How to draft CSR policies that draw ethical investors

Ethical investors seek companies that have an impact on the community. FILE PHOTO | NMG  

By CATHY MPUTHIA

More by this Author

Summary

• An ethical investment fund is a fund that uses ethical principles to choose what stocks to invest in by eliminating what is largely considered to be unethical such as alcoholic investments.
• As an ethical investor it is good to perform due diligence on the company you wish to invest in so as to ascertain its ethical policies.
• CSR is about philanthropy that is, how its operations impact positively on society.

A number of investors are keen to invest in companies that have good corporate policies, including good ethics.

This article sets out the importance of ingraining good values or ethical values in core business strategy to attract dependable investors.

An ethical investment fund is a fund that uses ethical principles to choose what stocks to invest in by eliminating what is largely considered to be unethical such as alcoholic investments and investing more in what is considered ethical such as green energy.

An ethical investor will consider the ethical policies of the companies he wishes to invest in. Some will not invest in companies that have bad governance practices such as corruption and instead use their shareholder rights to impact good governance, investing in companies that have sound environmental practices, good human resource policies, and avoiding those engaged in pollution.

As an ethical investor it is good to perform due diligence on the company you wish to invest in so as to ascertain its ethical policies, for example assessing its human resource policies and its impact in the community.

To ease their community impact assessment by their prospective investors, it is important for companies to at least have a Corporate Social Responsibility (CSR) policy dictated by corporate interests.

There is no specific law. Such activities are self-regulated. For example the rules are as set out in the CSR department policies.

The features of CSR consist of six principles; one being that CSR is voluntary. It is not regulated as the company goes beyond the statutory requirements. Secondly, CSR has a multiple stakeholder orientation that involves several stakeholders such as employees and the community and therefore involves a wide range of interests other than shareholder interests.

It is therefore good to take into account the interests of these stakeholders when developing a CSR policy. Thirdly, CSR should align the social and economic goals of a company, therefore; it should not conflict with profitability and economic performance.

Fourthly, firms should benefit economically from CSR. It should not be too expensive for the company or affect profitability in any way. CSR is about practices and values and therefore is determined by personal values of the managers as they formulate CSR policies.

Fifthy, in as much as stakeholders are involved, the values of the owners inform the CSR policies and activities. CSR manages externalities such that it is not concerned with the effects of economic behaviour of others on it.

Lastly, CSR is about philanthropy that is, how its operations impact positively on society.