Sunday, 18 February 2007

Changing financial analysis

A major feature of the socially responsible investment world of the past few years has been a focus on financial analysis. Specifically there has been a trend towards getting analysts to look at possible linkages between corporate social responsibility issues and financial performance, and, by extension, share price performance.

In a sense this is a shift away from screened funds of the past. In addition more recent developments like the Enhanced Analytics Initiative have turned attention to sell-side analysts, one the reasons being that they are deemed to be more influential in terms of their relationship with companies. The EAI spscifically tries to financially incentivise the sell-side to produce research into 'extra-financial' issues.

The EAI definitelty seems to be having an impact. More specialist research is being produced. Is this just more paper being pumped into the capital markets? Is it just being used to inform trading? A good overview of some of the arguments for revamping financial analysis can be found here.

1 comment:

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