David Marchick,
Managing Director and Global Head of Regulatory Affairs, The Carlyle Group
Moderator:
Betsy Zeidman, Research Fellow and Director of the Center for Emerging Domestic Markets, Milken Institute
Can incorporating environmental, social and corporate governance factors bring added returns to investors, or are these factors already embedded in the intelligent investor′s framework?
Considering the effects of environmental, social and governance factors could make for equal if not better returns in the long run, Barbara Krumsiek said. Calvert Group Ltd. looks at the quality and sustainability of earnings and the quality of management in prospective investments, she said.
Harold Bradley said those issues already are accounted for in any reasonable investor's system of evaluating companies. "Bad governance leads to bad investment decisions," he said. If an environmental or legal issue is going to result in litigation, that is a financial risk that should be considered before investing. Besides, Bradley said, the definition of a socially responsible investment is subjective.
"I am assaulted with the green venture funds coming to see me. Right now, the biggest green investors in the world are ExxonMobil and British Petroleum. Are they good or bad?" Bradley said.
David Marchick outlined principles that The Carlyle Group has adopted: incorporating environmental, social and governance factors into investment decisions, engaging stakeholders, and showing transparency. While he agreed that these principles were probably already part of Carlyle's decision process, formalizing the framework had changed some of Carlyle's decisions.
Marchick said one potential investment appeared to have excellent financial returns, but Carlyle's concern about the company's labor relations caused it to reject the investment.
The issue of how to deal with a conflict between financial factors and responsible investing was of real concern to the panelists. Sean Harrigan said activism in proxy voting is one way to address the problem. Krumsiek pointed to Calvert′s interest in communicating with boards of portfolio companies to promote board diversity. She also favors say on pay, or the ability to vote on executive compensation packages. Bradley concurred, saying a long-term view of performance for executives would more closely align management′s interests with those of investors. He also said claw-backs should become a major part of the discussion of compensation.
Global Conference 2013
Former Prime Minister Tony Blair, philanthropist Bill Gates and Strive Masiyiwa of Econet Wireless discuss advancing prosperity in Africa.
