Pictet measures “extra-financial” returns from socially responsible investing
Socially responsible investors have spent years trying to rid their movement of its soft and fuzzy, do-good connotations in favour of emphasizing the delivery of cold cash returns. But a new research report from the institutional investment arm of Pictet, the Swiss bank, attempts to reclaim the softer side of SRI by supporting it with hard evidence.
The report quantifies the environmental and social impact from SRI – its so-called extra-financial returns – by comparing how the companies in two portfolios perform in terms of their carbon footprint and ability to create jobs.
Pictet claims a socially responsible global equities portfolio would have carbon emissions 40% below those of a portfolio indexed to the MSCI global equities index.
In addition, the SRI portfolio would have created employment growth of 4.2% last year compared with 2.7% for the benchmark.
Entitled “The SRI performance paradox: How to gauge and measure the extra-financial performance of Socially Responsible Investment”, the study by Christoph Butz and Olivier Pictet points out that investors in SRI funds tend to accept performance reporting solely in financial terms. Hence the paradox: they choose to invest in a socially responsible manner without demanding any proof that society actually benefits.
Butz said: “Social investors’ objectives are multi-dimensional. This paper provides an insight into how extra-financial reporting might evolve, using CO2 emissions to assess the environmental impact and job creation as a criterion for social impact.”
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