Rafael García de Diego, General Counsel and Secretary of the Board of Directors reflects on socially responsible investment and its role in the way of companies towards a more just and sustainable model.
Socially responsible investment (SRI), also known as ethical investment, is one that takes into account not only the traditional investment criteria but also the environmental, social, and good governance criteria of organisations.
This type of investment, increasingly demanded by society, requires that companies maintain a high level of transparency, in order to allow investors to verify if the company in which they intend to invest incorporates adequate ethical principles, facilitating the decision to carry out a socially responsible investment.
The existence of ethical principles shared between the investor and the company target of the investment is another of the essential elements of SRI. This necessarily requires the formalisation of an ideology that includes the values and commitments that govern the activity of the company in which it they intend to invest in and the existence of a responsible management system that ensures compliance with these values and commitments (compliance system). Red Eléctrica, aware of the relevance that SRI has acquired, has incorporated into its Code of Ethics and its social commitment the growing demand of investors, analysts and society as a whole for greater levels of responsibility on the part of companies, with the conviction that one of the keys for recognising the good functioning and the reputation of companies is that they address and effectively respond to such demands.
In Red Eléctrica, we are aware that the business conduct of each employee has an influence on the reputation of the Company, through how they carry out their functions and responsibilities in the organisation and how they manage the relationship with stakeholder groups, being a shared responsibility -and so we have undertaken it- to strengthen that reputation through the commitment to embrace the values of integrity, responsibility and respect in all our actions.
Investors are a key player in the evolution of the results and reputation of the companies of the Red Eléctrica Group, and relations with investors and other stakeholders must be honest, transparent, loyal, respectful and ethical. In addition, Red Eléctrica tries to address the environmental, social and good governance criteria of the investment world in the undertaking of all the Company’s activities. To this end, adequate systems have been provided to allow any interested person or entity to verify their compliance at any time.
More and more, investors believe that SRIs are more efficient than those investments that don’t consider SRI criteria, not only from a business efficiency point of view but also from a profitability perspective, and allow better control of the risks of the companies and sectors in which they invest, which undoubtedly directly influences the security of their investments.
This is the reason for the appearance of new tools that are available to stakeholders and which allow them to analyse the behaviour of the companies that are the target of their investment from an environmental, social and corporate governance perspective. Among the most relevant tools that provide investors with adequate information to put together socially responsible portfolios, we can name some prestigious sustainability indexes, such as the Dow Jones Sustainability Index or the Ethibel Sustainability Index; indexes in which Red Eléctrica is included and holds very prominent positions.
The rating criteria of SRIs enable investors to understand, in a more documented and secure way, where they are investing and how the return of the investment impacts on society and in what aspects the investment approach can be improved in a way that has beneficial results not only for those who make the investment but also for society in general.
SRIs are open to both institutional investors and private individuals in general, i.e. both large and small investors. In both cases, the key is that companies shall have adequate systems to ensure compliance with the ethical criteria required by the SRI and to inform investors and stakeholders.
As a conclusion, ethical investment entails that when assessing the activity and commitments of each of the companies that are the target of the investments, an assessment of a company’s impact on society and the environment in general is added to their economic or financial profitability. This represents a further step towards a new rationality in business, towards more ethical business models that take into account the well-being of people and the conservation of the natural environment as fundamental elements. Moving in this direction will make the ethical conduct of companies decisively help society move towards a more just and sustainable model.