Deck 9: Responsible Investment

Question 1

To what extent do you think companies within the FTSE4Good are benefiting from their inclusion in these SRI benchmarking indices?
Refer to the report by Cobb et al. (2005).

Answer 1

Students needs to read a copy of Cobb et al. (2005). This can then be used as the basis for discussion in class. Students can be asked to research which companies are actually included on the index and why - what are the criteria. This in itself makes an interesting point for debate in class. They can then look at then evidence presented (as discussed in this chapter) and draw their own conclusions. Interesting questions to raise are for example, why are the conclusions of the study put in such careful terms?
The authors are very cautious about coming out strongly with conclusions. Further, what issues are the authors raising in their concluding section?
There is a philosophical section of the report which leads the way for further research and raises many new issues for debate. I suspect the issues raised in this report will be considered to be just as relevant now as then.

Question 2

Discuss whether you believe climate change is a material risk for institutional investors, supporting your arguments with reference to the literature

Answer 2

This question requires students to discuss the following paper:
Solomon, J. F., Solomon, A. Joseph N. L. and Norton, S. D. (2011) "Private Climate Change Reporting: A Discourse of Risk and Opportunity?", Accounting, Auditing and Accountability Journal, Vol. 24, No.8, pp.1119-1148.
This paper established the financial risk aspects of climate change for institutional investors
Students could then look at the websites for institutional investors such as Aviva or AXA to see what their stated climate change engagement policies are.

Question 3

Look at the website for the PRI. To what extent do you think PRI is driving responsible investment globally?
What are your views of their engagement and dialogue approach?

Answer 3

It is really interesting to look at the PRI website and to see the topics members are engaging on.
One important focus of the discussion could be increasing incidence of collaborative engagement whereby institutional investors from around the world collaborate to target companies on specific issues such as climate of board conduct, or diversity for example.
I normally ask the students to give group presentations where they explain the PRI Principles and provide examples of engagement in practice

Question 4

How important do you consider the role of institutional investors to be in saving species (such as bees) from extinction?
Why is species extinction a financial risk for the investment community?

Question 5

The socially responsible investment disclosure requirement for pension fund trustees had a substantial impact on trustees' attitudes towards, and practice of, socially responsible investment. This impact is, through a virtuous circle effect, likely to lead to increased corporate social responsibility. Explain and discuss the above statement with reference to the findings of academic papers and other published sources that you have read.

Question 6

Investigate one of the following cases: Nike, Huntingdon Life Science, Shell and Brent Spar, or BP and renewable energy. Discuss the implications of these cases for the socially responsible investment movement. Did they have a positive or a negative impact on the attitudes of institutional investors toward socially responsible investment?

Question 7

Spend some time developing your own diagrammatic image of the links between responsible investment and corporate social responsibility and the potential impact of socially responsible investment. Is yours a virtuous or a vicious circle?

Question 8

Do you think that the institutional investment community will take an increasing interest in responsible investment?
Or do you think responsible investment is a fashionable trend that will be dismissed in the near future?

Question 9

Do you agree with the findings of the Freshfields Bruckhaus Deringer (2005) report?
Do you think their findings set the scene for a completely new direction in pension fund investment at an international level?