Growth of SRI in Europe, Dexia adds to team

News just in from Engaged Investor magazine reports that SRI is gaining ground.

Robert Melia-Watson, News Editor, writes that "Socially responsible investment, known as SRI, has been with us for quite a while for those that think strongly that businesses should strive to run a company which actually cares about what it becomes involved in. A company should strive, at the very least, to have some basic no- go areas like child slavery, armaments and tobacco.

Of course, the whole SRI scene is a lot more complicated than that and there are great grey areas. For example, it is hard to decide whether it is more ethical to spurn a company or try to influence its ethics by investing in it, and influencing the board. Let’s hope this signals a domino effect until no self respecting fund manager will dream of having being invested in any unethical company."

Robert's comments echo some of what my discussion with Ben touched on last week > creating black and white for investors out of the SRI grey. As a real indictaor of that, Dexia Asset Management has announced it will be expanding its SRI offering [DEXIA UPS ITS COMMITMENT TO SRI ] with 12% of its funds are now in SRI.

Dexia Asset Management, which has €81.4bn under management, and a pioneer of sustainable management in Europe, has significantly strengthened its socially responsible investment (SRI) team with seven sustainability analysts working in with the financial analysts and eight managers also dedicated to SRI.

In January 2005 Dexia had sent out an RFP to boutique SRI research firms looking for input and seem to have made the buy-or-build decision with a view to creating organic growth in capability, tapping externally for pinpoint advice. CSR factos are considered for:

1. Human Resources/Social
2. Environment
3. Corporate Governance
4. Customers
5. Human Rights
6. Business Ethics
7. Suppliers
8. Society

The data and information obtained would be further interpreted and analysed by Dexia AM and would serve as input for an in-house proprietary SRI scoring framework. Primary research into sector-specific topical CSR issues including:

• Listed companies Europe, US, Pacific
• Listed and non-listed (non-governmental)
• Bond-issuers (EUR and USD denominated)
  

Dexia reported to Engaged Investor that the socially responsible investment market is flourishing: from December 2003 to March 2005 assets in SRI funds increased by 35%, against 16% for the global market for collective investment in Europe. At the same time, assets in the Dexia’s funds rose by 46%. Hugo Lasat, chairman of the executive committee of Dexia Asset Management explained, “The growth of our sustainable management funds is certainly significant, but that of tailor-made SRI management is even stronger. Long-term investors, such as pension funds and insurance companies, are beginning to commit themselves to the path of SRI. The potential for growth is therefore considerable”.
According to researchers FERI FMI’s database, more than 160 managers offer some 374 SRI funds in Europe. Sustainability analysis at Dexia Asset Management (formerly Cordius Asset Management) relies upon assessment of the relations between a company and all its “stakeholders” (shareholders, clients, employees, suppliers, the environment and society) in order, within each sector, to trigger the indicators of sustainability.For instance: the investments of a company in the training of its employees and in partnerships with its suppliers create opportunities for product innovation. A safety policy for exploitation sites minimises the risk of accidents, which can have a very negative impact on the image of the company and its goodwill.

In April 2004 EuroSIF reported Dexia's activity, including industry roadshows and their Dexia Quant range of funds managed through quantitative models developed and tested in-house by the quantitative management fed by over 40 alpha factors likely to generate an out-performance, and each with a history of more than twelve years, these models select the most attractive stocks in each of the MSCI sectors (energy, finance etc).

Dexia's activity this year included Dexia SRI project gathers momentumPortfolio21, the SRI-project set up by the insurance companies of Dexia, Dexia Asset management and Stock at Stake N.V. that focuses on Human Rights, gathers momentum. The Portfolio21-model in April 2005 reportedly applied to 6,07 billion euro under management against 4,75 billion euro September last. In December, Stock at Stake N.V. addressed 19 corporations about alleged violations of ILO core conventions. The assets under management are part of the reserves for car insurances, life insurances, pension provisions, and so on.