Thanks for giving examples of advocacy efforts you might see as a good use of investor time and capital! Getting to the concrete outcomes of impact investing seems pretty key for figuring out in what situations it’s a good use of time and capital to engage in.
When you say, ‘shareholder advocacy, which is the primary mechanism for impact in public equity investing’, I find this very much plausible in the sense that it’s the part which seems to have the highest potential. Interestingly, though, when I last looked into this, the vast majority of the SRI industry by capital seemed to be not engaging in shareholder advocacy.*
I would expect shareholder advocacy to be worth the time of effectiveness-minded altruists only in very specific situations (perhaps including some of the ones you named), but given that good shareholder advocacy seems so rare even in SRI, I wonder if there is room for getting the entire SRI industry to actually do the part of SRI which seems promising? Is it true that most SRI capital isn’t being used for shareholder advocacy? Is it tractable to improve the industry in this way? (Is that already your main aim?)
--
*I’m not counting screening/divestment campaigns which don’t involve talking to specific companies, because this generally seems not to provide clear incentives for any particular company to do anything in particular. Best-in-class screening might be an exception, but the incentives still seemed super weak to me when I last thought about this. Overall, it looks like there’s ${tens of trillions} of assets considered to be SRI and a small number (on the order of 1,000 per year?) of good shareholder advocacy campaigns, which suggests a massive difference between the potential of SRI and SRI in practice today.
Thanks for a well thought through response! I agree that the vast majority of “SRI” funds aren’t engaging with their portfolio companies in meaningful ways. In fact, since I joined the industry in 2013, there has been a boom in providers claiming to be “sustainable”. The hardest part of what I do these days is sifting through the pitches to find investment firms that are taking this seriously and not just “greenwashing” as we call it.
That said, the trend is real and important, and there’s another part of it that’s worth considering: while there are indeed a limited number of engagements in any given year, the funds that want to be seen as sustainable often follow the leaders in the space into engagements, so while a small number of firms lead engagements, the ‘hangers on’ magnify the assets behind these proposals. I personally believe that EA minded individuals should look for asymmetric ways to spend their time, where by working on an issue, you can attract more capital/investors/time/energy/effort/utility. I also believe that the trends we’re seeing in the SRI industry are the first wave, as firms develop their capabilities and learn what their investors want. as time goes on, I believe we’ll see more funds voting their proxies in response to advocacy campaigns (although—this is my personal belief and I could very well be wrong)
I’d direct you to the post I made on my (very new—please be kind) blog on the recent USSIF trends report, which has some additional graphics about WHY asset managers are acting this way (self-reported data) that supports this belief.
Thanks for giving examples of advocacy efforts you might see as a good use of investor time and capital! Getting to the concrete outcomes of impact investing seems pretty key for figuring out in what situations it’s a good use of time and capital to engage in.
When you say, ‘shareholder advocacy, which is the primary mechanism for impact in public equity investing’, I find this very much plausible in the sense that it’s the part which seems to have the highest potential. Interestingly, though, when I last looked into this, the vast majority of the SRI industry by capital seemed to be not engaging in shareholder advocacy.*
I would expect shareholder advocacy to be worth the time of effectiveness-minded altruists only in very specific situations (perhaps including some of the ones you named), but given that good shareholder advocacy seems so rare even in SRI, I wonder if there is room for getting the entire SRI industry to actually do the part of SRI which seems promising? Is it true that most SRI capital isn’t being used for shareholder advocacy? Is it tractable to improve the industry in this way? (Is that already your main aim?)
--
*I’m not counting screening/divestment campaigns which don’t involve talking to specific companies, because this generally seems not to provide clear incentives for any particular company to do anything in particular. Best-in-class screening might be an exception, but the incentives still seemed super weak to me when I last thought about this. Overall, it looks like there’s ${tens of trillions} of assets considered to be SRI and a small number (on the order of 1,000 per year?) of good shareholder advocacy campaigns, which suggests a massive difference between the potential of SRI and SRI in practice today.
Kit,
Thanks for a well thought through response! I agree that the vast majority of “SRI” funds aren’t engaging with their portfolio companies in meaningful ways. In fact, since I joined the industry in 2013, there has been a boom in providers claiming to be “sustainable”. The hardest part of what I do these days is sifting through the pitches to find investment firms that are taking this seriously and not just “greenwashing” as we call it.
That said, the trend is real and important, and there’s another part of it that’s worth considering: while there are indeed a limited number of engagements in any given year, the funds that want to be seen as sustainable often follow the leaders in the space into engagements, so while a small number of firms lead engagements, the ‘hangers on’ magnify the assets behind these proposals. I personally believe that EA minded individuals should look for asymmetric ways to spend their time, where by working on an issue, you can attract more capital/investors/time/energy/effort/utility. I also believe that the trends we’re seeing in the SRI industry are the first wave, as firms develop their capabilities and learn what their investors want. as time goes on, I believe we’ll see more funds voting their proxies in response to advocacy campaigns (although—this is my personal belief and I could very well be wrong)
I’d direct you to the post I made on my (very new—please be kind) blog on the recent USSIF trends report, which has some additional graphics about WHY asset managers are acting this way (self-reported data) that supports this belief.
https://www.commoninterestsfinancial.com/2018-trends-in-responsible-investing/