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 Professor Danica Purg, Founder and President of the IEDC-Bled School of Management, Bled, Slovenia and of the Central and East European Management Development Association (CEEMAN).
Professor Danica Purg is the founding and current President of the IEDC-Bled School of Management, Slovenia and the founding President of CEEMAN (the Central and East European Management Development Association), which has 185 members from 43 countries and whose aim is to enhance management development in Central and Eastern Europe and other emerging economies. She is also chairperson and director of the European Leadership Centre (ELC), established with the aim of assessing and promoting European leadership through the organization of forums, workshops and research. Professor Purg is also a member of several international advisory boards. Recently she has been invited to become a member of the UN Global Compact Steering Committee of PRME (Principles for Responsible Business Education). Since 2007 she has been President of UN Global Compact Slovenia. After graduating from the Faculty of Political Science in Ljubljana, she completed her PhD at the Faculty of Political Sciences, University of Belgrade, and studied at Harvard Business School, IMD Lausanne, INSEAD, Technological University Delft, London University, Sorbonne, and Kalamazoo College, USA.
Emerging Markets ESG: How would you define socially responsible investment (SRI)?
Danica Purg: For me, socially responsible investment is an approach to investment that takes into account not only the potential for creating shareholder value, but also proactively seeks to create stakeholder value – positive return for all parties that have a stake in the new venture. When both, shareholder value and stakeholder value are pursued, we are able to find a sweet spot for creating truly sustainable value.
Emerging Markets ESG: What distinguishes SRI from mainstream investment?
Danica Purg: Originally, socially responsible investment was pursued ad hoc; rather random projects were supported based on some preliminary promise of positive social, environmental, and governance impact. Now, it is a rather elaborate and systematic approach of screening and selecting investment projects that have strong evidence of potential positive impact beyond mere financial return.
Emerging Markets ESG: Which extra-financial theme – environmental, social or governance – is the most challenging for emerging market companies to manage?
Danica Purg: While emerging markets have some similarities, they also vary significantly. Thus, for a different market or even a different industry, the priorities and challenges differ significantly. In some markets, such as post-socialist countries, the social theme is rather easy due to a long history of social investment, but the environmental and governance dimensions are less understood, appreciated, or pursued. In some other markets, for example, in some countries of Latin America, the environmental dimension is thriving. So, one size does not fit all – historical, political, economic, cultural, educational and other factors influence the specific context within each market.
Emerging Markets ESG: Which extra-financial theme – environmental, social or governance – is the most challenging for investors in emerging markets to analyze?
Danica Purg: The unfortunate answer is that, when it comes to emerging markets, all three are extremely difficult to analyze. In many emerging economies, the infrastructure for collecting valid information, as well as making that information available to the market, simply does not exist. Added to that is a wide-spread damage of corruption, where information is constantly adjusted and manipulated, to fit particular needs and interests. Finally, many countries lack basic awareness, understanding, and appreciation of these issues, and therefore lack ability to develop clear metrics for capturing and understanding the data on social, environmental, and governance performance of business.
Emerging Markets ESG: What role does management education play in promoting responsible/socially responsible investment policies and practices?
Danica Purg: It is my strong belief that management plays an essential role in developing the mindset, competencies, and skills necessary for the promotion of responsible investment practices. I see the impact of good education in this area every day. For us, at IEDC-Bled School of Management, issues of social, environmental, and governance performance of business are embedded across the entire curriculum, and enjoy an important focus in finance, accounting, strategy, and many other courses – while being attended to by two compulsory courses – Business Ethics & Corporate Governance as well as Business in Society: Sustainability for Competitive Advantage. I am happy to say that managers feel their entire perspective is literally transformed after such intense educational experience, where they don’t only understand the responsibility of business, but also treat it is a great opportunity for long-term value creation.