Responsible investing isn’t just for hippies wanting to avoid stocks of tobacco or alcohol companies anymore.
The industry has undergone a broad shift, where the focus is on finding companies who are leaders in protecting the environment, reducing income inequality and promoting good corporate governance. Not because it’s a good thing to do, but because it makes good business sense, says John Streur. He is president and chief executive of Calvert Investments, one of the nation’s largest companies focused on sustainable investing.
Streur was recently in New York for a United Nations summit, where world leaders set new goals for sustainable development. Earlier, Pope Francis told diplomats at the United Nations that there is a “right of the environment.” Streur explains why he sees these as just the latest examples of an accelerating embrace of sustainable development, and investing.
Q: How up-to-speed were the people you met with at the UN?
A: We had a working session around the hoped-for implementation of the sustainable-development goals that were passed. And (German Chancellor) Angela Merkel was there. (Facebook CEO) Mark Zuckerberg and Paul Polman, Unilever’s CEO, were there. And our surprise guest for lunch was Bono (of U2). And Bono, boy, was he up-to-speed. He talked about the Dodd-Frank regulations. It was great.
Is there a belief that a “responsible” company will have lower returns than another one?
Yes, I think there’s a lot of that. There’s a lot of outdated thinking from an investor’s point of view but, interestingly, much less so from the CEO’s or big company’s point of view. That’s a fascinating dichotomy.
The CEO of Novozymes, which is a world-scale biotechnology company, his compensation is now directly linked to their achievement of their corporate sustainability goals. No board of directors would link executive compensation to that unless they were very confident that it served the interests of the corporation.
Novozymes is a European company. Do you think something like that would be popular in the United States?
Yes, I think that’s going to happen. Because it makes sense. Do you think Volks wagen wishes they had linked their CEO’s compensation to the achievement of proper environmental, social and governance standards? I’d say the answer to that is yes.
What’s behind the shift? Why should CEOs and boards care about the environment? Will it affect their stock price?
Unilever knows they need to secure access to agricultural products for the long term, because those are essential raw materials for the consumer products they manufacture. So they have a big effort both to source sustainable products and to teach people how to farm sustainably, because that secures their supply chain.
Other companies are figuring this out and saying, “Oh my gosh, we’ve been getting the cheap stuff, which is unsustainable. What are we going to do in 10 years if resources tighten up? What happens to us if we’re required to source sustainably?”
