Happy Employees Attract SRI Fund Investments

By Sunny Lewis

WARWICK, UK, February 11, 2016 (Maximpact.com News) – Google employees enjoy free rides to work at the California company’s headquarters campus, plus breakfast, lunch, and even dinner if they stay late – for free. New dads receive six weeks of paid leave, and moms can take 18 weeks. And Googlers can even bring their pets to work.

Employees at the Silicon Valley Internet giant enjoy free oil changes and car washes, massages and yoga, a play room, back-up child care assistance and $12,000 a year in tuition reimbursement.

Other California tech companies, too, top numerous lists of the best places to work. The California-based business software company Intuit offers education support up to $5,000 a year, as long as the employee’s courses are related to financial services. At the office, employees enjoy a state-of-the-art gym, dry cleaning services and on-site therapeutic massages.

Dr. Onur Kemal Tosun of Warwick Business School points to Pride Transport, a Utah-based trucking company. “It uses employee engagement as a competitive advantage to keep good drivers. Not only is their pay competitive, but they find accommodation for them while they are on the road and help their families while the truckers are away,” he says.

Dr. Tosun has just published a study of 1,585 U.S. corporations and 47 socially responsible investment (SRI) funds in which he quantifies how much more investment from socially responsible funds employee satisfaction attracted. He concluded it was 35 percent.

“This increased investment makes sense as firms investing in their employees signal high corporate social responsibility (CSR), which in turn potentially enhances a firm’s reputation and prestige,” said Tosun, an assistant professor of finance in Warwick Business School at University of Warwick.

“Improvements in this area of CSR have been known to boost loyalty, employee contribution, and motivation through which productivity, firm performance and firm value increase. Naturally, this would draw funds’ investment,” he said.

“Increases in society CSR, such as improving housing in a bad neighborhood by a construction company or covering education fees for local children, also sees firms gain a significant growth in investment,” Tosun explained.

“McDonald’s is a good example,” he said, “it has a society focus CSR. Ronald McDonald House Charities provides free ‘home away from home’ accommodation to families while their child is in hospital.”

As it happens, more than 16 percent of the assets under professional management in the United States are in SRI funds. This sector is growing quickly. SRI funds expanded their portfolios about 76 percent over two years – from $3.74 trillion (2012) to $6.57 trillion (2014).

For his study, Tosun created a unique new measure of investment patterns. “I use a comprehensive measure that combines SRI funds’ own CSR perception with corporate CSR scores to explain funds’ investment in these firms,” he explains.

A firm’s CSR score was measured by summing “Strengths” and “Concerns” of each issue area in the “Kinder, Lydenberg, and Domini Index.”

Funds’ CSR sensitivity was evaluated by SRI funds’ investment policy data for positive investment or negative, restricted, investment, available from Bloomberg’s Environmental, Social and Governance Service.

Tosun then combined the CSR score of each company with the CSR sensitivity of each SRI mutual fund investing in that firm.

“My research also shows firms in specific sectors can benefit more from increased CSR efforts, but on the whole CSR investment is a worthwhile endeavor for any firm looking to attract SRI funds,” he says.

But Tosun writes that CSR investments might not improve a fund’s bottom line, although they had higher returns than the market during the crisis period of 2007-2008.

“I show funds having CSR sensitivity underperform the market in general,” he writes, “and fail to improve their portfolio performance after they invest in firms with high CSR.”

The study, “Is Corporate Social Responsibility Sufficient Enough to Explain the Investment by Socially Responsible Funds?” has been submitted for publication to a number of finance journals.

Award-winning journalist Sunny Lewis is founding editor in chief of the Environment News Service (ENS), the original daily wire service of the environment, publishing since 1990.

Main image: Workers on the Scania front axle assembly line (Photo by Scania Group) creative commons license via flickr.
Bottom image: This happy woman works at TimeWarner in the Media Sales division. (Photo by Dylan H.) creative commons license via flickr.

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