmental, social and governance
changes with their investments.