The ethics of ethical investment

Buyside firms are placing more emphasis on sustainability issues in the research and advisory services they receive from brokers, according to the results of the Thomson Reuters Extel and UKSIF 2010 Socially Responsible Investing & Sustainability Survey.

The survey, whose results were presented at the FTSE group headquarters in London’s Canary Wharf on Friday, shows that 90% of buyside firms are planning to increase SRI & sustainability asset allocation in the coming year

“The investment community is increasingly looking at sustainable investment themes as the ones that offer best potential for significant growth, while effective management of sustainability risks and opportunities is becoming central to profitability in many industry sectors,” commented Penny Shepherd, chief executive of UKSIF.

“This eighth annual SRI & Sustainability Survey shows the value that both the sell side and buy side attach to sustainability analysis.”

Steve Kelly, global head of Thomson Reuters Extel surveys, added that while the BP oil spill might have catapulted discussion about environmental, social and governance issues and SRI investment on to the front pages in recent months, it was not a new phenomenon.

“The demand from fund managers for intelligent, well-argued SRI analysis has been strong for some time and is still growing,” he said. “The opportunities for firms and individuals best able to provide integrated and detailed SRI analysis are therefore huge.”

Respondents to the survey, which covered 254 buyside firms and 42 brokerage firms/research houses, nominated Threadneedle Asset Management as leading fund management firm for SRI, up from third position last year, followed by Aviva Investors and BlackRock Investment Management. Société Générale was nominated leading brokerage firm for SRI research for the second year running, followed by CA Cheuvreux and UBS.

Not everyone is convinced, however. The survey comes in the wake of a report released last week by the Edhec Research Institute in Nice which said that an SRI approach adds no financial value to investments, as sometimes claimed by SRI proponents. Edhec advocated “an approach that combines stock picking with SRI criteria and a well-diversified portfolio construction methodology”, saying that a pure SRI approach could sometimes force funds into creating portfolios that were too narrow and excessively risky.