Five Questions about SRI – Weekly Expert Interview with Ben Ridley, Head of Sustainability Affairs for Asia Pacific, Credit Suisse AG, Hong Kong – June 29, 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 Ben Ridley, Head of Sustainability Affairs for Asia Pacific, Credit Suisse AG, Hong Kong.

Established in 1856, Credit Suisse is one of the world’s leading financial services providers. As an integrated bank, Credit Suisse offers clients its combined expertise in the areas of private banking, investment banking and asset management, providing advisory services, comprehensive solutions and innovative products to companies, institutional clients and high-net-worth private clients globally, as well as to retail clients in Switzerland. Credit Suisse aims to conduct business with a long-term view to support environmental and social sustainability, and in this regard is a constituent of the Dow Jones Sustainability World Index and FTSE4Good Indexes, as well as being greenhouse gas neutral globally.  Credit Suisse’s Sustainability Affairs team is responsible for inter alia assessments of environmental and social matters primarily in the marketplace, but also the internal supply chain and the workplace; and for managing relationships with key stakeholder groups, such as the NGO community. The team’s key areas of experience include strategic and project-specific environmental and social impact assessment, management, monitoring and communications. Ben Ridley joined Credit Suisse following 15 years as an international sustainability consultant supporting customer needs in Asia and globally. He is a member of the Advisory Board of the Association of Sustainable and Responsible Investment in Asia (ASrIA).

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

Ben Ridley:  SRI, or increasingly just Responsible Investing (RI), is investing based on human values, or ethics and responsibility, which take account of environmental and social aspects to a significant extent. This means profit is not the primary motivator of SRI/RI, although there will be a varying importance attached to financial returns depending on the investment type.

 Emerging Markets ESG:  What distinguishes SRI from mainstream investment? 

Ben Ridley:  For an investor motivated by SRI/RI, ensuring that an investee company embeds these same human values into all aspects of its business weighs as least as heavily in an investment decision as the weight given to financial returns. The emergence of Impact Investing – with the express aim of making a positive environmental and/or social impact while having the potential for a financial return – is increasing the distinction with mainstream investment. Impact investing can be considered as core SRI/RI, whereas the use of ESG screening to achieve a risk-adjusted financial return in some otherwise mainstream investments can be considered as fringe SRI/RI.

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

Ben Ridley: The nature and scale of the challenge varies by country, sector and company. For example, we may say that food safety and labor rights have improved in China in recent times, but challenges may remain at a company and asset level and these can be exacerbated by rising employee and community expectations. Companies with robust governance frameworks should by default have better control of environmental and social risks, although bridging the capacity gap between commitment and credibility (i.e., performance and disclosure) remains a key challenge for many emerging markets companies.

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

Ben Ridley:  Corporate transparency and disclosure on ESG matters is relatively weak in emerging markets, even for the largest companies and most advanced economies, and this represents a major ongoing challenge for investors. It is also a challenge for investors to see through community CSR and philanthropy initiatives which, although certainly important, often deflect attention from more substantive issues such as human rights in the supply chain or biodiversity loss from land use conversion.

Emerging Markets ESG: In order of importance, what are the three most pressing sustainability issues for banks operating in Asia? 

 Ben Ridley:  Be they international, regional or local banks: enhancing internal governance to ensure products and services are not indirectly contributing to significant adverse social or environmental impacts; proactively supporting the development of the regional SRI/RI market; and disclosing their ESG performance against internationally recognized standards.