an interview with Adam Kanzer by author and journalist Marc Gunther (August 2010)
Domini Chief Investment Officer Steve Lydenberg, in collaboration with Jean Rogers of the consulting firm Arup and David Wood of the Initiative for Responsible Investment, has published From Transparency to Performance: Industry-Based Sustainability Reporting on Key Issues.
The authors believe that mandatory sustainability reporting is urgently needed in the U.S. and that the development of industry-based key performance indicators can play a crucial role in any such mandatory reporting scheme.
"It is our hope," they write, "that establishing KPIs [key performance indicators] for all sectors will enable companies to move from a compliance driven 'disclosure' mindset to one of managing — and even competing on — performance on the sustainability issues that matter most."
The reports builds on the important work done by the Global Reporting Initiative in establishing a "credible set of universally applicable indicators" and outlines a method for the development of KPIs within the context of this broader set of indicators.
This method for developing KPIs relies on three principles: simplicity, materiality, and transparency. This method should be useful for regulators and stock exchanges considering target requirements, corporations seeking to improve their sustainability reporting, and stakeholders and investors who wish to improve their assessment of the progress of companies toward sustainability.
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:
- 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?
- 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.
Domini officials contributed two chapters to Finance for a Better World: The Shift Toward Sustainability, a new book on sustainable investing published by Palgrave Macmillan. The two chapters focus on how socially responsible investing can address short-term thinking in our financial markets and improve corporate human rights performance, respectively.
Steve Lydenberg, Domini's Chief Investment Officer, argues that socially responsible investing can remedy the short-term thinking that has plagued our financial markets. "An excessive focus on short-term profits has various detrimental effects," writes Lydenberg. "It causes corporate managers to misallocate assets. It introduces dangerous volatility into financial markets. It means society must divert productive resources to repairing environmental and social damage done in the headlong pursuit of profits." Lydenberg suggests that social investing, with its focus on long-term social and environmental sustainability, can help to refocus finance on the long-term.
Adam Kanzer, Domini's Managing Director and General Counsel, draws on his experience as the head of Domini's shareholder activism program in a chapter examining the use of shareholder proposals to address corporate human rights performance. His chapter outlines the legal basis for these proposals and shows how nonbinding shareholder proposals have successfully influenced corporate behavior even when they fall far short of a majority vote. He points out, for example, that the shareholder proposals that helped bring Reverend Leon Sullivan to the Board of General Motors received less than 3% of the vote. Sullivan later authored the Sullivan Principles to guide businesses in apartheid-era South Africa, which played an important role in ending apartheid.
- Steve Lydenberg, "Building the Case for Long-Term Investing in Stock Markets: Breaking Free from the Short-Term Measurement Dilemma" (Read pdf)
- Adam Kanzer, "The Use of Shareholder Proposals to Address Corporate Human Rights Performance" (Read pdf)
According to its publisher, Finance for a Better World "provides an overview of current advances regarding the integration of sustainability in the financial sector. Its originality lies in the fact that it does not focus exclusively on a particular aspect of this emerging trend, but instead, presents various illustrations — or instance in the fields of SRI, sustainable banking or innovative investments — of what can be considered as the beginning of a paradigm shift in global finance."
The book was edited by Henri-Claude de Bettignies, the EU Chair Distinguished Professor of Global Governance and China-Europe Business Relations at CEIBS, Shanghai, China and François Lépineux, a Research Fellow at INSEAD, and Professor and Head of the Center for Responsible Business at ESC Rennes School of Business, Brittany, France.
From Finance for a Better World: The Shift Toward Sustainability (Palgrave Macmillan, April 2009)
(Earthscan, December 2008)
GreenMoney Journal, May/June 2007
Originally Appeared in the Journal of Corporate Citizenship (Autumn 2002)
Within the past five years, socially responsible investing ( SRI ) along with the related discipline of corporate social responsibility ( CSR ) have attracted worldwide attention. The strong momentum behind these two movements implies that they will soon work their way into the mainstream of the financial and corporate worlds. Much needs to happen, however, before they are fully integrated...
In 2002, Amy looked to the future of socially responsible investing, noting that we stood at a tipping point in history.