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Corporate Social Responsibility (CSR) is an idea that corporations have to consider the interests of customers, employees, shareholders, communities, and ecological considerations in all
Socially responsible investing (SRI) describes an investment strategy which combines the intentions to maximize both financial return and social good.

green@work : Magazine : Back Issues : Summer 2005 : Socially Responsible Investing : Courting Conscientious Investors

Special Section: Socially Responsible Investing

Courting Conscientious Investors
Five ways to make your corporate reporting more attractive to socially responsible investors.

by Michael J. Besly and Andrew W. Savitz

Socially responsible investment (SRI) portfolios reportedly represent more than $2 trillion in investment capital. Approximately 200 SRI mutual funds now screen for environmental, social and economic factors—the so-called "triple bottom line" of corporate performance. With the proliferation of stock market indexes that seek to measure both financial and non-financial value, analysts and investors are paying more attention to socially responsible profitability.

A recent survey indicates both the increasing influence of non-financial factors in equity research and valuation, and the frustration of analysts in trying to interpret those factors. The survey reports an "impressive number of leading financial services firms—represented through teams of 'sell-side' brokers and analysts—have confirmed the material relevance of governance and sustainable development performance on equity valuation. Companies such as ABN Amro, Deutsche Bank and Goldman Sachs are calling on investors, asset managers and financial markets to include these factors in their decision-making."

However, the report goes on to say, "(T)he majority of analysts noted difficulties in comparative analysis due to the range of reporting practices." Here are five approaches that may help to overcome this problem and attract the positive attention of socially responsible investors.

Approach One: Use an accepted reporting format to increase data transparency, accessibility and comparability.

A big problem facing companies seeking to attract socially responsible investors is presenting non-financial information that can be easily interpreted, analyzed and judged. Herein lies a mutuality of interest: analysts want simplicity and a way to compare apples to apples; companies want out from under an avalanche of questionnaires. As if in response, the Global Reporting Initiative (GRI) has emerged as the gold standard for sustainability reporting. GRI provides a reporting format and guidance on internal reporting structures and data presentation. Companies that use GRI both to drive toward key business objectives and to report their results will be more attractive to socially responsible investors.

Analysts and investors are beginning to utilize central repositories of company-reported sustainability data, including OneReport and the London Stock Exchange's "Corporate Responsibility Exchange." Participation in such data consolidation and tracking services will increase comparability and accessibility, and also decrease the need to respond to a multitude of analyst surveys and questionnaires.

"Integrated reporting"—the inclusion of non-financial performance data as part of a company's financial report—will enhance the impact of triple-bottom-line information. The aforementioned survey notes that ". brokerage firms recommend that corporate managers and board directors 'include social, environmental and governance reporting in their annual reports and financial statements.'" Currently, the practice of integrated reporting is patchy at best—however, some leading companies (i.e. PepsiCo, Inc. ) are presenting an integrated report.

Approach Two: Get listed on a respected corporate social responsibility (CSR) or sustainability index.

A certain way to get attention from socially responsible investors is to get listed on the Dow Jones family of Sustainability Indexes (DJSI) , the FTSE4Good Index , the Ethibel Sustainability Index (ESI) or the Domini 400 Social Index . Each one is regularly rebalanced and the listed companies screened to ensure they meet established sustainability criteria. Inclusion provides data credibility as well as immediate access to millions of dollars of passively managed socially responsible capital.

Approach Three: Align your information with SRI investment criteria.

Large, actively managed SRI funds, including Calvert Funds , KLD and Trillium Asset Management , use internally developed investment screens and filters as the basis for investment decisions, and often make this information available. Some companies (i.e. Novo Nordisk ) align internal and external reporting with widely used SRI investment criteria, and such an approach allows analysts to access and analyze reported data more easily.

Approach Four: Obtain external assurance and verification.

Independent third-party verification of a company's data collection processes, and ideally the underlying data, provides greater validity and power to non-financial data. Although less than a third of surveyed U.S.-based companies reported to PwC that they had used external verifiers, that percentage is likely to increase as sustainability assurance standards such as AcountAbility's AA1000 Assurance Standard and ISO's pending CSR standard gain acceptance.

Approach Five: Develop and strengthen internal CSR initiatives including mission, metrics, data tracking and research.

A clear sustainability or CSR vision and mission statement is important to successfully attract SRI investment. An unambiguous sense of direction, aligned with specific goals backed up by metrics, conveys conviction to outside investors and lays the foundation for establishing strong non-financial data tracking and reporting processes.

To facilitate and enhance these processes, companies must develop meaningful metrics. Although companies are sometimes confounded by sustainability metrics, plenty of guidance is available. Stakeholder engagement can help in developing relevant and meaningful metrics, as can consultation with peer companies and trade associations. The performance-improvement lessons learned from Six Sigma and other management tools can often be applied to triple-bottom-line goals and objectives. Once companies develop measurable targets, meaningful progress becomes more transparent and auditable.


Fund managers and analysts face significant challenges today when researching and analyzing non-financial performance data. Making the job of the analysts easier will significantly increase a company's probability of attracting socially responsible investors and the wider investment world. We believe that one key to success lies in a company's ability to increase data comparability, accessibility, transparency and credibility.

Mr. Savitz and Mr. Besly, along with their colleagues in PricewaterhouseCoopers LLP, Sustainability Business Services, have assisted dozens of Fortune 1000 companies with opportunities and risks related to economic, environmental and social impacts—the "triple bottom line" of sustainability. Their practice specializes in strategic assessment, opportunity and risk evaluation and the design and implementation of sustainability programs including stakeholder engagement, metrics and performance reporting. The authors can be reached at: or

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