Hazel Henderson on Socially Responsible Investment
Interview conducted by Geoffrey Mazullo.
"Emerging Markets ESG: How would you define socially responsible investment (SRI)?
Hazel Henderson: Socially responsible investors, individuals and pension funds, foundations, etc., use much broader metrics than those of traditional economies and finance which focus on the single bottom line of profit and money returns to investors. Socially responsible, ethical and “green” investors use additional metrics on a company’s environmental, social and governance (ESG) behavior, including many different measures aligned with their values, often summarized as the “triple bottom line”: people, profits and planet. These measures are evolving to include more green and sustainable energy-saving technologies as we cover at www.ethicalmarkets.com and at www.greentransitionscoreboard.com.
Emerging Markets ESG: What distinguishes SRI from mainstream investment?
Hazel Henderson: Mainstream investments is the historic calculus of purely economic “efficiency” which allowed companies to “externalize” from their balance sheets many social and environmental costs of production – shifting them to taxpayers, society, future generations and the environment, e.g., oil from BP appeared to be “cheap” to consumers and profitable to investors but turned out to cost many billions of dollars to fisheries, businesses and citizens in the US Gulf of Mexico.
Emerging Markets ESG: Which extra-financial theme – environmental, social or governance – is the most challenging for companies in emerging markets to manage?
Hazel Henderson: For companies in emerging markets, the biggest challenge is often large mainstream investment banks, hedge funds, sovereign wealth funds, etc., trying to maximize their profits and returns by investing in countries where wages are low and environmental and social regulations are lower than in their home base countries. Fraud on Wall Street, practices like insider and high-frequency trading and naked short-selling become obstacles to ESG management. Supporting emerging markets through a global financial commons is called for by the Transforming Finance initiative at www.transformingfinance.net.
Emerging Markets ESG: Which extra-financial theme – environmental, social or governance – is the most challenging for investors in emerging markets to analyze?
Hazel Henderson: All three ESG factors are equally material to the value of stocks to SRI investors. Each may have different weights in different countries, e.g., in more developed countries there may be more data available and more analysts to do ESG research – while less developed countries might have more such problems and be more vulnerable to exploitation.
Emerging Markets ESG: What is the relationship between ethics and SRI?
Hazel Henderson: Ethics is a much broader concept than SRI and relates to an entire country, its culture and policies, its impacts in the world community, e.g. few SRI investors have screens to address the huge impact in most countries of advertising which supports mass media, shapes cultures and politics and can either educate and inform citizens or degrade social responsibility and conceal environmental and social damage. The EthicMark® Award for advertising that uplifts the human spirit and society, which will be presented at the 2010 SRI in the Rockies conference, is an effort to call attention to role ethical advertising can play in SRI." (http://www.ethicalmarkets.com/2010/12/08/five-questions-about-sri-%E2%80%93-expert-interview-with-hazel-henderson/)