The Financial Implications of SRI Growth

Socially Responsible Investment (SRI) as an industry is one that is growing and evolving exponentially. As it becomes a higher priority on political agendas around the world, and with the current fiscal climate, profit is affected ever increasingly by externalities. This article discusses how financial implications of environmental issues and the resourcing of them is at the forefront of many firms.
Why SRI has grown in both size and value as an industry. As environmental costs of human activity have increased from $6.6 Trillion in 08, and projected costs are set to hit $28.6 trillion (from 11% to 18% of GDP) it is clear that large companies are causing externalities that affect the environment, and in turn the economy, and the rate of return to investors over time. Increased risks as well as unavoidable increases in insurance, taxes and prices cause this reduction in return for investors, and the stability of investments is undermined. Not only this, but for the institutional investor one firms externalities can affect the wider capital markets and an investor’s portfolio, dragging returns down across the board. Obviously investment in equities that are environmentally friendly, and have strong governance in place are beneficial for all.
As SRI has developed from a smaller niche more into the mainstream, so has headcount. On both the buy and sell side the increased demand for analysis of environmental costs has led to increases in teams. Large growth has been in consulting and advisory firms in a range of offshoots of core socially responsible investment. As well as the research teams, and sustainable investment fund managers, many of which have grown, increasingly so have areas including investor and shareholder engagement and governance consultancies. There is a cultural shift here which is generating a steady increase in people interested in SRI. An attitudinal change in the market is at work. When evaluating equities Environmental and Social Governance (ESG) prospects they are no longer negatively screened and excluded on certain grounds, they are positively looked at to generate a ‘best in class’ classification. This shift is widening the space, sucking banking professionals in to the area and in turn increasing the level, scope and importance of the analysis.
On the flip side of the coin often organisations struggle and are unsure of how to proceed with initially bringing SRI into the organisation in a meaningful fashion. Within fund managers particularly, many firms wishing to integrate ESG analysis into decision making find it difficult to imbed and affect the cultural shift necessary to make full use of the person in an SRI position. In many cases candidate’s abilities and research are wasted due to the practicalities of the investment process, synergy is needed between human capital and strategic direction to release the value of ESG analysis.
“We think, and research suggests the market will continue to grow, steadily, even in the current climate” says Andy Cannon, Associate Director – SRI and Governance at Murray McIntosh”.  The consequences of not prioritising governance are too great for investors, as recent corporate governance failings at BP and UBS show. “As the cultural shift continues, hopefully more people will be drawn to the possibilities of investing responsibly. The career path in the space is becoming more fluid as SRI interlinks with more traditional investment banking operations. Employers have a wider pool of candidates and experience to choose from whereas candidates themselves have a broader career path to explore”.

About Andy Cannon, Associate Director, Murray McIntosh
Andy is responsible for Murray McIntosh’s financial services offering.  His particular focus is building Murray McIntosh’s socially responsible investment function, including areas of corporate governance, research, consultancy and fund management.  His team handles mandates across banking, investment management, private equity and hedge funds in accountancy, specialised finance and operations. As Associate Director, Andy will continue to build upon the success the business has experienced over the last few years whilst developing new markets in these sectors and growing the Financial Services team further.

About Murray McIntosh
Murray McIntosh offer recruitment and search in specialist sectors, including SRI, Governance, Policy, Accountancy and Treasury Services. Their client portfolio ranges from bulge bracket banks to boutique investment management firms, and from start-up companies to multinationals, highlighting their flexibility in providing the very best in recruitment solutions for their client’s needs.

http://www.murraymcintosh.com

Socially Responsible Investment (SRI) as an industry is one that is growing and evolving exponentially. As it becomes a higher priority on political agendas around the world, and with the current fiscal climate, profit is affected ever increasingly by externalities. This article discusses how financial implications of environmental issues and the resourcing of them is at the forefront of many firms.
Why SRI has grown in both size and value as an industry. As environmental costs of human activity have increased from $6.6 Trillion in 08, and projected costs are set to hit $28.6 trillion (from 11% to 18% of GDP) it is clear that large companies are causing externalities that affect the environment, and in turn the economy, and the rate of return to investors over time. Increased risks as well as unavoidable increases in insurance, taxes and prices cause this reduction in return for investors, and the stability of investments is undermined. Not only this, but for the institutional investor one firms externalities can affect the wider capital markets and an investor’s portfolio, dragging returns down across the board. Obviously investment in equities that are environmentally friendly, and have strong governance in place are beneficial for all.
As SRI has developed from a smaller niche more into the mainstream, so has headcount. On both the buy and sell side the increased demand for analysis of environmental costs has led to increases in teams. Large growth has been in consulting and advisory firms in a range of offshoots of core socially responsible investment. As well as the research teams, and sustainable investment fund managers, many of which have grown, increasingly so have areas including investor and shareholder engagement and governance consultancies. There is a cultural shift here which is generating a steady increase in people interested in SRI. An attitudinal change in the market is at work. When evaluating equities Environmental and Social Governance (ESG) prospects they are no longer negatively screened and excluded on certain grounds, they are positively looked at to generate a ‘best in class’ classification. This shift is widening the space, sucking banking professionals in to the area and in turn increasing the level, scope and importance of the analysis.
On the flip side of the coin often organisations struggle and are unsure of how to proceed with initially bringing SRI into the organisation in a meaningful fashion. Within fund managers particularly, many firms wishing to integrate ESG analysis into decision making find it difficult to imbed and affect the cultural shift necessary to make full use of the person in an SRI position. In many cases candidate’s abilities and research are wasted due to the practicalities of the investment process, synergy is needed between human capital and strategic direction to release the value of ESG analysis.
“We think, and research suggests the market will continue to grow, steadily, even in the current climate” says Andy Cannon, Associate Director – SRI and Governance at Murray McIntosh”.  The consequences of not prioritising governance are too great for investors, as recent corporate governance failings at BP and UBS show. “As the cultural shift continues, hopefully more people will be drawn to the possibilities of investing responsibly. The career path in the space is becoming more fluid as SRI interlinks with more traditional investment banking operations. Employers have a wider pool of candidates and experience to choose from whereas candidates themselves have a broader career path to explore”.

About Andy Cannon, Associate Director, Murray McIntosh
Andy is responsible for Murray McIntosh’s financial services offering.  His particular focus is building Murray McIntosh’s socially responsible investment function, including areas of corporate governance, research, consultancy and fund management.  His team handles mandates across banking, investment management, private equity and hedge funds in accountancy, specialised finance and operations. As Associate Director, Andy will continue to build upon the success the business has experienced over the last few years whilst developing new markets in these sectors and growing the Financial Services team further.

About Murray McIntosh
Murray McIntosh offer recruitment and search in specialist sectors, including SRI, Governance, Policy, Accountancy and Treasury Services. Their client portfolio ranges from bulge bracket banks to boutique investment management firms, and from start-up companies to multinationals, highlighting their flexibility in providing the very best in recruitment solutions for their client’s needs.

http://www.murraymcintosh.com