Socially Responsible Investing (SRI) has experienced unprecedented global growth in recent decades as a viable and competitive option to traditional investing.  As a result, sustainable asset management and the types of available SRI investment vehicles have also flourished.  For instance, the Dow Jones Sustainability Index was launched in 1999, and now has various investment vehicles that have been created based upon its competitive positions.  This is one of many examples.

The sustainable asset management industry has also experienced significant growth in the U.S., with competitively performing SRI investment vehicles ranging from Stocks and Mutual Funds, to REITs and ETFs.  The rise in socially responsible investing in the U.S. over the last decade or so, from around 640 billion dollars to approximately 2.3 trillion dollars (1995-2005) in professionally managed assets, is a clear sign that the SRI movement has now taken hold in the U.S. 

Many view this recent ethical surge as a result of some of the relatively recent corporate scandals (e.g. Tyco, WorldCom, Enron) as investors demand greater transparency and public responsibility, especially of top executive management.  But this is just one aspect.  Greater environmental awareness through all but now obvious global issues like global warming, water scarcity, and others, have also contributed to sustained SRI investment.  Greater transparency and responsible use of the resource can also mean less unknown risks across various business segments, which translates into greater shareholder value in the markets.

Moreover, an innovative aspect of SRI is its ability to drive markets as a holistic paradigm shift.  Beyond the valid and ever growing concerns over environmental and social equity issues, there is also the growing realization that these social externalities have been oversimplified.  Once treated simply as costs and liabilities, innovative companies can metamorphose these externalities into significant revenue streams that simultaneously protect or even enhance ecological and social integrity, while enhancing shareholder value. 

The most innovative of companies are well on their way to accomplishing this innovation in various aspects of their businesses.  The value of this integration is sometimes referred to as the "triple bottom line," representing increased economic, ecological and social values, whereas the "bottom line" has traditionally been associated with solely economic drivers.

In many instances the companies that are striving to go beyond status quo, to meet and set the current best practices in sustainability, are providing substantial value differentiation.  Whether this means being better prepared to accommodate stricter governmental regulations or being poised as a best-in-class innovator of products and services, sustainable innovation is a key ingredient to success.  And increasingly, companies in all industries across the globe are subscribing to sustainable practices and seeing their investments pay off on various levels.

The asset management firms that have the capacity to stay on top of these innovations and successfully integrate them into their portfolios will enjoy the best returns on investments for their clients. 

At Smith Pierce, we firmly believe that our intimate knowledge of markets coupled with our experience with the CSR community, enable us to uniquely capitalize on otherwise unrecognized values in capital markets and in various social paradigms. 

Smith Pierce practices socially responsible investing with respect to the unique needs of each client, but primarily by first assessing the business case for the investment – i.e. from a fundamental perspective, we first select those investments which are expected to outperform, and then utilize a combination of the following social factors:

• Screening – including investments with generally positive sustainable attributes and excluding those with generally negative sustainable attributes.

• Selecting – including investments with unique business operations or propositions, perhaps a best-in-class, sustainable and innovative company that uniquely solves or holds as one of its strategies to solve and value a social externality; these companies usually maintain progressive corporate practices that additionally diminish their own ecological footprint on the environment and/or enhance social equity.

• Shareholder Activity – including investments that may present the opportunity to engage the corporate structure of the respective company, specifically on integrating improved “sustainable business practices.”

Everyday, our ideas and actions are making our SRI practice exceptional.^SM

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