Growing Demand for Money Managers with Expertise in Socially Responsible Investing
In the investment world, taking responsibility for environmental and social issues has never been more popular. Money managers are tackling what’s known as “Socially Responsible Investing” or SRI. It turns out that poverty, obesity, the aging population, clean water and global climate change are not only among the world’s most pressing problems, they’re also attractive and sustainable opportunities for investment.
SRI is the selection of stocks or funds based on certain social criteria…in other words, investing with a conscience. And the past few years have seen growth of SRI funds in a range of asset classes, including hedge funds.
Investment News reports that there are an estimated 36 individual hedge funds already applying environmental and social screens to the investment process. Speaking at a recent Managed Funds Association Forum on SRI, Sandy Selman, Managing Director of Asia West LLC, said that socially screened funds, shareholder advocacy funds and community investing funds are a large asset class, accounting for about $2.29 trillion in the U.S.
A growing percentage of professionally managed money is somehow involved in SRI, mostly through screening. Historically, SRI involves screening out the “bad” stocks investors want to avoid, such as tobacco, firearms and casinos. But the more modern approach being adopted by many fund managers is that there are profits to be made by investing in companies that are helping to find solutions to the world’s problems. The investment strategy is not to simply screen things out, but to seek opportunities that may benefit society at large.
Former San Antonio Spurs All-Star David Robinson recently announced he’s launching a $250 million private equity fund to invest in socially responsible businesses. The fund will buy stakes in companies that operate in what he considers to be a “socially conscious” manner.
But being socially responsible doesn’t mean giving up on higher returns. Global energy consumption is one prime example of how an issue of goodwill can translate into a profitable investment opportunity. According to Hedge World, the United States produces 22% of global carbon emissions, with China trailing close behind at 18%. Worldwide oil consumption stands at roughly 85 million barrels of oil per day, 9.7 million of which will be consumed in the United States each day this summer.
With more than 600 green power corporations now in existence, it’s clear consumers and investors around the world are looking to alternative sources of power. Peter Fusaro, Chairman of Global Change Associates Inc., told Hedge World that the $830 billion carbon market is potentially a $3 trillion market. He added that carbon is the first global commodity market to develop worldwide since oil, and the U.S. could be a significant player. Robin Stoakley, Head of UK retail business at Schroders, which is bringing a Global Climate Change fund to the market, also told the Financial Times that climate change is likely to be the biggest global investment theme of the next two decades and beyond.
SRI appears unlikely to slowdown as more major financial institutions set up their own ethical funds. Executive recruiting firm, A.E. Feldman, suggests that job seekers looking for portfolio management opportunities, as well as hedge fund jobs and private equity jobs, be aware of the growing trend towards socially-responsible investment. In fact, the UK Social Investment Forum, a leading organization on ethical investment, recently launched a training course for financial advisers to help educate them on how to advise clients on ethical investing.
