Each week Emerging Markets ESG publishes an interview entitled, “Five Questions about SRI.” The interview features a practitioner’s insights about SRI in emerging markets and through Emerging Markets ESG shares this expertise with a wide global audience. The goals of Five Questions about SRI are fourfold:
- To collect a catalogue of examples of SRI in practice in emerging markets;
- To raise awareness about SRI in emerging markets; and
- To reflect on what SRI in emerging markets means to practitioners; and
- To enable SRI practitioners in emerging markets to network with peers around the world.
This week’s interview is with Philippe Spicher, CEO, Inrate, Switzerland.
Inrate is an independent sustainability rating agency based in Switzerland. Since 1990, it has linked its sound understanding of sustainability with innovative research solutions for the financial markets – the main reason why it is one of the largest and most respected agencies in Europe. Its mission is to be an integral part of the global financial infrastructure by providing sustainability intelligence that allows capital markets to redirect investment flows toward a more sustainable economy. To do that, Inrate analyzes and assesses the ecological and social responsiveness of companies, institutions and countries by investigating the way they integrate sustainability issues into their products and services, strategies and operations by using proprietary frameworks and methodologies developed over the past 20 years. Philippe Spicher is the CEO of Inrate, formed by the merger of Centre Info and INrate in 2010. As CEO of Centre Info (from 1999 to spring 2010), he successfully developed the company by introducing new products and services and expanding the client base. He was instrumental in the foundation of SiRi Group in 2000, a coalition of leading local SRI rating agencies. He started his career in the SRI field in 1994 when he joined Centre Info as an ESG (Environmental, Social, Governance) analyst. As Head of Research (1996-1999), he set up a formal system to assess corporate environmental and social performance, and developed relationships with international partner organizations. He holds a degree in economics from the HEC (University of Lausanne) and a Master’s degree in environmental management from the Fondation Universitaire Luxembourgeoise (Belgium) and the Swiss Federal Institute of Technology in Lausanne. Philippe is a co-founder of Sustainable Finance Geneva, an association of Geneva-based professionals and investors with a common interest in promoting sustainable finance and responsible investment.
Emerging Markets ESG: How would you define socially responsible investment (SRI)?
Philippe Spicher: I define SRI as, broadly speaking, integrating extra-financial or, as commonly named now environmental, social and governance (ESG) information into the investment process. Some of the factors taken into account have some material implications, particularly in the long-term. An important aspect to include in the definition relates to the motivation or the aim of such investment practice. In addition to generating risk-adjusted performance comparable to traditional investment, SRI seeks to deliver environmental and social added-value.
Emerging Markets ESG: What distinguishes SRI from mainstream investment?
Philippe Spicher: SRI, by definition, adopts a long-term perspective. Although this can also be the case for mainstream investment, it is not necessarily so. Another difference, related to the long-term perspective, lies in the set of information considered. Put simply, SRI considers a broad scope of environmental, social and governance factors, while mainstream investment tends to ignore these factors or, at best, considers a very limited set. But this is evolving rapidly, as more and more mainstream investors are starting to consider (some of) these ESG issues, while not necessarily branding their approach “SRI.”
Emerging Markets ESG: Which extra-financial theme – environmental, social or governance – is the most challenging for companies in emerging markets to manage?
Philippe Spicher: Companies may not agree with me, but I would say the governance theme is the most challenging for companies to manage.
Emerging Markets ESG: Which extra-financial theme – environmental, social or governance – is the most challenging for investors in emerging market companies to analyze?
Philippe Spicher: The social theme, as the related challenges vary from one country to another and from one sector to another. But overall, all themes are challenging, due to a lack of disclosure on ESG issues (although the situation is improving).
Emerging Markets ESG: You have been engaged in SRI in Switzerland for almost two decades. What role do emerging markets play in Swiss SRI? Has anything changed during the past ten years?
Philippe Spicher: Emerging markets definitely play a growing role in Swiss SRI. We started to analyze and rate emerging markets companies as early as 2006, at the specific request of one of our pension fund clients. At that time, we considered this as an investment and it starts to pay-off. We have accumulated quite some experience in analyzing these companies and are now able to respond to a growing demand. As a matter of fact, we have seen in the last two years more and more interest from investors and asset managers for SRI in emerging markets. And this trend will continue.