Summary: The clearest message from the conference is that the SRI brand has grown up. Endorsed by the Wall Street Journal on Monday, SRI is now a mainstream financial segment, albeit a small and relatively unknown one. The issue is where SRI will fit in the asset management world. Historically, SRI was the radical outsider, accused of being fringe and, worse, a drag on returns. Can it maintain its leadership in SRI now that it is mainstream? or will it be co-opted by the larger fund managers? While conference attendees cheered the idea of making SRI obsolete by weaving SRI factors into every company’s financial profile, the reality is that SRI advisors want to reap what they’ve been sowing for 20 years. Strengthening the SRI brand will help the industry weather this critical phase.
SRI Goes Mainstream. Gone were the long hair and beards — lots of jackets and even ties in evidence. As one relatively new SRI analyst commented forlornly, “This year’s conference feels closer to the financial industry conferences I used to go to when I was in mainstream asset management.” There were also a lot more sponsors across a wider set of industries, from F100 companies to a CleanTech business to Lehman!
This migration from fringe to mainstream was confirmed on the third day of the conference, when attendees woke up to a Wall Street Journal headline “A Smarter Approach to Social Responsibility,” referring to how SRI’s research has become more sophisticated. Conference reaction to the article was mixed: optimism over the mention of SRI stalwarts KLD and Pax World, but fear that traditional asset managers might weaken SRI criteria, might use their more established reputations to push out existing players and might suppress the shareholder advocacy that has pushed reluctant companies to act more sustainably.
SRI Goes Global. KLD, arguably the industry’s leading analyst, introduced its Global Sustainability Index (which, according to the Wall Street Journalarticle, will soon be used to create a fund from Northern Trust) and Pax World and Domini presented their global funds. This is more evidence that SRI has moved beyond its original definition.
Increasingly Sophisticated Metrics. The conference buzz was that the future of SRI will be driven by metrics. The most exciting new metric presented was one that measured employee satisfaction (Fortune’s annual “Best Companies to Work For”) against stock price and found that returns were up to three times that of the market as a whole. In addition, analysts working with traditional measures are applying advanced statistical techniques such as Scenario Planning and Data Envelopment to more accurately predict returns from SRI investing. SRI is growing out of its associations as a well-meaning but unsophisticated investment strategy and should work to insure that its brand image evolves in tandem with the new reality.