Anti-social investing

A brief moan about the alphabet soup that we have to deal with in the shareholder engagement world these days. When I first got interested in this area, about 8 years ago now, most people used the term 'ethical investment'. That was discarded, rightly in my view, in favour of the less loaded label 'socially responsible investment' and in came the acronym SRI.

Now though SRI is no longer the term of choice, with 'responsible investment' or RI now more common in the UK (presumably because we are 'anti-social'...). And when you do see SRI sometimes it is used to refer to 'sustainable and responsible investing'. More recently some people (I think the Marathon Club started it?) have also used 'long-term responsible investment' or LTRI, to complicate matters further.

Meanwhile the issues we grapple with are environment, social and governance (ESG) ones, sometimes social, environmental and ethical (SEE) ones, and broadly corporate social responsibility (CSR) ones. They can be both 'non-financial' and 'extra-financial', which in practice seem to mean exactly the same thing, but are just different ways of expressing the fact that such factors don't appear in the 'financial' bit of company accounts.

And how do we put it into practice? Some of us are shareholder 'activists', whereas others prefer shareholder 'engagement'. And 'engagement' is so loosely defined that it is apparently something you can both expect your fund managers to already be doing for you, or something you need to pay them more money to do for you via an 'overlay'. Where does voting fit into this? Some suggest that engagement is more important than voting, or that voting is simply part of engagement, whereas others see them as separate.

There is a serious point to my grumble. I have found it hard enough trying to explain to trustees why they should seriously consider developing SRI/RI/LTRI strategies without the needless proliferation of acronyms and ever-changing terminology. When I've done sessions with TU trustees in the past a number have still used the term 'ethical investment' even though no-one in the SRI/RI/LTRI mini-industry does these days. This sometimes leads me to think that new terms and acronyms may have more to do with differentiating products than providing clarity.

I understand that as a still relatively new area the terms we use are going to evolve, but surely we can settle on some widely agreed basics. Otherwise we risk SRI developing like other bits of the investment industry, where 'expert' terminology disenfranchises trustees and makes them less confident to take decisions.