Socially responsible corporations a better investment?

A team of researchers in Accountancy and Business Finance, led by Dr David Collison, have found that investors in corporate social responsibility-embracing companies are likely to be better off, or, at worst, neutral least no worse off, than mainstream investors. However the findings may call in to question how such companies are defined.

The report, FTSE4GOODFTSE4Good: Perceptions and performance* found there was little evidence of underperformance for FTSE4GOOD FTSE4Good indices when compared with their more mainstream equivalents from 1996-2003 - a time covering both bull and bear markets.

The FTSE4Good Index Series is calculated by the FTSE Group and contains nine equity indices which cover developing global markets.

The researchers found that since its launch in July 2001, FTSE4GOOD FTSE4Good has gained higher financial returns with less risk relative to other indices.

However, their findings also suggested thatgiven the very high proportion of FTSE100 companies qualifying for inclusion in the FTSE4GOOD FTSE4Good index it could be argued that the initiative will tend to "muddy the waters" of what may be regarded as may result in less reliable socially responsible investmentinvesting.

The researchers also investigated perceptions of company representatives: these suggested membership of the index had led to improved relationships with a number of stakeholders - and some influence on internal procedures, particularly in the area of reporting.

The publication of the findings were published by the Association of Chartered Certified Accountants was marked by a launch event in London involving representatives of the FTSE4Good initiative and of the UK Social Investment Forum.

*FTSE4Good: Perceptions and Performance, ACCA, London, 2005, pp.76, (George Cobb, David Collison, David Power & Lorna Stevenson)

http://www.accaglobal.com/research/publications/summaries/rr-088