Columbia's Nair: What Drives Investors Toward SRI

If Columbia Business School's student population is any indication of future business trends, then we'll continue to see a growing interest in sustainable enterprise and investing. Currently 45 percent of Columbia MBAs are involved in the Green Business Club, International Development Club and the Social Enterprise Program. The school is also offering a handful of new courses to address this growing area.

I recently spoke with Dr. Vinay Nair, author and founder of Ada Investments, who is teaching one of these new courses, Sustainability and Investment Management. We talked about his Columbia class and why investors pursue Sustainable and Responsible Investment (SRI).

BNET: In what ways do you think the topic of SRI was an important addition to Columbia's curriculum?
Nair: I think that increasingly, the demand for sustainable investing is going up. Various indicators show this, such as the United Nations' Principles for Responsible Investing, which about $18 trillion worth of capital has signed on to. So there's an obligation for those $18 trillion to take into account what is called extra financial variables, such as environment, labor, etc., into investment decision making.
Along with this, more and more we believe that we've reached a critical point in addressing some public issues, such as environment and climate change, at least in terms of attention. So I think there is a growing perception that there is a role for private citizens and corporations to play in solving public issues.

With regard to finance and sustainability, it's important that this is integrated within the MBA curriculum. Columbia is one of the first few schools to do that, and they have other programs built around corporate social responsibility. But I believe this is the first that they have from a more investment viewpoint.

BNET: One of the things your course covers is the diversity in motives that drives investors into SRI. Can you give our readers an idea of this range of motives?

Nair: I was working on a book called Investing for Change, which came out earlier this year through Oxford University Press. In that book, we categorized investors into three broad groups. The first was interested in responsible investing for pure ethical reasons. They didn't want to be part of anything that made money in "sinful" ways. They didn't want to be associated with alcohol, gambling, tobacco or anything like that.

They were very different from the other extreme group of investors that don't care about any of these things; they only care about making money. If you told them you could make money by investing responsibly, they would do that, but the means of those higher returns were secondary.

The biggest group is actually in between. the middle category is people who want to see change, but don't want to see their returns affected too much. It's kind of like recycling. People would recycle if the facility was close to their apartment and if they actually felt that going to that facility and dropping off your things meant that they were getting recycled.

These three groups approach the problem very differently. Our view is that the world is going more toward this [middle] group. People are focused on return-oriented sustainability, and that is the way we can mainstream it.

Next week, I'll share more of Nair's views on the future of SRI and its impact so far.