June 18, 2009

 

Domini Charts Future of Responsible Investing

 

Domini Chief Investment Officer Steve Lydenberg and sustainability investment strategist Graham Sinclair of Sinclair & Company have published “Mainstream or Daydream? The Future for Responsible Investing” (PDF) in the April 2009 issue of the Journal of Corporate Citizenship,

 

The article begins by surveying the state of responsible investing today, then poses — and answers — three key questions for each of three stakeholders: corporations, institutional investors, and financial and academic communities:

 

Corporations

 

• Can the widely accepted definition of the role of the corporation as a short-term profit-maximizing machine be changed, and, if so, how?
• Will corporations come to recognize that rule-setting by government can enhance their abilities to address social and environmental challenges, and, if so, why?
• Can corporations work cooperatively with government to define the relationship between these two powerful forces so that the pursuit of private goods does not undercut the creation of public goods?

 

Institutional investors

 

• Should the goal of investing encompass broad benefits to society as well as short-term, price-based returns, and, if so, in what ways?
• Should politics be separated from investment decision-making, and, if so, who is to make this distinction?
• Should the practice of responsible investment be applied across asset classes, and, if so, is this practice the same for all classes?

 

Financial and academic communities

 

• Should the value of investments be assessed in terms other than stock price, and, if so, what is the yardstick for such measurement?
• Should responsible investing be legitimized as a key part of the investment process, and, if so, through what means?
• Can individual investors be active enough “financial citizens” to make responsible investing a reality, and, if not, why not?

 

The answers to these questions, the authors say, could point the way to fundamental changes in the relations between corporations, government, and society in general, as well as the basic principles on which the financial community operates.