In the Year 2022

{Editor's Note: This is the fourth in a weekly series of articles by experts in sustainable business originally published in the "GreenMoney Journal."}

By Barbara Krumsiek

BETHESDA, Maryland, August 20, 2007 (ENS) - Socially responsible investing is gaining momentum. The past 15 years have seen SRI redefined from exclusionary investing around sin stocks to a far more inclusive definition that embraces corporate governance, the environment, product safety, workplace standards, indigenous peoples' rights and other issues.

Today, SRI is about identifying companies with lower risk and better management. Today, SRI is about the integration of financial and social analysis in portfolio management.

We are indeed at the "tipping point" in a re-definition of mainstream investing. The growth in assets under SRI management and the explosive growth in the availability of SRI funds to investors, particularly in the popular 401(k) retirement programs, bode well for continued growth in the coming 15 years.

Barbara Krumsiek is chair, president and CEO of Calvert Group, Ltd. (Photo courtesy ASRIA)
However, what will be most remarkable about socially responsible investing in the next 15 years may well be the generational shift in the leadership of our corporations and financial firms. The average baby boomer, the founding generation of the modern SRI movement, will be nearing 70 years of age in 2022. In all likelihood, the founding generation will be well into active retirement.

Despite a lifetime of activism and historic shifts in cultural and social models, the boomer generation, having succeeded in establishing financial services infrastructure for SRI, microfinance and community investing, will likely not have produced a significant impact on poverty eradication, the environment and the quality of life in our communities. At least not yet.

In 2022 leadership of what used to be called SRI firms will have fully transitioned to the generation of professionals raised on Net Impact, social networking and Internet communications. People in my generation learned SRI on the job. Now, people are coming out of college with joint degrees in business and environmental studies. They went through business school when Net Impact made a difference and they learned from each other and social networking groups focused on social and environmental subjects.

The Internet makes it so much easier to communicate and share information about people who are marginalized - people we would never have heard about in all likelihood. So, our industry will be led by professionals operating in more sophisticated manner with a greater understanding of issues and better technology to address them.

The next 15 years will be all about outcomes. The Net Impact generation, having grown up in the post-civil rights, post-Vietnam era, will bring a heightened set of expectations to corporate leadership. Having been educated with business school curricula that include chapters on the strategic importance of integrating ESG [environmental, social and governance] analysis into corporate strategy, this generation will be driven to complete the work of the SRI founders by demanding outcomes in addition to process.

By 2022 we will see microfinance assets and programs embedded in just about all major financial institutions and making a significant dent in global poverty as these programs, in combination with corporate actions to better protect the environment and worker rights, are instituted throughout the emerging markets. Indeed, in 15 years the emerging markets will likely "have emerged."

Take China, a country of two billion people, all trying to improve their standard of living and growing their economy at double-digit rates. What does all that mean for emissions, water pollution, product safety and labor practices, not just for the Chinese but for the world? The issues we are working on so hard in this U.S. and much of the Western world will have to be dealt with in today's emerging market countries.

New metrics will evolve for measuring portfolios on ESG outcomes as well as financial ones. Morningstar ratings will be revised to include ESG outcome metrics as well as conventional financial risk/return metrics.

Already we are seeing companies reporting on things they never had to report on before: energy usage, greenhouse gas emissions, total number of spills, employee turnover, diversity and other subjects. Today, some companies have chosen to voluntarily issue reports that conform, at least in part, to the standards of the Global Reporting Initiative. But it's conceivable that we will see this type of reporting become mandatory at some point in the next 15 years.

As a final point, I believe the need for good ESG research will persist, as the issues of the early 2000s are replaced with the as yet unidentified issues of the future. What is the next issue around the corner? We never know. Twenty years ago it might have been climate change or five years ago, Sudan. Our task as analysts is to identify issues long before they become problems or worse, crises.

Many believe access to water and water scarcity will be the big issue of tomorrow. So, our task is not just attacking the issues we know, but identification of issues when they are in their nascent stage.

While there are many opportunities ahead of us, there is also the challenge of evolving the concept of SRI into something that will appeal to a much broader cross-section of people without losing touch with our roots. We need to strike a balance between taking the next step while being firmly rooted in the past and remaining true to our origins.

I believe that 15 years hence we will look back and say that in this era SRI grew to maturity and fulfilled its promise.

{Barbara Krumsiek is chair, CEO and president of Calvert Group, Ltd., an investment management and mutual fund firm. For more information go to http://www.calvert.com}

Copyright Environment News Service (ENS) 2007. All rights reserved.