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Growing trend of socially responsible investment

Socially responsible investment (SRI) is on the rise in the investing world, raising the questions of how should investors react to the growing trend of socially responsible investment and how to ensure that CSR initiatives are truly impactful and relevant to the market needs, and ultimately how CSR changes our behaviour and society.

economicsThe Phuket News

Sunday 10 June 2018, 02:00PM


This was the message shared at a forum held at the CUHK (China University Hong Kong) Business School last month, with leading speaking Prof Cao Jie, Coordinator of the MPhil-PhD studies in the CUHK Business School’s Finance Program.

“SRI is an investment discipline that considers not only the financial returns but also the social impact of the firm. It has been growing rapidly recently. In the US, every one out of five dollars goes to SRI and in total there are US$8.1 trillion in assets involved,” said Prof Cao, based on his recent research paper “Investor Preference, Corporate Social Performance, and Stock Prices”.

This growing trend, according to him, will have an effect on their investment decisions.

“When investors find undervalued stocks, they are more willing to buy those with good social performance, rather than those with bad social performance,” he said. “Similarly, when investors identify overvalued stocks, they are more willing to sell ‘bad stocks’ or those with bad social performance, leaving a negative abnormal return for the ‘good stocks’ in future,” he added.

As for China, SRI is still in its developing stage but “due to the rising awareness of social responsibility and the supportive policies, it has become more popular and crucial,” explained Elaine Zhang, a PhD student of Prof. Cao, who was also speaking at the forum.

Prof Cao said that in view of the growing trend, the government needs to educate investors properly to ensure they can differentiate between financial performance and social responsibility performance, and choose the investment products wisely based on personal preferences and investment horizons.

“It is still unclear how SRI will affect the financial market in future, however, we’re certain that its importance will continue to grow,” he said.

Diana Tsui, Head of Global Philanthropy of Asia Pacific at JP Morgan, believes it’s important to approach social responsibility issues with a global perspective.

“As a corporate company, I believe it is important that our strategy aligns and reflects the organization’s core competence. That’s why in JP Morgan, we focus on economic inclusion and one of our investments is to provide skill trainings to underprivileged individuals so that they can enter the workforce and secure quality jobs,” she said. “We want to create economic opportunities for all, not just for a small group of elites.”

To make sure their good effort and work actually offers solutions to market needs, the JPMC Foundation also funded Tsinghua University and Fudan University the New Skills at Work research to understand the skills gaps in China’s labour market.

“This way we can help validate our effort to make the right intervention, and also help other key stakeholders, including the policy makers, to come up with informed decisions for the current stage of economic development in China,” she said. “What we really want is to build the industry connection and see that our effort is relevant to the skills needed for the growing sectors.”

To help the company achieve successful and sustainable CSR initiatives, it’s crucial to build a good team with the right talents. That’s why Diana hired a diverse team with members who do what they do best.

“I have colleagues with thought leadership and research background, others who know how to manage programs on the ground in developing countries, and those who know how to turn our initiatives into measurable KPIs that can be monitored. Having the right talent is critical in building relationships with our partner organizations and managing risks,” she said. 


The forum attracted a group of enthusiastic participants from the business community, NGOs and CUHK alumni, who contributed to a highly interactive Q&A forum. China Business Knowledge @ CUHK is the knowledge platform of CUHK Business School. It showcases top-end research by the faculty at CUHK Business School and offers thought leadership and insights into the ongoing developments and modern business environment of China and the world. Visit bschool.cuhk.edu.hk

 

 

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