Julia Dreblow, founder of sriServices, believes the most noticeable SRI trend over recent years has been the increasing diversification of the sector, with an increasing profusion of choice compared to ten or twenty years.
While it has led to some criticism, one trend has helped bring SRI funds closer to mainstream benchmarks – and so helped them to appeal to a wider audience.
“This is the shift away from only applying ‘blunt’ negative exclusionary policies in favour of favouring companies which are ‘on balance’ considered better than their peers – and the definition of ‘better’ varies between funds of course.
“This has manifested itself in the shift towards considering both positive and negative business attributes more often and selecting more forward-looking sector leaders rather than excluding imperfect companies.”
Another popular and broad-based theme is the expansion of sustainability-themed funds, which, on a purely pragmatic level, make sense to many clients as well as advisers as this area is increasingly important to corporations.
Looking back, Mike Appleby, SRI investment manager at Alliance Trust, notes that the frenzy of interest in single-themed clean-tech funds that worked well in 2005-7 had collapsed by late 2008 as power prices and political incentive support softened and huge amounts of capacity were added in Asia.
“The lesson is you are probably better off with multi-themed funds to better exploit timing on these sustainability themes. These are long-term structural trends but do not move up in a straight line.”
Another theme he observes is that many large investment houses have opted to exit or seriously reduce dedicated SRI teams and outsource this type of research. “Many core SRI clients invested in their funds voted with their feet and moved into SRI funds. SRI clients are quite discerning.”
On the other hand, there has also been a big rise in the number of industry wide initiatives that are supported by many ‘household name’ major investors.
Ms Dreblow explains: “These programmes involve major investors working together to identify and encourage more robust, sustainable business practices across big business.”
The UN backed ‘Principles of Responsible Investment’ (UN PRI) is the biggest such initiative, currently boasting that over $30 trillion dollars is managed by its signatories.