The world of Corporate Social Responsibility (CSR), Socially Responsible Investing (SRI) and Environmental, Social and Governance (ESG) Reporting is not always easy to navigate. It is heavily laden with definitions that often overlap, yet their users (or opponents) attempt to keep them distinct. I always thought this peculiar. If a company is concerned with reporting on ESG issues for its SRI investors, is it not at all concerned with CSR? I would be the last person to throw another acronym into the mix, but Matthew Kiernan, founder and chief executive of Inflection Point Capital Partners, makes a great argument for SAI (Strategically Aware Investing) in attempts to finally mainstream some of these ideas.
In his Responsible Investor article, Kiernan states, “I truly believe that one of the primary causes of the painfully slow pace of “mainstreaming” (but by no means the only one ) is the enormous confusion and conflation between and among the various acronyms. The sad result has been the stigmatization of most if not all of them by mainstream asset owners and their traditional advisors and asset managers.”
Kiernan’s article points out the following outrageous hypocrisies in the SRI community that proliferate the confusion and stigmatization of responsible investing.
(1) Some of the world’s largest and most prestigious foundations give away literally hundreds of millions of dollars worth of grant money to advance environmental and social causes each year, while having fully 95% of their assets invested without even the faintest regard for their environmental or social impacts, which could easily be undoing all of their good work on the program side.
(2) The same is true for the staff pension funds of both the United Nations and the World Bank, despite the enormous efforts that both organizations devote to ameliorating environmental and social conditions worldwide. In the case of the former, the UN came within a hair’s breadth in 2006 of not signing its own UN Principles for Responsible Investment!
(3) By some estimates, less than 5% of the assets pledged to support – and implement – the aforementioned UNPRI are currently subject to a consistent, systematic assessment of their environmental and social impacts or risk.
Kiernan’s proposed “magic bullet” acronym to clear up these inconsistencies is SAI, which stands for “strategically aware investing.” Why SAI? “Words do matter, and if sustainability concerns could be shorn of their historical, ideological, and emotional baggage – on all sides – we’d all be a good deal further ahead, and so would global environmental and social conditions, not to mention investors’ risk-adjusted returns.”
SAI you say? I can deal with one more acronym if there is hope of mainstreaming its intended results. But will this cause more clarity or confusion? What do you think?
Image Credit: Kankie via Flickr under CC license.