Five Questions about SRI – Weekly Expert Interview with Stephen Hine, Head, Responsible Investment Department, EIRIS, United Kingdom – November 11, 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 Stephen Hine, Head, Responsible Investment Department, EIRIS, United Kingdom.

Stephen Hine is Head of the Responsible Investment Department at EIRIS, Experts in Responsible Investment Solutions.  EIRIS, a signatory to the UN Principles for Responsible Investment (PRI), is an independent, not-for-profit organisation, working to help its clients develop the market in ways that benefit investors, asset managers and the wider world.  Its mission is to empower responsible investors with independent assessments of companies and advice on integrating them with investment decisions.  EIRIS sector-based research teams provide in-depth coverage of around 3,000 companies globally, covering over 100 different environment, social and governance issues.  Stephen joined EIRIS in 1989 and works to expand the market for responsible investment in the UK and beyond. He also assists in the promotion of both EIRIS’ services for investors and of socially responsible investment (SRI) in general, directly or through partnerships. He has worked closely with EIRIS’ overseas sales partners for the marketing of ESG/SRI data internationally. Stephen is also responsible for policy development at EIRIS, working with the Global Reporting Initiative (GRI), UK Sustainable Investment and Finance association (UKSIF), Eurosif, the Organisation for Economic Co-operation and Development (OECD), United Nations Principles for Responsible Investment (UNPRI) and governments amongst others.  Stephen represents EIRIS on a steering committee working on the Voluntary Quality Standard for Corporate Sustainability and Responsible Research set up by independent SRI research groups in Europe. He is a Trustee of the FairShare Foundation and Treasurer of the Association for Independent Corporate Sustainability and Responsibility Research.

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

Stephen Hine:  SrI is the application and ideally integration of environmental, social and governance factors into financial analysis, providing both an historical as well as forward looking picture of how these issues affect longterm profitability and sustainability of a company.

Emerging Markets ESG:  What distinguishes SRI from mainstream investment? 

Stephen Hine:  In an ideal world there would be none and should be none. Responsible investment has the forsight to know that certain global challenges such as water, climate, food, have implications for the long term valuations of companies. And the imagination to believe that these also present opportunities to the prescient investor. This can be the place where values and value meet in the centre of the sustainability nexus.

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

Stephen Hine:  This varies by market as awareness of issues may depend on local variables such as profile of issue; state of government regulation; strength of civil society; extent of corporate management awareness; whether shareholder base (or markets operated in) include investors (or consumers) who may raise such issues. That said social issues may be more difficult especially in countries with human rights challenges where the raising of such delicate matters can be problematic.

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

Stephen Hine:  Much the same considerations as above apply. However, part of the challenge is the relative but improving record on ESG disclosure. Initiatives such as the growth in sustainable stock exchanges – we work with those in Johannesburg and Mexico – and better reporting requirements from some gov’ts etc are helping to make this task easier.

Emerging Markets ESG:  In early October 2011 EIRIS published the report “State of Responsible Business (Asia).”  What were the key findings of the report and what are the most important issues in SRI in Asian emerging markets today?

Stephen Hine:  Key findings include the fact that Japan & Korea are ahead of other countries in the region across all issues but that even for these two social performance is less good than environmental. China lags behind the other countries but is starting from a low base and for leading companies reporting and perfomance on environment in particular is improving and will continue to do so. Very few companies anywhere in Asia have even a basic human rights policy.

More ESG findings on emerging markets will be available as we launch our new Emerging Market Service early in 2012.