SRI agencies
For the past 20 years, SRI agencies have been the sole specialist providers to asset managers of sustainability data, ratings and research. Their analysis is used by fund managers to determine SRI fund universes and index constituents. Their services can be grouped into four with most agencies provide a range of different services:
- Data – the provision of raw environmental and social data to fund managers and index providers
- Screening – the provision of stock (equity or bond) lists based on the compliance of the underlying issuer with one or multiple ‘ethical’ or ‘sustainability’ factors
- Ratings – the interpretation of that data to create rankings and ratings of companies and to develop ‘approved lists’ and ‘at risk’ recommendations that are then used by asset managers
- Research – broader analysis of environmental and social factors and their interaction with company performance
Agencies tend to charge fund managers an annual fee at either a flat rate or as a percentage of assets under management. In addition, they often undertake specific research projects for asset owners, fund managers, NGOs etc.
After many false starts the SRI research business finally appears to be going through a sustained period of disruptive change. Financial pressures, new entrants and changing client demands are forcing substantive re-examination of the various business models that operate in this segment of the market.
It is too early to tell whether this process will be one of creative destruction that sees the SRI research business emerge as a more economically-rational, client-focussed business that can contribute to the next phase of SRI development – and specifically to the ‘mainstreaming’ of sustainability factors within broader investment processes.
In a worst case scenario, the industry will sleepwalk through a consolidation process that strips it of creative research in favour of lowest common denominator ‘pile ’em high, sell ‘em cheap’ data products.
