Friday, January 30, 2009

What is the significance of Responsible Investment in a Culture and Context which is Irresponsible?

In response to correspondence about academic research in relation to "Socially Responsible Investment" (SRI), the following may be of wider interest:

To my mind, "Socially Responsible Investment" (SRI) at present is a bit like trying to build a dam on one stream of a delta of a river, when there is a flash flood coming - even if the dam holds on that delta stream, there will be a flood on all the other delta streams anyway.

So here is my list of questions for SRI-related research (in no particular order):

1. Can one responsibly invest in Hedge Funds, Derivatives, CDSs, CDOs?

2. How can responsible investment help to change the culture from IRresponsibility to Responsibility?

3. If the global context for trade is set by the WTO and that specifically excludes considerations regarding the environment and social justice (attempting to penalise those companies or countries which take such issues seriously), can you responsibly invest in trade? How can SRI operate in such a way as to tend towards the inclusion of such issues in the WTO regime?

4. If a government is bankrupt (as Iceland is in reality and many other countries are in principle), is it responsible to invest in those countries? - starting with the USA and UK!

5. If the current form of globalisation engenders unprecedented booms and busts (which by their very nature hurt the environment as well as the poor), how can SRI help?

6. Is it responsible to invest in any company whose turnover is in excess of 0.5% of the GDP of the country where it is registered?

7. Is it responsible to invest in any country which prints more money than is justified by its GDP? (The USA already had, in Autumn last year, about one trillion more dollars than it should!)

8. How can tax and other positive and negative incentives be used to discourage credit-based growth for individuals, families, companies and countries? Instead, how can investment-based growth be encouraged?

9. As accelerating stock market activity over recent years has speeded-up short-termism, should SRI research examine the case for the creation of two classes of stocks (Long Term and Short Term)? In theory, these could be created for all publicly-quoted companies, and all stock holdings existing at that point could be immediately considered to have been divided equally into these two classes. New stocks could then be purchased only in equal quantities of Short Term stocks and Long Term stocks. Short Term stocks could be traded at any time. Long Term stocks could be traded only after being held for, say, a year. This will slow down "day trading" and so slow down the rate of economic activity, but at the same time enable growth to be much more solidly and healthily based. The exact proportions of Short Term and Long Term stock issuable and purchasable can be varied by global agreement from time to time, say every 3 years.

10. Can there be Responsible Investment as long as there is the possibility of regulatory arbitrage around the globe? How can SRI encourage the creation of global frameworks, global minimum standards and global approaches to health, safety, pensions, minimum income, environmental protection, and tax (for the last, minima and maxima can be established depending on the level of achievement of a country). As a level playing field cannot be established around the world straightaway, there should at least be rational and agreed principles on which different levels of playing fields are recognised and established from time to time - with a plan for moving towards convergence as soon as possible.

ENDS Sphere: Related Content

1 comment:

Ron Robins said...

Wow, you certainly have a list of exacting questions!

I have some further thoughts on the subject. When we invest in a company, or many companies in the case of a mutual fund, we share in the responsibility for the activities of those companies as well as participate in the outcomes of their corporate activities. So, anyone valuing their personal or spiritual growth has to take these things into account when investing.

I believe that if everyone does invest according to their personal values, then, since so many of core values are alike — and are supportive of higher ideals — that in the long run, only companies employing these higher values will truly prosper. And there is real evidence of this now.

I’ve been following socially responsible investing for about forty years. For anyone interested I have a popular site that covers the latest global news and research on the subject. It’s at

Best wishes, Ron Robins