Five Questions about SRI – Weekly Expert Interview with Dragomir Boyadzhiev, Managing Partner, Copula Capital Advisors, Sofia, Bulgaria – May 4, 2012

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 Dragomir Boyadzhiev, Managing Partner, Copula Capital Advisors, Sofia, Bulgaria.

Copula Capital Advisers is a comprehensive corporate research and advisory services entity founded in mid-2009 by a team of veteran accounting and investment professionals with extensive experience in corporate advisory, financial analysis, portfolio and risk management and broad professional skills in the scope of accounting services.  With a cumulative investments and advisory experience of more than 15 years, it pretends not only to know the investment environment in Bulgaria and the region thoroughly, but more importantly to understand it.  It closely monitors and examines its sectors of interest, in order to be constantly up to date with recent technologies and trends.  Copula Capital Advisors currently provides a broad range of both traditional and environmental, social and governance (ESG) sector and company research, valuation and analysis, including macro-economic assessments of different companies, sectors and industries, as good as private equity advisory for its institutional clients.  It closely looks at and specializes in the most promising sectors, such as energy & renewable energy sources (RES), hi-tech, biotechnologies, telcos & IT. Thus it keeps its devotion to support clients with the best service by offering core and independent views.  Dragomir Boyadzhiev has extensive experience in portfolio and risk management, econometrics and statistical analysis. His professional record includes a wide range of activities in the field of financial analysis and securities trading.  From 2005 until 2007, Dragomir worked consequently as a Financial Analyst, Chief Financial Analyst and Investments Consultant for Deltastock AD, later he joined Expat Asset Management EAD as Portfolio Manager and Procurator.  Currently he is Managing Partner at Copula Capital Advisors OOD, Investments Consultant at Denovo EAD and CEO at the Bulgarian Investment Managers Association.  Dragomir holds a Bachelor’s degree in Logistics from the Technical University of Sofia, a MSc degree in Finance from the University of Veliko Tarnovo and a Degree in Investments from the Postgraduate Institute at University of National and World Economy, Sofia.  In early 2006 he was certified as an Investment Consultant by the Bulgarian Financial Supervision Commission.

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

Dragomir BoyadzhievInvestors usually focus their strategies on the required rate of return on their investment.  When additional social and ecological constraints are adopted, investors weigh the social and ecological costs of their investments along with profits.  Specific issues, such as consumers and employers protection, diversity, environment, fairtrade and human rights are important guidelines for socially responsible investors.

Common topics for socially responsible investments include:  avoiding investments in companies that produce or sell weapons, gambling and addictive substances; and seeking out companies engaged in environmental sustainability and renewable energy (the so-called negative and positive screening).  Socially responsible investments can be made in individual companies or through a socially responsible exchange-traded fund, mutual fund or pension fund.

Emerging Markets ESG:  What distinguishes SRI from mainstream investment? 

Dragomir Boyadzhiev: If referring to the old school (and still the mainstream) theory of finance, one will observe that the only goal of the company is to maximize both its profit and shareholders’ wealth.  There is an underlying view that the purpose of a firm is not to work socially and eco-responsibly, but merely to make money… at all costs.

However, more and more professionals believe that being responsible and being wealthy (profitable) are two terms, which are not mutually exclusive.  Making additional spending for some specific issues, which directly affect the company and its activities, could help the overall corporate value grow in the long term.  And when an investor adopts this view, he puts these socially responsible companies on his screen.  He begins to follow a long-term investment approach that integrates economic, environmental and social considerations for the selection and retention of investments.  He becomes a socially responsible investor.

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

Dragomir BoyadzhievDespite the fact that it is part of the European Union (EU), Bulgaria is still an emerging market.  The country has much to do in many areas and, of course, ESG issues are among these.  While there are good practices employed and many activities undertaken with respect to corporate governance issue, environmental and social issues are still not being respected fully.  Many companies do not understand the need of being environmentally and socially responsible or do not want to adopt this code of behavior.  It is only recently that some of the largest corporations started to pay attention to environmental and social issues. And unfortunately the number of these companies is not large at all.

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

Dragomir BoyadzhievThere is a significant lack of information regarding all of the ESG issues.  At the same time, the stakeholders – mainly investors and the society at large – are beginning more and more to pay attention to corporate activities and the footprint of companies.  There are many ecologically-oriented NGOs engaged in environmental issues and many industrial chambers addressing ethical, governance and social issues; however, their information is usually subjective, unclear, and most of all non-quantified.  These problems are now in the past, since the Bulgarian Investment Managers Association, being part of the European Society of Financial Analysts Societies (EFFAS) initiative, adapted and presented the EFFAS key performance indicators (KPIs) to the Bulgarian business community.  And with our next step – the establishment of the first core ESG advisory company (Copula Capital Advisors), my belief is that we will be able to offer a standardized information tool to financial analysts and investors.

Emerging Markets ESG:  What is the business case for ESG analysis, disclosure and management in Bulgaria? Which challenges will your new firm face in growing its business?

Dragomir Boyadzhiev: There are very few ESG reports published by Bulgarian companies until now.  We are currently partnering with two industry chambers on the establishment of their environmental, social and governance codes.  It is obvious for us that the business community in Bulgaria is becoming more and more concerned about ESG reporting and realizes the need for it.

Major problems will appear and they have already started to appear for us, regarding the readiness with which each rated company partners in the overall process of collecting ESG information and preparing the ESG rating.  The process of collecting the ESG information is crucial for the whole procedure and the partnership with the company is for its own good.  It is obvious that the exactness of the rating depends strictly on the quality of the information which has been provided by the company.