Five Questions about SRI – Weekly Expert Interview with Helen M. Rake, Principal, Collins Capital Management, Inc., Jacksonville, Florida, United States of America – July 1, 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 Helen M. Rake, Principal, Collins Capital Management, Inc., Jacksonville, Florida, United States of America.

Established in 2002, Collins Capital Management, Inc. (CCMI) provides comprehensive wealth management services (analysis, financial planning and portfolio management) customized to each client’s profile.  Clients include business owners, individuals, qualified plans and trust accounts.  CCMI has developed a proprietary three-part process to identify companies that meet Environmental, Social and Governance (ESG) criteria, are fundamentally sound and represent good current value. The process includes fundamental analysis, a SRI Criteria Matrix© and technical indicators. Helen M. Rake, Principal and Portfolio Manager, CCMI, is a Certified Financial Planner™ Professional.  She is the President of the Northeast Florida Green Chamber, a member of the US Green Builder’s Council of Northeast Florida, the World Affairs Council and The Girls Gone Green. Helen has made it her mission to bring a better understanding of SRI to consumers and investors in Florida and beyond.

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

Helen M. Rake: I would define SRI as an “emerging market” in its own right. There is no one definition to which one can refer, because the definition of SRI is unique to each individual investor. SRI is still evolving and changing as investors needs and wants evolve. Even so, individual investors have accepted this strategy as a legitimate and important part of values driven wealth creation, just as emerging countries evolve and gain acceptance in global financial markets with time.

To me SRI is investing with the welfare of future generations as a primary goal. I think our clients would tell you that they wish to create wealth that sustains them and their children and grandchildren while also sustaining and improving the health of the world for the future. Our clients help to create wealth by placing their money with companies that foster and encourage sustainable products, services and business practices.

Emerging Markets ESG:  What distinguishes SRI from mainstream investment?

Helen M. Rake: Mainstream investing narrowly focuses on profitability for the company and its shareholders. Historically many corporations have had little regard for how their quest to create shareholder value damaged the environment or their employees’ wellbeing. SRI investing has a broader focus that encompasses not only profitability, but sustainability of nature, product, employee and corporation. Today I am happy to say that through shareholder advocacy the leaders of many mainstream companies have begun to realize that creating shareholder value is not enough, they must respect and embrace shareholder values. Otherwise shareholders will move their money to a competitor that does. SRI is quickly becoming much more mainstream because it makes good business sense and improves a company’s access to the fast growing eco-aware consumer segment.

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

Helen M. Rake: While I believe in many emerging countries with little infrastructure and corrupt governments all of these factors converge to present a formidable challenge, I would have to say that governance may be the most troublesome. Many emerging market companies are caught between government interventions, corrupt business affiliations and maintaining profitability. They may have less control over their internal practices and may cut corners to offset outside influences which could have devastating results for the environment, their employees and consumers alike. There are many examples of such consequences as we have seen with China’s recent milk and lead paint scandals.

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

Helen M. Rake: Without a unified global accounting standard, the most daunting challenge for investors, especially individuals and small wealth managers, that want exposure to emerging market companies is trusting company reports which may or may not be accurate or may be incomplete. This is often compounded by the fact that guidelines and regulations are very different from one country to the next. Even publically available research data regarding these corporations may be skewed or incorrect. The International Accounting Standards Board (IASB) is working toward an single international accounting standard that we hope is adopted in 2015, but unless these new standards are adopted by all countries there could still be confusion and inaccuracies that make it difficult for investors to know which emerging market companies are truly responsible and which are green washers. Of course, regardless of the amount of regulation or the size of the country there will always be companies that are less than honest. In the end, we must use our own best judgment when investing.

Emerging Markets ESG:  How can a small, independent registered investment advisor incorporate emerging markets SRI into its SRI portfolio?

Helen M. Rake: As a small firm, part of our challenge is having to depend on what is publically available without the benefit of hands on research that includes visiting emerging market countries and the companies themselves to get a feel for how business is conducted and to determine how much of the information we obtain is accurate. We sometimes have less access to certain international exchanges than we would like as well. Exchange traded funds are a simple and often efficient way to gain exposure to some markets and provide diversification that we otherwise may not be able to structure through individual securities, but they are not a perfect solution. Of course, there is no “perfect” solution so we will continue to put the client first and educate ourselves for their best interest.

Peer to peer information sharing, such as what is offered through Emerging Markets ESG, is very helpful in this respect. We are fortunate to live in a time when information is readily available and global connections are possible through the internet so we can all benefit from each other’s knowledge in areas of deficiency.

Disclosure:  Helen Rake, CFP® is a Registered Representative of and securities, advisory services, and certain insurance products are offered through INVEST Financial Corporation (INVEST), member FINRA/SIPC. Products offered are not FDIC insured, have no bank guarantee, and may lose value. INVEST does not provide tax or legal advice. Please consult your tax and/or legal advisor for guidance on your particular situation. Investment advisory and wealth management services are offered through Collins Capital Management and is not affiliated with INVEST or its affiliates.

*Opinions expressed are those of the author and not necessarily those of INVEST.