I was introduced to him by Michael Connor, Publisher & Executive Editor of Business Ethics Magazine who thought it might be worth passing along as a contact for an article on SRI Retirement options I am writing for the Winter 2005 edition of the quarterly magazine. Michael met the advisor at a panel at the NYU School of Business. One of the audience members specializes in SRI investing for average folk. The advisor happens to have a doctorate in environmental science and his marketing material says he "has investigated the relationship of environmental performance of large corporations with their valuations in the capital markets..."
The SRI papers, "Crossing the River..." and "Sustainable Investable Themes" both dated 1 July 2005 from the London Equity office led by Mike Tyrell and Meg Brown who presented to select Citigroup clients earlier this month but were prevented from speaking with SIRAN or other analysts because of compliance issues. In an embarassing twist for Mike & Meg, my peers and I who had accepted the invite to the call were disinvited from the telecon. I deleted the emails as requested (as requested), so perhaps them finding their way to me this afternoon in Boston was a good turn returned in kind.
Sustainability Themes (112 pgs) is referenced as "industry report" providing "A guide to the environmental and social factors affecting each industry sector" offers a neat collection of available SRI info: CitiGroup company coverage, neat "forthcoming events" calendar, lists relevant Smith Barney research, references notable reports written by third parties and outline the expected sustainability reporting timetable of companies. It looks at each sector in a thin but broad way: "in a way that relates their potential financial impact, their environmental and social significance and the degree to which further analysis will be best rewarded".
I noted how they focus on "financial materiality" first, then enviromental and social factors, and finally "where [firms] will be rewarded first" - the first mover argument for SRI. My friend used this in his pitch for SRI used for the HNW market, suggesting that that SRI acts as a proxy for business risk and the old moniker "doing good by doing well" has been flipped to "doing well by doing good". It is used in a SB marketing piece "Doing Well By Doing Good: Interest in Socially Responsible Investing Increases" which references their use of KLD's SOCRATES research in their investment program.
Most interesting from a business perspective is Citi/Smith Barney's SRI research proposition and "SB stepping stones aim to help SRI analysts and financial analysts bridge the current gap between sustainable development and capital markets".
Crossing the river (60 pgs) is intended for action, interpreting SRI for financial markets "as companies begin to exploit sustainable development as a key source of competitive advantage and as institutional investors come under pressure to factor environmental and social factors into their investment processes…"
Questions to ponder: does this SRI capability
- Replace what niche buy-side SRI analysts could do?
- Would clients buy this (or indeed get it gratis from sell-side analysts) and still want to buy SRI research, or
- Would Citi AM/SB (soon to be Legg Mason) buy buy-side research to use as basis for this paper?
- Does it apply to both sides of Atlantic?
Most interesting to my mind is the strategic conception they offer in "Crossing the river..." which I quote verbatim (Tyrell/Brown, 2005, p.12/60):
Why does [SRI] exist at all?
Why SRI exists at all is perhaps the most interesting question to address. Simplifying to make the point, there are a variety of views of the role that SRI plays in society. We review each in turn and outline their prospects:
1 SRI is a mechanism for allowing those investors with specific moral or political preferences to exercise these through their investments.
2 SRI is the investment dimension of a wider self-regulation process being encouraged by European governments whereby voluntary action by companies, investors and civil society organisations reduces the need for governments to intervene.
3 SRI is a thematic investment strategy for investors who wish to make money by focussing on investing in companies in emerging and growing markets for environmental technology, education etc.
4 SRI is a broader strategy for investment outperformance based on the thesis that robust environmental and social management systems are useful indicators of broader management systems and therefore a lead indicator of share price outperformance.
5 Combining factors 3&4, some regard SRI simply as the investment community’s first steps towards financing sustainable development.
I really like what these two papers add to the SRI lexicon and hope to speak with both authors soon.
1 comment:
From: Tyrrell, Mike [CIR]
Sent: Monday, October 17, 2005
I agree that it is a shame that you could not join the call. However, I hope you will understand that tight compliance standards are the price we sometimes pay for operating inside a large financial institution. Of course, neither you nor I would want to encourage Citigroup to break securities regulations!
Also, thank you for the review of our research notes in your blog. I was pleased to see that they struck some chords with you - but they also clearly raised some questions, which I am happy to answer:
1) Does this replace what buy-side SRI analysts do? This has never been our experience, for obvious reasons we tend to focus on activities that complement the work of the buy-side rather than replace it
2) Would clients buy this and still buy SRI research? Typically, yes - we've never tried to compete with the independent SRI research houses for two reasons (1) because we couldn't deliver the volume and (2) because it wouldn't be leveraging our core skills as investment researchers
3) NB Citi AM (soon Legg Mason) is an entirely different operation (you would have to contact Mary-Jane McQuillen about their intentions)
4) Does it apply to both sides of the Atlantic? We only cover European stocks - although we are happy to talk to US clients if they are interested in these companies or in the sustainability themes that affect them.
Hope this helps.
All the best
Mike
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