Social Responsibility Investment (SRI)

Arif Hartono, SE. MHRM. PhD.

Introduction
SRI involves considering the ethical, social, &

environmental performance of companies selected for investment as well as their financial performance SRI sometimes call as Ethical Investment The origins of SRI lie on various religious movement that sought to invest their funds without compromising their principles

SRI & CG
Institutional investors have become aware of the

importance of SRI because of:

Client demand Corporate citizenship Potential economic benefits

Strategies for SRI

Engagement: identify areas for improvement in

ethical, social, environmental policies of the companies invested, & encourage them to make improvement Preference: fund managers work to list of guidelines that trustees prefer companies invested in to meet Screening: trustees ask for investment to be limited to companies selected (screened) for their ethical behavior.

International Guidance
Global Sullivan Principles (1977) The MacBride Principles (1984) Coalition for Environmentally Responsibilities

Economies/ CERES (1989) UN Global Compact (1999) OECD Guidelines for Multinational Enterprses (2000) Global Reporting Initiative (GRI) Sustainability Guideline (2002) EC CSR (2002)

CSR Indices
A number stock market indices of companies with

good CSR have been launced in recent years. The two most well-known:

FTSE4Good Indices (2001): is designed to reflect the performance of social responsibilities equities for UK, US, Europe & global (Criteria: human rights, stakeholder relations, & the environmental impact of companys activities). Dow Jones Sutainability Indices (DJSI): are aimed at providing indices to bencmark the performance of investment in sustainability companies & funds

CSR
Conceptualized by Carroll (1979): the social

responsibility of business encompasses the economic, legal, ethical and discretionary expectation that society has of organization at a given point time It means that the business having a responsibility to produce goods that it sells at a profit, to abide by legal requirements, to do what is right & fair, and finally to do what might be desired of companies in terms of supporting the local community and making charitable donations.

The Impact on Shareholder Value

There is an increasing perception that SRI can

help to maintain shareholder value SRI is now increasingly perceived as element of good CG SRI will continue to gain momentum