Robbie Parker, associate director at Osmosis Investment Management operates a fund that invests in stocks of resource efficient companies
Investors are increasingly looking at information on resource usage to make investment decisions. Although most fund managers will know what CSR means, they may not know how to interpret and utilise the data.
There are often good examples of material activities undertaken by companies but, historically, they have been mixed alongside the philanthropic efforts of the business, something that is simply not of interest to many investors.
What is becoming more interesting is the idea of integrated report, where the material information such as energy and water use and waste are integrated into the annual report alongside typical financial metrics. Integrating such environmental, social and governance (ESG) metrics will give investors a holistic approach from which they can appraise management.
Osmosis believes it is of great importance that companies disclose such information. It is not only material information on corporate behaviour but also highlights the long-term risks that a firm may be exposed to relative to industry peers.
There has certainly been a transition away from short-termism to the long-term within the investment community.
As the UN’s Principles for Responsible Investment gain momentum, disclosure will become of great importance for companies when trying to attract investors.
‘ESG investing’ is becoming more prominent as investment strategies have become more innovative. Instead of simply screening out ‘bad’ or ‘dirty’ sectors, strategies such as our Model of Resource Efficiency try to identify those companies that are most efficient within their respective sector, for example, identifying the least wasteful mining company.
Companies have long been aware of the benefits achieved by resource efficiency of increasing margins and lower long-term risks. Having spoken to many companies from a wide variety of sectors, all are striving to become resource efficient with the belief that it is already, and will continue, to create competitive advantages.