Do you know where the money you invest goes? What businesses or endeavours does it fund while accumulating a return for you? As individuals and large investors increasingly ask these questions, the strategy of responsible investment—seeking to maximize both financial return and social good—has gained in popularity.
“There is a tremendous interest in how large investors can have an impact on corporations,” says Tessa Hebb, managing director of the Carleton Centre for Community Innovation (3ci).
Hebb’s research, supported by a grant from the Social Sciences and Humanities Research Council, focuses on the financial and extra-financial impact of pension fund investment in Canada. She explored the topic in her recently released book, No Small Change. As the largest single driver of financial markets around the world, pension funds have the ability to use their ownership position to change corporate practices for the sake of the bottom line and, perhaps, better the world in the process.
“Pension funds have to pay out benefits over many decades, so their trustees are concerned about the long-term value of the stocks in their portfolios,” says Hebb, BA/95. “If a company is taking a risk, the investor is at risk. We see investors factoring in governance, environmental and social standards.”
Instead of divesting of stock when they don’t like what a company is doing, investors now engage with the company to improve it. “Investors signal change to companies about what society expects from them,” says Hebb. “Engagement is a new strategy.”
The Responsible Investing Initiative at 3ci is undertaking research needed to quantify the impacts of pension fund corporate engagement. The centre is developing tools and instruments for social finance and collecting evidence to support the approaches.
“There is a gap between a board developing policy and staff implementing it. This is where 3ci comes in with tools and information,” says Hebb. “There’s interplay between the university and stakeholders: knowledge has a latent capacity for action and when co-produced with the community, it is activated.”
While social investing is rather new in North America, it is more established and innovative in Europe. As a participant at the first European Centre for Corporate Engagement (ECCE)/United Nations Principles for Responsible Investment (UNPRI) responsible investing academic conference in September, Hebb can help to connect 3ci to international expertise.
A first step in building a global academic network around responsible investment, the conference also facilitates joint research projects in the field. Hebb was pleased to offer to host the second conference at Carleton in September 2009.
“Mentoring is a key part of the work we do, so bringing international networks to students, connecting them, and giving students a platform at the conference are important,” says Hebb.
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