Domini Social Investments LLC, manager of the Domini Social Equity Fund (NASDQ: DSEFX), announced today that Steven D. Lydenberg, a principal of the firm, has published an article entitled, "Envisioning Socially Responsible Investing: A Model for 2006," in the October issue of The Journal of Corporate Citizenship. The groundbreaking article identifies the trends that are shaping socially responsible investing (SRI) and argues that new organizations and initiatives must be created to satisfy a growing demand for SRI research, products and education. The article’s proposals include the creation of new, niche-market SRI research firms and the integration of SRI and corporate social responsibility (CSR) into business school curricula and financial analyst training.
"Envisioning Socially Responsible Investing: A Model for 2006" is intended to paint a picture of the developments and initiatives that may occur over the next several years if the SRI community is to seize this historic moment, and to provoke thought and debate on the future course of socially responsible investing. Mr. Lydenberg will be addressing aspects of his paper at Ethical Corporation’s "How to Manage Corporate Responsibility" conference in New York City on October 2nd – 4th and at the Social Investment Forum’s "SRI in the Rockies" conference in Colorado Springs, Colorado, October 17th – 20th. An executive summary is available at the Domini web site, http://www.domini.com .
"After three decades of laboring to win recognition and acceptance, socially responsible investing (SRI) now stands at a crucial juncture," says Lydenberg. "It has emerged from what was essentially an obscure niche financial market to become a potentially important player in a major political debate about globalization, the relationship between corporations and society, and the role of capital in creating both social and financial value."
In his article, Lydenberg argues that SRI needs to capture the gains it has made to date and leverage the same to create new initiatives that are more ambitious and potentially more effective. His paper focuses on three communities – the corporate community, institutional investors, and the wider financial community (including academic institutions) – and examines the role that SRI practitioners can play in helping those communities create new models and programs to hasten meaningful change.
In the corporate community, Lydenberg writes that companies will need to clearly and specifically state their social and environmental values, adopt specific management practices to integrate these values into their operations, and fully disclose comprehensive data on their social and environmental impacts. The SRI community, government regulators, academics and nongovernmental organizations (NGOs) need to be involved in shaping the disclosure and reporting regimes that will help make corporate practices more transparent.
Institutional Investors will need to adopt comprehensive proxy-voting policies on social, environmental and corporate governance issues, and to publicly disclose their proxy votes as well as the extent to which they incorporate social and environmental issues into their investment practices. The SRI community can aid this effort by delivering a range of research, educational and consulting services to institutional investors concerned with social and environmental issues.
Mainstream financial firms need to train their analysts to routinely incorporate corporate governance and CSR considerations into securities analysis for stocks and bonds. The SRI community can help develop financial valuation models that incorporate social and environmental data, integrate the fundamentals of SRI and CSR in the training and self-certification process for financial analysts, and help educate senior executives and boards of directors of financial services companies.
In addition, the academic community should begin offering courses and degree programs in CSR and SRI, and the SRI community can assist in this process of developing new curricula, degrees, research initiatives and research centers.
Finally, Lydenberg argues that the SRI industry itself needs to develop new quality standards, undertake theoretical research on topics of communal concern, and create a network of issue-specific, niche-market research firms to analyze particularly complicated sets of social and environmental data (e.g., toxic chemicals, bank lending practices, union relations, military contracting information, and labor practices of companies operating in developing countries).
Steven Lydenberg is a Principal of Domini Social Investments. He has been active in social investing for more than 25 years and is a founder and the former Director of Research at Kinder, Lydenberg, Domini & Co. (now known as KLD Research & Analytics, Inc.), where he was instrumental in the creation and maintenance of the Domini 400 Social Index(SM), the first socially and environmentally screened equity index in the United States. He also played a key role in the development of the firm’s Socrates Database, currently a major corporate accountability research tool for socially responsible institutional investors. In 1986, he co-authored Rating America’s Corporate Conscience, the first systematic assessment of the records of corporations across a broad range of social and environmental issues. He is also co-author, with Amy Domini and Peter Kinder, of The Social Investment Almanac (1993) and Investing for Good (1994).
Domini Social Investments manages more than $1.2 billion in assets for individual and Institutional investors seeking to create positive change in society by integrating social and environmental criteria into their investment decisions. Its flagship fund, the Domini Social Equity Fund (NASDQ: DSEFX), was the first socially and environmentally screened index fund and is the nation’s largest socially responsible index fund. The Fund includes companies with positive records in community involvement, the environment, diversity and employee relations, and excludes companies deriving significant revenues from alcohol, tobacco, gambling, nuclear power and weapons contracting. In addition to the Domini Social Equity Fund, the company also offers the Domini Social Bond Fund (NASDQ: DSBFX) and an FDIC-insured money market account (in partnership with ShoreBank), both of which focus on community economic development.