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Barbara Krumsiek: how to elevate sustainable responsible investing?

Barbara Krumsiek’s professional background spans four decades from asset management, including most recently as the CEO and Chair of Calvert Investments, Inc. During her tenure at Calvert, Krumsiek helped to triple the firm’s assets under management and developed a global code of conduct that was later adopted as the basis for the U.N. Women’s Empowerment Principles.

SRI can enhance the future of a company

According to Krumsiek, sustainable and responsible investing (SRI) is the process of incorporating the analysis of a number of factors that can influence the future prospects of a company but might not be reflected in traditional financial analysis. Examples include environmental, workplace and human rights practices, corporate governance, community relations, indigenous people’s rights, etc. A company’s SRI strategy can either enhance the future of the company or be a potential liability.

Sustainability produces results

Krumsiek firmly believes that holistic analyses of companies and sectors must be carried out to produce better financial results in the long run. This means having the right talent and resources in place to analyse the issues. A number of studies have demonstrated the positive effect on financial results, such as having a more diverse Board.

Handling climate risk

In recent decades, changes in climate have had a detrimental impact on natural and human systems on all continents and across the oceans. Almost all sectors will face major disruption from climate transition and its impacts over the coming years.

According to Krumsiek, companies tend to deal with climate risk in three ways:

  1. The traditional way is companies looking to reduce their greenhouse emissions or carbon footprint.
  2. Alternatively, there are companies that view climate risk as a field for innovation and expansion. These companies may research new tools for consumers and businesses to manage their energy and water use or limit their environmental impact.
  3. Finally, there are companies that choose the mitigation path, i.e. not just reducing their environmental impact, but finding ways to mitigate it. One example of this is flooding which has become much more problematic in recent years. Previously, a response might have been to put equipment in a company’s operations, but now there are companies that look into a comprehensive way to protect their assets. In doing so, they recognise that reducing their carbon footprint is not just good for the company but also for the environment and society overall.

Disclosure is key

In the investment world, disclosure is critical. Disclosure requirements are included in the area of diversity, for example, whereby companies are expected to report on how they conduct their Board searches, what talent they look for and why they have chosen the candidates they have. Diversity should be part of their disclosures.

Asset owners such as large pension funds are increasingly asking asset managers to discuss how they address SRI factors in their investment process and how their organisation is shaped.

What is needed in the future, says Krumsiek, is for the pieces to come together in the organisations to collaborate to effect change.

About Barbara Krumsiek
2014 – present: Serves on the Investment Committee of the Meyer Foundation, and chairs the Investment Committee for the Cosmos Club in Washington, DC. 2015 – present: Senior Fellow – Women’s Leadership Institute at Georgetown University 2016 – present: Independent Director of Arabesque Asset Management, London 2017 – present: Director of MISO Energy, the Midcontinent Independent System Operator 1997 – 2014: CEO and Chair of Calvert Investments, Inc. 2010 – 2012: Co-chair of the U.N. Environment Programme Finance Initiative
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