Socially responsible
investment funds have made it possible to define broader strategies for
sustainable development, says Tessa Tennant
Investors have a key role to play in tackling climate change. Using the
model of socially responsible investment (SRI), they can influence the
policies of many companies to support protection of the environment.
A key part of any SRI investment strategy is to back industries which
fit with a sustainable future. The stock exchange of 20 years ago looks
nothing like that of today. The stock exchange in 2020 will include
large companies central to sustainable economies, such as mass transit,
renewable energy, water management, healthcare and multimedia.
Many of today’s companies will no longer exist. Those that do will have
prospered by merger and acquisition, and by using environmental and
social pressures as business drivers. Companies which view these issues
as a drag on returns will find life tougher.
The
disclosure requirement for pension funds in the UK is already
influencing the thinking of many financial institutions. This invisible
revolution can transform the shape of economics, from the
business-as-normal model which externalises all business impacts not
judged commercially useful, to one that counts, and differentiates
between, the total cost – environmental, social and financial – of
doing business in different ways.
But there are things investors cannot lead on. These need the support of both government and society.
The initiative by the UK government’s Department of Transport,
Environment and Regions to develop standard accounting methodologies
for environmental indicators is welcome. The next step the government
could take is to examine how to incorporate environmental risk
assessment into actuarial evaluations.
It would also
help if there were a clearer and more consistent line on environmental
and social accountability and how this relates to disclosure
requirements specified in the Turnbull guidelines and the company law
review.
The investment community should also be working
with progressive wings of industry to define targets for Rio+10 in
2002. For example, it could agree to ensure that by the next Earth
Summit, in 2012, every saver on the planet had a sustainable investment
option.
Investors are crucial to spearheading the scale
of business response needed. There are now sufficient numbers of
investors who recognise they must act in new ways to protect their
assets – if only to hedge their bets.
This is an edited version of the Cherie Blair Millennial lecture
delivered by Tessa Tennant to an audience which included
Tony Blair, the prime minister, in December 2000.
