Five Questions about SRI – Weekly Expert Interview with Bogomila Hristova, Chair, Bulgarian Investor Relations Society – April 15, 2011

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 reflect on what SRI in emerging markets means to practitioners;
  • To collect a catalogue of examples of SRI in practice in emerging markets;
  • To raise awareness about SRI in emerging markets; and
  • To enable SRI practitioners in emerging markets to network with peers around the world.

This week’s interview is with Bogomila Hristova, Chair, Bulgarian Investor Relations Society (BIRS).

Bulgarian Investor Relations Society (BIRS) is an organization of professionals active in investor relations (IR) and IR related activities.  BIRS aims to stimulate the good performance of securities issuers through perfecting their relations with the investment community.  BIRS does its best to establish high criteria of professionalism and ethics in the investor relations profession in Bulgaria and works actively to introduce the best international practices in the field of investor relations.  Recent BIRS activities for Bulgarian IR professionals include:  job descriptions and standards for IR professionals, an educational program and an online library.  These activities are the result of a project realized by BIRS and Foundation Burov, and financed by the EU funds program OPAC.  Bogomila Hristova is Chair and one of the founders of BIRS.  She is the investor relations director of Industrial Holding Bulgaria plc as well as a representative of BIRS at the Global Investor Relations Network and a member at the Bulgarian National Corporate Governance Commission.

Emerging Markets ESG:  How would you define socially responsible investment (SRI)?

Bogomila Hristova:  For me, SRI is to invest in companies that sustain a good social responsibility, take into consideration social issues such as care to people, environment and society as a whole, and aim at sustainable development, thereby contributing to the economic sustainability of the country and the world.  Socially responsible (SR) companies care about adhering to legislation, standards for healthy and safe labor conditions, professional development and growth of the employees, good corporate governance, environmental issues and safe products. Such companies maintain good relationship with stakeholders – employees, contractors, the local community and society.

Emerging Markets ESG:  What distinguishes SRI from mainstream investment? 

Bogomila Hristova:  Investors invest for a profit and the difference in mainstream and SRI investment is the attitude of the investors to profit. In my opinion, in mainstream investment fast profit is the main criteria, while in SRI investors together with analyzing the financial results take into consideration the behavior of the company on SR issues.  By investing in SR companies, investors contribute to the sustainable development of the economy and the society.

Emerging Markets ESG:  Which extra-financial theme – environmental, social or governance – is the most challenging for companies in Bulgaria to manage?

Bogomila Hristova:  I would say that all three are challenging now, especially in and after the crises from the past two years. Good corporate governance is comparatively new for emerging markets that changed from a state-owned to a private-owned economy. Even after 20 years since the changes, it is still a challenge and there is much to be learned and improved.

Coping with environment issues is mostly a matter of finance – investments are needed to comply with the frequently changing environmental requirements and regulations.  The social issues are not a big problem to former socialist companies because they have had great achievements in that in the past. Here again the challenge comes from the financial resources available for social issues.

Emerging Markets ESG:  Which extra-financial theme – environmental, social or governance – is the most challenging for investors in Bulgaria to analyze?

Bogomila Hristova:  Probably environmental – it is more complicated to understand which requirements apply to the specific business / sector and how the specific company complies.  In addition to reporting, the company must also correctly assess the environmental risk of the business and take the proper measures to manage this risk.

Emerging Markets ESG:      Bulgaria became a member state of the European Union (EU) in 2007.  What changes in extra-financial reporting have occurred during the past five years and what are the drivers for improving extra-financial reporting in Bulgaria?

Bogomila Hristova:  I would not relate extra-financial reporting with the accession of Bulgaria to the EU. In my opinion, the process of extra-financial reporting moves with comparatively the same speed in all capital markets, as the investors are almost the same. So, in Bulgaria, listed companies have had a legislative requirement to report on complying with the OECD best practices in corporate governance and on environmental issues before joining the EU. But of course, after joining the EU the legislative requirements are synchronized with EU directives and thus made comparatively the same in each EU country which makes things easier for investors.