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 Robert Rubinstein, Founder and CEO, TBLI Group™, Amsterdam, The Netherlands.
Robert Rubinstein founded TBLI Group™. TBLI Group™ have pioneered the concept of “Triple Bottom Line Investing” (TBLI) or as often referred to as ESG (environmental, social and governance) or impact investing, which is a sustainable finance approach that takes into account environmental, social and financial returns. In this context, we have played a key role in mobilizing private sector capital for sustainable development projects. As part of their activities, TBLI Group™ has organized seventeen TBLI Conference™ events as well as sustainable finance training programs for leading banks, including teaching sustainable finance to MBA students at Rotterdam School of Management. TBLI Conference™ has become the most important and largest event on ESG Impact Investing in the world.
Emerging Markets ESG: How would you define socially responsible investment (SRI)?
Robert Rubinstein: The definition that TBLI uses is not the same as what others use. Here is a standard definition: ESG adds social and/or environmental value to external stakeholders, while increasing value to shareholders.
The definition that we use is the following: I believe that if companies achieve environmental and social balance, then their profitability will be the highest.
ESG or Impact Investing questions if, to maintain profitability, your products or services:
- worsen environmental and social balance;
- maintain social and environmental balance; or
- improve social and environmental balance.
Emerging Markets ESG: What distinguishes SRI from mainstream investment?
Robert Rubinstein: SRI is a more a holistic approach to analyzing a company’s performance. One looks at the social, environmental and governance as well as financial. This approach actually lowers risk because it takes into account all the potential risks (social, reputation, environmental, governance) and is a much more professional manner in managing money.
Emerging Markets ESG: Which extra-financial theme – environmental, social or governance – is the most challenging for emerging market companies to manage?
Robert Rubinstein: I would say that the environment is hard, not because it is hard to do, but because it requires investment. Emerging markets often are starting to build their economy and are focused on jobs and growth. The perception is that by investing in environmental safeguards, this will impact returns. China is the most extreme example. Massive growth occurs at the cost of the environment, which ultimately means even more investment later, which hurts returns.
Emerging Markets ESG: Which extra-financial theme – environmental, social or governance – is the most challenging for investors in emerging markets to analyze?
Robert Rubinstein: I would say social is the most challenging, because it is the hardest to measure. Not only for emerging markets companies. Developed markets have the same problem. How to measure the emotional and social health of an organization is quite difficult, in spite of the development of various tools. Some things are just hard to measure. If I asked you how happy are you at your job, only looking at the amount of money spent on training, how many accidents there were, the amount of sick days, etc, this might not give an indication of the social balance of the organization.
Emerging Markets ESG: You established TBLI Conference Europe 12 years ago and TBLI Conference Asia in 2006. How has SRI evolved over the past 12 years and why is it still a niche practice?
Robert Rubinstein: I think we have moved from why (why should one do SRI) to how (how to implement SRI in our investment analysis). That change in attitude has been the most rewarding. TBLI has always focused on trying to get the financial sector to see three things; self -interest, opportunity, and money flows. That is what is required to get buy in and ultimately asset allocation.