Stock selection

A careful consideration of environmental and social factors adds value to existing financial analysis:

Environmental

Issues which SRI investors are likely to examine include the exposure to and impact of corporate activities on: climate change, water scarcity, water, air (including noise) and soil pollution, toxic waste generation, biodiversity, resource depletion (such as tropical and old growth deforestation) and ecological footprint overload. High quality SRI research will consider these issues while undertaking a systematic assessment of the following:

Impacts: Comment on overall implications of product, process, service

Record: Look for infringements or negative publicity

Environmental Innovation: Look for indications of environmental innovation in product design, pollution minimisation/avoidance in manufacturing processes, strategic thinking in management planning.

Employee Motivation: Do they encourage employees to reduce impacts eg recycle, avoid car use, minimise use of aircon, if so how successfully and do they set housekeeping or other targets to measure these?

Management: Management commitment, management systems and standards, such as ISO 14000 and management training.

Companies which SRI investors find attractive from an environmental perspective can demonstrate clear, uncompromised thinking about the environment as a core component to their corporate strategy. They can also show examples of eco-efficiency, increasing the material and energy resource use efficiencies of their operations, and the eco dimension to new product design.

Social

In considering the social aspect of corporate performance the following factors are usually considered by SRI researchers.

Profit sharing: % of employees benefiting.

Welfare at work: Employee turnover, Health and safety record (number of lost days to accident, illness and injury), Family friendly policies (No. of provisions beyond legal requirements), Redundancy policies. The adequacy of pension provision.

Equal opportunities and diversity: women and minorities in line management, and senior management positions, including board level representation.

Participation and rights: % of workforce unionised, participation in management and communications (% satisfied in employee opinion surveys)

Civil or employee actions: No of employee disputes/ strikes, community demonstrations and regulatory notices/action.

Supplier Motivation: Do they encourage suppliers to improve environmental and social performance, how? ISO 14000, SA8000 or other?

Community and Public Policy : Community action and giving (?and kind), nature of policy participation. Policies for overseas operations: Global standards?

Corporate Governance
Split role of Chair and CEO, transparent and independent remuneration policies for directors, length of directors' contracts, number of NEDs, market reputation.

The companies which SRI investors find attractive from a social perspective can demonstrate the strong and willing involvement of the entire workforce in the development of the company. They can equally show the ways this is achieved. The company will also be able to demonstrate its accountability to the wider world through appropriate corporate citizenship.