While Europe’s companies are commonly thought to lead the world in corporate social responsibility (CSR), many companies there are still proving slow to wake up to the benefits of behaving responsibly, a recent survey has shown. A study unveiled in December by consultant RSM International in association with the Union of Issuers Quoted in Europe found that only 10% of respondents listed corporate responsibility among the top-three most important factors affecting their investor relations strategy. According to the report, quoted companies did not think CSR held enough sway with investors to have a significant impact on their market value.
While companies may be slow to catch on, it appears consumers, in the United Kingdom at least, are voting with their pockets. According to the UK-based Co-operative Bank’s Ethical Consumerism Report, “green” shopping (purchasing of goods with the Fair Trade logo, for example) increased by 11% in 2005. Fund managers such as Mike Fox of the CIS Sustainable Leaders Trust fund believe the “green pound” is here to stay, particularly with the passing of the Climate Change Bill in the UK parliament late last year. Citing Co-operative Bank Ethical Consumerism Report research, Fox says the green pound is already worth more to the UK economy than alcohol and cigarettes, at £29.3 billion. “Many wise investors have already benefited through companies that have reacted to existing demand, particularly around fair trade products and green energy,” he says.
Funds like Fox’s also appear to have benefited. According to Standard & Poor’s figures cited by CIS Sustainable Leaders Trust, it provided a total return of 28% over the 12 months to November 30, 2006, compared to 17.4% achieved by the UK FTSE All-Share index. It appears the returns are sustainable, too, as over the three years to April 30, 2006, it produced a return of 83.7%, compared to 75.4% for the average UK unit trust and 79.6% for the FTSE All-Share. Companies that haven’t yet tapped into the green economy should take note.