SRI: No longer a niche investment strategy; Being included in socially responsible investment indexes has its rewards. Does your company qualify?

AuthorMoskowitz, Jerry
PositionSHAREHOLDER VALUE

IN RECENT YEARS, the notion of a corporation taking the voluntary initiative to uphold standards and practices that contribute to the greater good of society, its employees, and the environment has taken hold across the globe. Corporate social responsibility--CSR for short--has blossomed from the grassroots efforts of a few firms to a worldwide initiative practiced by most, if not all, Fortune 500 companies.

The International Finance Corp., a member of the World Bank Group, defines corporate social responsibility as "the commitment of businesses to contribute to sustainable economic development by working with employees, their families, the local community, and society at large to improve their lives in ways that are good for business and for development."

With heightened concerns and media attention being given over to global warming, carbon emissions, and other pollutants, as well as general health of the population, corporations are becoming more aware of the impact of their actions. From hiring practices and fair trade to tighter emissions standards and energy conservation, companies are reexamining the way they do business.

A need for tools

FTSE, which creates and manages more than 100,000 equity, bond, and alternatively weighted investment strategy indices, first became involved in socially responsible investing (SRI) in response to growing demand from investors for tools to measure the numerous and varied global CSR standards. FTSE launched the FTSE4Good Index Series in 2001, offering a series of transparent, rules-based, and pre-screened benchmark and tradable indexes. Many companies use the globally reputable FTSE4Good standards in developing CSR strategy and initiatives as well as a measure for their success in meeting CSR goals.

One of the tenets of the FTSE4Good Index is to challenge companies to improve their CSR practices for the good of the environment and human rights. FTSE4Good criteria are regularly revised to ensure that they reflect developments in corporate responsibility and trends in socially responsible investment. Most recently, in an effort to offset global climate change, FTSE introduced new climate change criteria that companies will need to meet in order to be eligible for inclusion in the FTSE4Good Index Series. These criteria aim to encourage companies to support and contribute to scientific understanding and consensus on climate change, and to participate in strengthening public policy frameworks to address climate risk and reduce greenhouse gas emissions.

A booming SRI market

In response to companies operating with both social and economic concerns in mind, inclusion in socially responsible investment indexes has its rewards. SRI...

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