SRI
- A Global Revolution
Tessa Tennant, Chair
24 October 2003
www.asria.org
Corporate Governance
“The governance of the corporation is
now as important in the world economy as
the government of countries”
James Wolfensohn, President, The World Bank Group
.... Investor Governance Matters too…
"Investment is the process of foregoing
immediate expenditures in order to build a
more prosperous future. What kind of
future are we now building?"
The New Global Investors, Robert Monks 2001
www.asria.org
What is Social Responsibility?
“Social responsibility is not a question of
charity, it’s a question of self-interest – it’s
an issue of how we’re going to keep our
planet stable so that your businesses
survive”
James Wolfenson, President of World Bank,
Corporate Leaders in Chicago, December 2nd 2002
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What is SRI
 Mechanism for achieving sustainable
economic development worldwide.
 The facility for investors to be more
consistent in their view of the world and
the values they hold.
 A risk management tool for reducing
beta and enhancing earnings.
www.asria.org
Introducing ASrIA
100+ members in
first year – global
and local
Conferences,
workshops, seminars
Not-for-profit
membership
association1
Awareness raising –
website, media
1 Sister
organisation to UKSIF and US SIF
Research – issues
and opportunities
www.asria.org
ASrIA 2001 - 2003

ASrIA is a not-for-profit membership
association dedicated to promoting
sustainable and responsible
investment (SRI) practice in Asia.

over 100 members including
investment institutions managing
over US$2 trillion in assets.

Held 20 + events around the Asia
Pacific Region

Presenting at many events in Asia
and Globally

Conducting Research on SRI issues

Significant press coverage – media,
TV, radio

Website launch: average 1800 hits
per day, 5000 e-bulletin subscribers
64 Corporate
Members
and
40 Associate
Members
www.asria.org
ASrIA.org.. the “Go To” site for SRI in Asia
Chinese
Section
5400+ hits per day
FREE
news
service
5,200 ebulletin
subscribers
www.asria.org
4 Reasons why SRI is growing




Fundamental Rationale
SRI product choice and strategies
Performance
Legislation and Pressures for higher
corporate governance standards
 Investor Demand
www.asria.org
Five World Economy
Linear Economy
Fossil Fuels,
Nuclear
Rich Ore Deposits,
Ancient Forests etc..
Energy
Materials
CO2, Nox,
SOx
Heavy metals
Carcinogens,
EDCs
Products and Services
Slidewww.asria.org
thanks to Morley FM
One World Economy
Cycling Economy
Renewable
Sources
Energy
Wastes
Sustainably
Managed
Resources
Bio-degradable
and reusable
wastes
Materials
Quality of Life Enhancers
Slidewww.asria.org
adapted from Morley FM
SRI Methodologies
Ethical
Investment
Green
Investment
Socially
Responsible
Investment
Sustainable &
Responsible
Investment
 Negative screening
 Positive screening
 Engagement/Advocacy
 Community Investment
www.asria.org
Common SRI Criteria
Environment
Social
Ethical
Energy
Profit Sharing
Military
Water Use
Welfare at Work
Gambling
Air Pollution
Equal Opportunities
Pornography
Wastes & Toxics
Civil/Employee Actions
Alcohol
Transport
Community & Public
Policy
Tobacco
ISO 14000
Repressive Regimes
Supply Chain
Resource Productivity
Genetic Engineering
Public Disclosure
Biodiversity
Nuclear
Product Impact
Animal Testing
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Investors’ Interests – Japan, UK, USA
Com parison of Individual Investors' Interests Ministry of the Environm ent Survey 2003
Japan
USA
UK
Consumer health and safety
Environmental issues
Prevention of corruption
Labour/management relations
Occupational health and safety
Stability of employment
Equal opportunity
Contribution to community
Prevention of child labour
Others
0
10
20
30
40
50
60
70
80
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SRI Globally
Canada US$ 32 bn
UK: US$2.5 bn in funds plus
US$250 bn portfolios
Japan US$ 1 bn in
funds
US$2.16 tn in
funds and
portfolios
Europe €336bn
institutional funds
….updated and more precise data coming soon
US$10 bn funds
& church assets
www.asria.org
Global Growth in SRI Funds
US$ BN
$2,500
192 Funds
$2,000
U.S.
22% CAGR
$1,500
$1,000
$500
$0
1995
1997
1999
2001
U.S.
US$ MM
67 Funds
$6,000
$5,000
U.K.1
$4,000
49% CAGR
$3,000
$2,000
$1,000
$0
1995
1997
1999
2001
U.K.
Source: UBS Warburg - 1999 US Trends Report, USSIF, EIRIS
1 U.K.
Retail volume only. Does not include institutional, predicted to be approx. GBP120 billion end 2001
www.asria.org
www.asria.org
Domini 400 Social Index – S&P 500
Comparative Performance Since Inception in May 1990 to
June 2003
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5 Years: July 1998 to July 2003
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DJSI World – USD Performance and Risk
 DJSI World / DJGI World:
 Correlation:
0.9644
Tracking Error:
4.37%
 DJSI Volatility: 16.33%
DJGI Volatility: 15.10%
 December 1993 - June 2003, USD, Price Index
330
280
230
180
130
67%
40%
80
12/93 6/94 12/94 6/95 12/95 6/96 12/96 6/97 12/97 6/98 12/98 6/99 12/99 6/00 12/00 6/01 12/01 6/02 12/02 6/03
DJSI World (in USD)
DJGI World (in USD)
http://www.sustainability-index.com/
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CARBON DISCLOSURE PROJECT
 35 institutional investors with assets in excess of
$4.5 trillion
 31st May 2002, they wrote to the Chair of the Board
of the FT500Global. The largest companies in the
world as measured by market capitalization
 asking them to provide investment relevant
information relating to greenhouse gas mitigation.
 analysis undertaken by Innovest Strategic Value
Advisers, US. Published February 2003
"The project demonstrates that many investors
have a very comprehensive view of their
fiduciary duties to invest prudently“
Prime Minister Blair, February 2003
www.asria.org
www.cdproject.net
SRI and Pensions




SRI about understanding societal risks
Broad Range of SRI styles now exist
SRI and CG enhance fiduciary role
Governments legislating eg UK and Australia
Conferences in 2003:
The North European Pension & Investing Summit and SRI Congress. Stockholm 3rd
June 2003 www.imn.org/a474/agenda.dhtml
Long-term Fund Performance: Factoring Engagement and SRI Policies 8th & 9th
September 2003: Central London www.marcusevansconferences.com/
Towards a more Sustainable Retirement System: The Quest for
new Governance and Asset Management Strategies for Pension
Funds. 15th October 2003, Zurich www.sustainability-zurich.org
UNEP Finance Initiative Global Roundtable: Defining Sustainable
Investment Strategies for Pension Funds 20 October 2003
Tokyo www.unepfi.net/tokyo
www.asria.org
UK Trustees Concerns
60
52%
5 - 10 Year Effect on Investments
50
42%
40
30%
30
23%
20%
20
11%
10
0
Good
Corporate
Governance
Quality
of Consumer
Relations
Good
Employee
Practices
Communication Environmental
and Transparency Management
on Social /
Ethical Issues
Respect
for local needs
in Developing
World
Funds of over €7bn felt more strongly about good Corporate Governance
Source: UK Social Investment Forum
www.asria.org
Proxy Voting regulations in the USA
 SEC regulations passed January 2003
 Affect some 3,700 mutual funds and 6,200investment advisers
who have the power to vote shares on behalf of clients.
 They must report to their clients and the public:
 their policies and procedures for voting in corporate elections;
 And how they voted on each issue at each company.
 New rules in full effect for the 2004 proxy season subject to a
final review for burdensomeness by the Office of Management &
Budget.
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