The Effects of Australian SRI on International Investment

Due to the high rate of change associated with the development of socially responsible investment (SRI), it is particularly important to maintain a current purview of both the behaviour of financial institutions and the introduction of relevant statutory regulation, says Garry Taylor, Strategic Environmental Management consultant at Croesus Project Services.

Due to the high rate of change associated with the development of socially responsible investment (SRI), it is particularly important to maintain a current purview of both the behaviour of financial institutions and the introduction of relevant statutory regulation.

Successive Australian and State governments have spent the last 15 years legislating a raft of statutes which regulated corporate behaviour in respect of, inter alia, their environmental and related financial planning and development obligations – implicitly spurring on the acceptance of SRI as the way of future corporate project financial planning.

SRI has now so captured the imagination of the Australian government that it has taken the principles underlying the ‘broad market’ concept and focused them upon achieving specific socio-economic targets in localised communities. Terming this new SRI approach “Impact Investment”, the government aims to achieve investments in specified localities that intentionally generate positive social impacts and financial returns, recognising that there is increasing demand for investment that not only offers financial returns but also makes an impact socially and environmentally.

One can discern a causal relationship between both CSR and SRI, and CSR and international investment law – with the result being the development of a strong facilitational relationship between SRI and international investment markets.

The pervasive effects of CSR upon corporate social behaviour have been profound; not only have they influenced the internal and external behaviour of corporations within sovereign states but also internationally by exercising extensive influence upon the investors who provide the source capital for ventures undertaken by corporations – as well as upon the very establishment of corporations, themselves – and the development of a reciprocal facilitational relationship between SRI and international investment laws.

In the last decade or so, the principles of CSR have directly affected the investment decisions of a significant proportion of the world's largest capital providers (investors), such as pension and superannuation funds; insurance companies; mutual societies; ethical investment funds; philanthropic trusts; and religious foundations, a significant proportion of whom have altered their investment strategies by exclusively allocating between 25% and 75% of their available capital for investment in ventures that are considered to be "socially responsible".