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 collect a catalogue of examples of SRI in practice in emerging markets;
- To raise awareness about SRI in emerging markets;
- To reflect on what SRI in emerging markets means to practitioners; and
- To enable SRI practitioners in emerging markets to network with peers around the world.
This week’s interview is with Rafal Matusiak, President of the Management Board, TFI SKOK S.A., Sopot, Poland.
TFI SKOK S.A. is part of the Polish credit union system. It began operations in 2004 and now runs eight different investment funds/investment strategies (five of them under an umbrella structure) while having over PLN 1 billion (approximately €250 million) assets under management. Due to the fact that people are most important for credit union systems throughout the world, SRI is very significant for TFI SKOK’s activity. Being pioneers of ethical investing in Poland, the company launched the first two Polish ethical funds. Rafal Matusiak is President of the Management Board of TFI SKOK S.A. He is also currently the Chairman of the Supervisory Board of the Cooperative Savings and Credit Union Financial Society. Previously he was a member of the management board of CDU Mutual Insurance Society and a member of the board of the National Association of Cooperative Savings and Credit Unions. He is a graduate of the University of Economics in Katowice, Poland.
Emerging Markets ESG: How would you define socially responsible investment (SRI)?
Rafal Matusiak: For me this is investing with eyes wide open. All the people, at all fields of their activity, must think not only about themselves but also about environment, other people and about the future. SRI is an investment strategy taking into account the manner that the economic activity of the companies issuing securities influences their environment. Investors that are socially responsible simply care not only for their investment goal but also for the fact whether their money is used in a proper way.
Emerging Markets ESG: What distinguishes SRI from mainstream investment?
Rafal Matusiak: Ethical screening. It is the initial phase of selecting securities that allows definition of the so-called ‘socially responsible investment universe’. It consists only of companies that meet previously-set ESG criteria while doing business. Once a company becomes a part of such an investment universe, its securities are further financially analyzed. That ensures the investor that the assets in his portfolio are issued by companies that are not only financially strong but also consonantly coexist and cooperate with their environment. There is another point of view, namely, that the difference between classical investment and SRI is the investors’ attitude to profit. The point is whether it is the only goal or not. In SRI strategies we look for compromise between profit and social responsibility.
Emerging Markets ESG: Which extra-financial theme – environmental, social or governance – is the most challenging for companies in Poland to manage?
Rafal Matusiak: In my opinion – governance. It is the area that is continuously being created and changed. The Polish free-market economy is only 22 years old and all the companies were either established or completely restructured in this period. Governance was not the managers’ priority in the initial phase bur during the last years its importance has grown substantially. Polish companies simply follow the way that their counterparts from developed countries have already covered, but using their experience, they follow that way much quicker.
Emerging Markets ESG: Which extra-financial theme – environmental, social or governance – is the most challenging for investors in Polish companies to analyze?
Rafal Matusiak: It is impossible to clearly define which one of these themes is more difficult to analyze than the others. ESG as such is a relatively new scope of interest for Polish companies. For many years they were used to publishing only their financial statements. It was practically impossible to perform ESG analysis then. Fortunately, this has been changing. More and more companies reveal their ESG activity, by adding ESG sections to their annual reports or publishing special ones. That helps investors a lot and makes our job much easier.
Emerging Markets ESG: TFI SKOK S.A. was the first Polish financial institution to launch an ethical investment fund. It now has two ethical funds. Would you please briefly describe the experience of the two funds, both as an investor in Polish companies and as an investment vehicle sold to Polish investors.
Rafal Matusiak: It was not easy in the beginning. When we launched our first ethical fund in 2008 there was nobody on the market who could provide us with ethical screening for Polish companies. Therefore, from the fund manager’s perspective it was impossible to define the socially responsible investment universe. In order to satisfy our investors, we cooperated with an Austrian ethical investment fund – buying its shares for our fund’s portfolio. But later the situation rapidly changed. ESG became more important for companies. Analytical companies entered the market. Ethical screening reports appeared. Thus we were able to redefine the investment strategy of our fund and fill its portfolio with debt securities of Polish ethically-screened companies. To offer our clients a wider range of investment opportunities, we also launched another ethical fund – focused on equities.
Finding investors in Poland was not a ‘bed of roses’. We had to explain to our potential clients the whole concept of ethical screening – practically teaching them what SRI is about. Although we still do that, we are not alone anymore. The growing interest in ESG issues brings us more investors. We believe that SRI will shortly become an important segment of asset and fund management in Poland. We are also aware of the fact that this will lead to strong competition. However, our potential rivals will only enter the market then. We are already there.