Mumbai, Sept. 21: “The governance of the corporation is now as important in the world economy as the governance of countries.” This comment by World Bank president James Wolfensohn reflects the growing concern among investors on socially responsible investing. This kind of investing is big business in advanced countries, but in India, with lax controls and virtually non-existent shareholder activism, the awareness is low.
However, that is changing. Organisations like the Centre for Social Markets led by Malini Mehra is building awareness among investors, individual and institutional, on the need for more responsible investing.
It assumes more relevance as foreign companies source environmentally hazardous chemicals from India due to tougher norms in their own countries.
Responsible investors believe in social causes like helping micro-financing borrowers, who are otherwise fleeced by money-lenders and have no recourse to banks. They also work for the environment. In a small way, even foreign banks like ABN Amro and Rabo India have stepped into empowering women and financing municipal initiatives.
The potential is huge, considering that the Dutch banks have in their own country small co-operatives called Groen banks (green banks) that specialise in these activities. While it is catching on in other parts of the world, responsible investing in India is virtually non-existent.
A majority of these investment groups come from mutual funds and pension funds that form pressure centres to cajole companies into following their line of thinking.
Socially responsible investing is integrating personal values and societal concerns with investment decisions. It considers both the investor's financial needs and an investment's impact on society. With responsible investing, you can put your money to work to build a better tomorrow while earning competitive returns today.
In developed countries responsible investing is gaining in popularity. Recently, in Japan, the Nikko-Eco fund collected over $1 billion, an overwhelming response considering that it had targeted only $300 million in six months.
Social investors include individuals and institutions such as corporations, universities, hospitals, foundations, insurance companies, pension funds, non-profit organisations, churches and synagogues. In Indonesia, Islamic organisations also propagate social investing.
The Centre for Social Markets recently organised a seminar in Mumbai, where senior officials from Rabo India, ABN Amro, ICICI Bank and Industrial Development Bank of India participated.