Investor interest in CSR is on the rise

2003

Good corporate social responsibility (CSR) policies can help companies gain a competitive advantage in attracting investors as well as offering excellent risk management strategies, say investor relations professionals at Europe’s leading companies.

A new study by CSR Europe and INSEAD, carried out in cooperation with the Investor Relations Society, suggests that the interest in social and environmental issues has risen significantly over recent years and that investors are beginning to ask more informed and detailed questions about companies’ corporate social responsibility performance.

The study, "Corporate social responsibility and the role of investor relations – from switchboard to catalyst", is based on interviews with investor relations and corporate social responsibility experts from twenty leading European companies. It reveals that the awareness of social and environmental issues among investor relations professionals (IROs) is much higher than previously thought.

In particular, the study focuses on the much more proactive approach that investor relations departments at companies such as Volkswagen and BT are displaying towards investors in bringing CSR issues to the forefront of the investment world.

IR officials interviewed said that they are seeking to help investors better appreciate the business value of responsibility strategies. No longer performing a mere switchboard function between investors and environmental or CSR departments, these dedicated IR officials are effectively becoming a catalyst for corporate social responsibility by galvanising investors’ interest in these issues.

Interviewees also predicted that the traditional financial community (in particular the pension fund industry) is likely to come under more pressure to recognise the impact of social and environmental issues on the company value. Almost all IROs said they expect mainstream investors and analysts to increasingly integrate social and environmental criteria into their assessments - but only gradually. Some were looking at a timeline of four to five years.

"Investors see corporate social responsibility as a major indicator for a firm’s exposure to non-financial risk, but they don’t fully understand a firm’s true social perfomance. Investor relations has emerged here as a missing link; providing much more than just the last finacial results, IR officers are playing a pivotal role in helping investors appreciate the business case for social responsibility and its practical effect on firms’ perfromance," says Dr. Kai Hockerts, Research Programme Manager at INSEAD’s Centre for the Management of Environmental Resources.

"It is clear from this study that investor relations professionals are taking CSR issues increasingly seriously. This report provides some valuable insights into the communication between companies and various market participants over CSR and will be important reading for investor relations professionals", said Andrew Hawkins, Chief Executive of the Investor Relations Society.

"These companies are actively demonstrating to investors that corporate social responsibility makes good business sense, and the firms are already seeing the benefits it can bring them in terms of risk management and attracting investment", said CSR Europe’s SRI Coordinator Adeline Hinderer.

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