Research organisations that specialise in socially responsible investment (SRI) are failing to provide relevant information to institutional investors, according to a report.

The report, Values for Money, was carried out by Sustainability a consultancy specialising in sustainable development. It was financed by Mistra, the government-backed Swedish Foundation for Strategic Environmental Research.

The report says SRO research organisations must develop methodologies that develop the link between sustainability and investment value.

SustainAbility surveyed 15 organisations and found that that only three - CoreRatings, Innovest and SAM Research - explicitly link sustainability strengths, weaknesses and risks to investment value drivers.

“The majority still focus on negative and best-in-class screening models which, although serving current niche ethical investors well, do not meet the needs of more mainstream investors,” it concluded.

Mans Lönnroth, managing director of Mistra, commented: “As an investor we need research that supports both our social and environmental objectives as well as our financial responsibilities. Unfortunately very few specialist organisations meet these objectives.”

The SustainAbility report also says research organisations must broaden the range of sources used in the research process. Currently, SRI research organisations gather information primarily from the companies themselves. Organisations must also increase the amount of financial skills and large cap experience in their research teams, the report says.

Gemma Taylor-Gee, responsible for client development at CoreRatings, said: “The focus on materiality and how useful the research is to mainstream investors is one of which we see as the most prevalent issue affecting the development of SRI research and we are delighted to be identified as a leader in this respect.”

The report can be downloaded from www.mistra.org


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