Is Socially Responsible Investment still possible nowadays?

This week in the lecture I’ve been introduced to SRI, or Socially Responsible Investment. Those are nice word, very ethical, but what does it really mean? Why is everybody suddenly talking about that now?

For most people, making investment, and expecting a lot of returns, is anything but social or responsible. However, this is not how SRI is defined. Indeed, to fully understand this post, it is to be understood that when we talk about Socially Responsible Investment, we are actually talking about how companies use money, and not how they get it. I don’t think that these two points should be dissociated. Do you think it is possible for a company to be “socially responsible” on how it spends its money, and not on how it gets it? Therefore, would it be possible to be “half-ethical”? I really don’t think it is!

On the other side, before taking too “black or white” position, we all need to think about where these rules come from. Indeed, when we know that making Socially Responsible Investment is about having a head above regulations and rules, then who decides what is and is not SRI? As soon as any action becomes mandatory, it not a socially responsible investment anymore. This definition then means that companies willing to invest in a social and responsible way are to spend some time to find some other kind of investment to do so. Is it fair to them? They are already spending their money in a social and responsible project, why would they have to spend their time trying to find other projects because a new law says it now mandatory to do what they were doing in the first place?...

Speaking of fairness for these companies, I think it is worth underlining the next point. Once a law is promulgated in company’s home country, the company then have to abide by this rule, even in its foreign subsidiaries. That means, for example, that a company which has to pay its “home employees” at fair price, will have to do it also in its foreign subsidiaries. And this could seem as a good thing, I agree. But, let’s see the issue from the other side. That also means that a company having a subsidiary in China, for example, will have to pay its Chinese workers at fair price, when its competitors will be allowed to pay them less, because they won’t have to abide by the same laws… It is still fair to the first company? How is it supposed to be competitive with the local companies then? And if the companies are not competitive, then they will leave the country, closing their subsidiary, and that will imply the loss of several jobs for the local population.

In my opinion, it is very important that everybody is treated in an equal way. However, I think that if this situation continues all the different players in that matters will have to find a compromise between having jobs for local population paid less than if employees were to work in the company’s “home country”, and no job at all if the company closes its foreign subsidiary.

To conclude on this subject, I don’t think that SRI should have anything to do with any rules, and I don’t think that we should stop calling socially and responsible investment SRI just because a new law says it is now mandatory to do it.