IN CONVERSATION is a monthly profile of people actively engaged in sourcing. Wanda Lopuch, the Chair of the GSC sits with Meg Voorhes, the Director of Research and Operations for the US SIF Foundation, to talk about Meg’s experience in the area of corporate responsibility and socially responsible investment.
US SIF Foundation is a nonprofit organization that supports educational, research and other activities of the Forum for the Sustainable Investing (US SIF Inc.).
Lopuch (Q): Meg, I would like to start this conversation on a personal note: can you share with us your journey into the space of socially responsible investment?
Voorhes (A): I was introduced to the field of corporate responsibility in 1979 when, as a very young researcher, I was hired by the Investor Responsibility Center. IRC was created by US foundations and universities to explore questions on how their investments affect societies. I found myself in the middle of discussions on the role of American companies doing business in then apartheid–governed South Africa. A discussion that was economic, political and emotional at times.
At the age of 25, I was sent to South Africa to conduct research on the ground with South African companies and other institutions. It was a fascinating time. I had an opportunity to talk to the managers of international companies about their views on the role of business under apartheid rules; either divesting assets and moving out, or staying-in to support the transformation. I had an opportunity to watch trade unions rising to power. And the rest is history.
Although the heavy lifting in ending apartheid was definitely done inside South Africa, I do believe that the anti-apartheid corporate responsibility movement in the US and elsewhere in the world played a role in how history unfolded itself.
These early experiences created the foundation for my career. In the ‘90s I was involved in a number of projects addressing labor rights, global supply chains and environmental issues. (Lopuch notes: Meg co-edited the 1998 book, The Sweatshop Quandary: Corporate Responsibility on the Global Frontier.)
So when I joined the US SIF Foundation in 2008, it was a continuation of my journey in the field of investors’ responsibility and corporate responsibility.
Lopuch (Q): Meg, please introduce to the GSC membership the Forum of the Socially Responsible Investment (US SIF) and the US SIF Foundation.
Voorhes (A): Our vision is a world in which investment capital helps build a sustainable and equitable economy.
US SIF is The Forum for Sustainable and Responsible Investment, a US membership association for professionals, firms, institutions and organizations engaged in sustainable, responsible, and impact investing. US SIF and its members advance investment practices that consider environmental, social and corporate governance criteria to generate long-term competitive financial returns and positive societal impact.
US SIF Foundation is a nonprofit organization that supports educational, research and other activities of the Forum for the Sustainable Investing or US SIF Inc.
Lopuch (Q): You are responsible for the US SIF Foundation flagship research program called “Trends in SRI”.
Voorhes (A): Since joining the US SIF Foundation in 2008, I have been involved in a number of research projects ranging from examining the size and scope of sustainable, responsible and impact investing (SRI) and measuring attitudes about SRI. These have included specialized reports on community investing, alternative investing, the roles of US foundations endowments, and of course the SRI “Trends” report.
Indeed since 1995, every two years the SIF Foundation tracks the trends in the SRI space. This report provides an overview of the scale and scope of SRI over years. The last published report in 2012 documented dynamic growth in the SRI space. We will be releasing the newest 2014 SRI Trends Report on Nov. 20th this year. Advocates of SRI will find more good news in this year’s snapshot.
Lopuch (Q): What are the highlights of the 2012 Trends Report and what can you unveil about the 2014 report?
Voorhes (A): The most important findings of the 2012 report was the confirmation of the amount of capital involved in the SRI space. We are not talking any more about SRI as a tiny corner of the capital investment space. In 2012 the assets engaged in SRI strategies amounted to $3.47 trillion dollars under the umbrella of the SRI strategies representing over 11% of all the capital markets in the US. New players are coming to the SRI space – firms that traditionally have not been engaged in SR investment strategies. SRI is consistently growing faster than the general capital markets. I can only say now, that there is more good news in the 2014 Report. So stay tuned.
Lopuch (Q): To what factors would you attribute this growth?
Voorhes (A): In 2012 a part of the growth is attributed to the recovery in the economy which was just coming out of the recession. At the same time more players that engaged ESG factors in evaluation of their investment portfolios entered the field – from 497 firms in 2010 to 720 in 2012. This significant increase came from traditional firms, such as large mutual funds that started to embrace ESG as an integral part of their investment strategy. Plus, there are new funds coming to the investment market with ESG factors built-in as the investment parameters.
When we probe our respondents, especially the traditional ones, asking what prompted a shift to embrace SRI strategies or ESG factors, the overwhelming reason is always: clients requests and clients demands. This pressure is visible and growing.
Lopuch (Q): How would you compare this trend towards incorporating ESG factors in the US to other parts of the world? Let’s start with Europe where local governments play an active role in SRI.
Voorhes (A): European institutional investors have generally been ahead of their US counterparts in taking SRI seriously.
There are a number of organizations similar to US SIF in Europe. In both the proportion of capital engaged in SRI strategies as well as organizational infrastructure for SRI space. The European Sustainable Investment Forum, or EuroSIF, consists of country level membership organizations in Belgium, Holland, Germany, France, Italy, Spain, Sweden and the UK, which have strong local agendas. Frequently they collaborate with local governments.
A number of large European pension funds make clear when they search for and select investment managers, that they expect these managers to have expertise in analysis of ESG factors. Members of EuroSIF, frequently international financial management institutions, expect their US financial partners to embrace ESG factors. They expect the managers of funds to be proficient in the ESG framework. This has helped persuade US-based investment management firms to develop SRI expertise in order to compete.
Lopuch (Q): In Europe, local governments play a significant role in pushing the SRI agenda in terms of legislation and/or by participating in public-private SRI initiatives.
Voorhes (A): In the US, the situation is different. There is an Office of Social Innovation in the White House, which is supportive of sustainable and impact investing, although its charter is limited. The US Securities and Exchange Commission has also required publicly traded companies to disclose certain environmental, social and governance factors. It is required under “Dodd-Frank” financial reform law of 2010 to issue a rule to require companies to disclose the ratio of their CEO’s pay to median worker pay. Sustainable and responsible investors are also petitioning the SEC to require companies to disclose their political and lobbying expenditures.
Lopuch (Q): So Europe is ahead of the US. What about other parts of the world?
Voorhes (A): Responsible Investment is definitely a growing global field. In just about every part of the world except Africa, there are organizations that champion responsible investment strategies. US SIF is a member of the Global Sustainable Investment Alliance (GSIA), which consists of:
- Association for Sustainable and Responsible Investment in Asia
- Responsible Investment Association Australasia
- Responsible Investment Association of Canada
- UK SIF – UK Association
- US SIF – US Association
- VBDO – Dutch Association
The GSIA releases its own trends report which offers the global outlook on the SRI field. For more information: www.gsi-alliance.org.
Lopuch: Meg, thank you very much for your time and insight. We will be following-up with you on the highlights of the 2014 Trends in Socially Responsible Investment Strategies.
Voorhes: Thank you Wanda and the members of the Global Sourcing Council.
About Meg Voorhes: Meg is Director of Research and Operations for US SIF. Before joining US SIF in 2008, Meg directed environmental, social and governance research for RiskMetrics Group’s Financial Research and Analysis division. She spent much of her career at the Investor Responsibility Research Center where she directed research for institutional investors and corporate clientele on environmental, human rights and other social issues raised by shareholders at U.S. companies and specialized in issues related to multinational investment and corporate responsibility in South Africa.
She is the author or co-author of several US SIF Foundation publications, including its biennial Report on Sustainable and Responsible Investing Trends in the United States.
For more information on US SIF Foundation: http://www.ussif.org/