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 Iveta Cherneva, Managing Editor, The Business Case for Sustainable Finance, and Executive Director, ICWords Ltd. – Bulgaria.
Iveta Cherneva is a writer and practitioner in the spheres of sustainable finance and ESG, public-private engagement, security policy, human rights and sustainability. She has worked on these issues for the United Nations, US Congress, Oxford’s Global Economic Governance Programme and a number of non-profit institutions. Currently she is the Executive Director of ICWords Ltd, a research consultancy firm she founded in 2011. Iveta is also a member of the G8/NATO Summit Young Atlanticist Working Group at the Atlantic Council in Washington, DC. She is the author of the book Trafficking for Begging (2011), co-author of Beyond Market Forces: Regulating the Global Security Industry (2009) and editor of the upcoming book The Business Case for Sustainable Finance (June 2012). Iveta has testified before the UN Working Group on business and human rights, and has been widely referenced academically; her articles have appeared in peer-reviewed academic journals such as The Fletcher Forum of World Affairs, Buffalo Human Rights Law Review, Essex Human Rights Review and the Intercultural Human Rights Law Review. Global Business Magazine calls her a “rising writer.”
Emerging Markets ESG: How would you define socially responsible investment (SRI)?
Iveta Cherneva: I would take the definition that the upcoming edited collection The Business Case for Sustainable Finance assumes: the integration of issues traditionally seen as public interest issues relating to the well-being of humans, society and environment, which now increasingly enter the realm of business and finance.
Emerging Markets ESG: What distinguishes SRI from mainstream investment?
Iveta Cherneva: SRI is really not that much different from traditional investment. SRI is an addition to something finance has always done and always will – the analysis of various factors that impact the likelihood of profit from investments. Why do you think financiers watch the news? Why are they concerned with countries’ elections outcomes, newly enacted laws, or international negotiations? For the same reason that SRI is part of investment: what happens in the world naturally affects financial decisions.
Emerging Markets ESG: Which extra-financial theme – environmental, social or governance – is the most challenging for companies in emerging markets to manage?
Iveta Cherneva: Here I would have to play the classical “It depends” card. It does make a difference if we are speaking about Eastern European emerging markets, with many of these states European Union (EU) members, South-East Asian emerging markets, or Sub-Saharan financial markets. This relativist position in fact is the position The Business Case for Sustainable Finance takes. Without trying to be evasive and without falling into regional stereotypes, each emerging market region or country faces various issues as priorities at different times. It is up to the individual institutional investor to draw the ESG list most relevant to the local context priorities, which they themselves know or should know best.
Emerging Markets ESG: Which extra-financial theme – environmental, social or governance – is the most challenging for investors in emerging market companies to analyze?
Iveta Cherneva: The ones investors are not aware of. I believe quantification is sometimes overrated as a challenge – the real challenge is the issues investors don’t even suspect to be affecting their work, such as corporate governance groupthink.
Emerging Markets ESG: Would you please share some of the key insights presented in the forthcoming book, The Business Case for Sustainable Finance. What is the business case for sustainable finance? And, what is the business case for sustainable finance in emerging markets?
Iveta Cherneva: From the point of view of financial institutions, the business case for sustainable finance is seen from the lenses of: ESG analysis as a predictor of a company’s quality of management; expanding portfolios and identifying new opportunities; cost-cutting; risk management; ensuring that according to “universal ownership theory” a negative issue does not re-appear in other parts of the portfolio to drive down returns; avoiding liability, litigation costs and ensuring regulatory compliance; enhancing success in emerging markets; and from a holistic long-term structural lens pertaining to the state of the economy and economic growth as a whole. The business case covers issues such as climate change, natural capital, human rights, poverty reduction, labor standards, social development, corruption, economic and social impact, etc., and finance industry sectors such as asset management & investment, banking, microfinance, insurance and re-insurance and accounting.
Following this interview, interviews with other contributors to the book will appear on Emerging Markets ESG in June and July 2012. These interviews will put the spotlight on the book’s specific chapters and each expert’s area(s) of expertise. I hope that readers will enjoy the upcoming interview series.