Investment study wins 2002 Hydro student prize

June 24, 2002, 01:00 CEST

Graduate students Diarmaid Gavin, Daniel Hufschmid and Inese Smildzina began a week-long visit to Norway on Monday as winners of an annual prize awarded by Hydro for best paper presented in an environmental workshop at the College of Europe in Belgium.

This year's winning paper - "The Case for SRI (Socially Responsible Investment) Legislation at Community Level" - critically examines the case for European Union legislation in the field of SRI.

"Firstly, we propose to examine the need for such action in the context of changing investor profiles and attitudes, from the viewpoint of the screening companies and also in light of legislative developments at a national level," said Gavin, an Irishman studying for his Master's Degree in Advanced European Legal Studies.

The students claim "social pressure and growing interest for sustainable investments have triggered the importance and necessity for sustainable actions and sound policies" and argue that "there can be no denying recent international and domestic trends which point to a growing consumer demand for ethical investment products."

They point out that "screened (ethical) portfolios" in the US were worth USD 1,497 billion in 1999 versus just USD 529 billion in 1997. The UK ethical investment market grew by 48 percent between 1997 and 1998. The figures are based on a submission to the Australian Parliament by the Australian Conservation Foundation.

Less risk, more gain

"Consumers are not only investing in ethical investment products because of a perceived benefit for the environment or society as a whole. They are now viewing ethical investment as carrying less risk than so-called 'unscreened' investments whilst providing the potential for higher returns," commented Smildzina, who is working on her Master's degree in European Studies with an environmental focus.

They assert that a "stumbling block" is insufficient information, reporting and, subsequently, transparency of companies participating on SRI indices.

"If consumers are demanding ethical investment products, it is essential that they be provided with sufficient and accurate information to enable them to differentiate between an ethical and unscreened investment product at the point of sale."

Sensible legislation

One area of legislation that "would make sense" would include the reporting methods of the screened companies - "since they usually represent one of the major sources of information for the evaluation. The level of discourse and the reliability of the information they provide is crucial," remarked Hufschmid.

Legislation should not stifle SRI through high costs of compliance and there is a danger of trying to make "one size fit all."

The report concluded that legislation itself is not enough to achieve the EU's CSR goals. "If real progress is to be made in delivering concrete improvements, it requires joint actions - partnership of government, NGOs, business, and trade unions."

Why pursue SRI

At the end of their presentation, the students posed two questions to Hydro: Why does it invest so much time and money into CSR issues, and why does it try to be included in social investment indices?

"One of the things is altruism," said Hydro vice president of oil and gas strategy David Nunn. "One of the main drivers is that we're looking at increasing Hydro's stock on the market... more investors are becoming aware of the value of CSR." Hydro has a progressive CSR legacy and continually seeks the most effective means of using to generate more market value. He asserted that Hydro is active in what are commonly deemed dirty businesses, but "it is the cleanest in those industries."

Asked their impression of Hydro's commitment to CSR, Gavin replied, "Hydro is a model company:" Smildzina remarked that Hydro's strength is its "social focus, which is excellent," but that it "could take a stronger focus on the environment."

"I have an impression, yes, that people here really are concerned about these issue," remarked Hofschmid.

Norway in nutshell

The students will now spend several days touring Norway - seeing both the country's natural wonders and Hydro industrial sites, including trips to Hydro's aluminium plant on Karmøy and to the Troll B platform in the North Sea.