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February 06, 2002
Swedish Foundation Reports on Socially Responsible Asset Management and Research
by William Baue
MISTRA, a Swedish environmental research foundation, recently released a report that assesses asset
managers and research firms as its first step toward adopting socially responsible investing
principles.
SocialFunds.com --
Many people oppose corporate globalization because of the perceived association with unacceptable
business practices such as sweatshop labor and environmental degradation. However, the
globalization of more positive initiatives, such as socially responsible investing (SRI) and
sustainability, may be a good thing. The notion of socially responsible investing originated in
the United States, but it is now practiced in a number of countries around the world.
 Recently, the Swedish government's environmental
research foundation, MISTRA, commissioned a
report to assess the providers of SRI products and research in the U.S. and Europe. The report
resulted from MISTRA's desire to shift its portfolio from traditional investments to SRI
investments in an effort to align the foundation's assets with its environmental and social values.
"Since we support environmental research for sustainability, our board decided last year
that we should have a vision that our assets should work in the same direction," said Eva
Thörnelöf, MISTRA's deputy director for asset management and administration.
In early
2001, MISTRA decided to investigate the impact on financial performance of using environmental and
social criteria in investment decisions. MISTRA commissioned Sweden-based KPMG Consulting to
evaluate the economic implications of shifting MISTRA's portfolio of Skr 4 billion (about $US 400
million) from traditional investments to socially responsible investments.
"[KPMG's]
conclusion was that although existing literature is limited it nevertheless indicates that the
financial returns and risk levels are not affected negatively by adding SRI-criteria," the report
states.
MISTRA next commissioned Sweden-based Miljöeko AB and UK-based SustainAbility to
produce a report assessing the quality of existing products and services in the socially
responsible investing arena. MISTRA based its understanding of socially responsible investing
primarily on SustainAbility's earlier report, A Responsible Investment?--an overview of the
Socially Responsible Investment Community.
The MISTRA-commissioned report, entitled
Screening of Screening Companies, identifies three best-practice SRI managers, based on
MISTRA's social and environmental criteria. The managers named are UK-based Henderson/NPI,
Norway-based Storebrand Asset Management, and US-based Trillium Asset Management. In addition, the
report identifies the two best providers of SRI research and analysis: Belgium-based
ETHIBEL/Cordius Asset Management and US-based Innovest.
The theory and practice of SRI,
which is more widely accepted in the U.S., differs somewhat from sustainability, which is more
popular in Europe. Socially responsible investing focuses on investing only in companies and
industries that are socially responsible and environment-friendly. With this form of SRI,
investments in entire industries may be decided against. Sustainability investing, on the other
hand, uses a "best-of-class" approach. Companies are chosen for investment because they are the
best social and environmental performers in their respective industries.
"MISTRA has not
chosen SRI instead of sustainability. MISTRA has chosen SRI as one tool to move in the right
direction," said Ms. Thörnelöf.
Indeed, MISTRA is aiming to align its investments with
its values, regardless of the semantics.
"MISTRA has a strong environmental profile and
would look for screeners, funds, etc.... that are compatible with MISTRA's statutes and goals; if
they are called SRI or sustainable funds will be a later question," said Ms. Thörnelöf.
MISTRA's implementation of screening criteria will likely fuse traditional SRI with
sustainability.
"MISTRA is at the moment working on two tracks in parallel. One is the
negative screening to remove 'bad guys'--those who are violating Swedish law or breaking
conventions Sweden has signed," stated Ms. Thörnelöf. "The other track is positive best-in-class
screening, where we at the moment do not exclude any sector besides tobacco."
MISTRA has
yet to decide whether it will purchase SRI research and manage investments in-house, or simply buy
into an existing fund. Whichever it chooses, MISTRA intends to serve as an example of an
institutional investor that prioritizes financial return while promoting social and environmental
progress.
"We believe that in the long run it will be profitable and a matter of survival
for companies to take a large responsibility in environmental and social matters," concluded Ms.
Thörnelöf.
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SRI World Group, Inc. All Rights Reserved.
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