Despite the view that responsible investment compromises returns being frequently made by members of the traditional finance sector, there is little reliable evidence to back it up.

Some recent articles in the Australian media made reference to the September's Sensis Consumer Report, rightly noting that less than half of consumers were enthusiastic about the prospect of paying more for energy under the new emissions trading scheme.  This finding is hardly a surprise, given the straightened financial circumstances many Australian families find themselves in.

What WAS a surprise to myself and other readers was some journalist's extrapolation that this was in some way bad news for the responsible investment community.  No evidence was provided for this leap of logic, but one can only assume that it is based on the mistaken, but sadly commonly-held, view that responsible investment compromises returns.  Despite this statement being frequently made by members of the traditional finance sector, there is little reliable evidence to back it up.

The most credible recent research on this subject was released by consultants to the investments of the Oxford University in late March 2008. Their review compared the performance of UK, European, US and global socially responsible investment (SRI) funds with their mainstream peers.  It found that investment in SRI funds did not automatically lead to poorer returns, and in fact SRI funds can perform better than non-SRI funds, albeit with a slightly higher level of variability in returns.

The message is getting through to the nation's superannuation funds, with a number of the larger funds including VicSuper, UniSuper, HESTA and the Local Government Superannuation Scheme signing on to the United Nations Principles for Responsible Investment (UNPRI), and implementing an exciting range of responsible investment management strategies.

Their decision is supported by the 2005 Freshfield's report.  This authoritative work was commissioned by the United Nations Environment Programme's Finance Initiative, and concluded that a pension fund trustee's fiduciary duty could in fact be compromised by NOT taking environmental, social and governance factors into account when making investment decisions.

In our time, we cannot wait for hundreds of years while the rules evolve to suit our requirements; we cannot even wait decades, largely because of the speed of technological development and its social, economic and cultural consequences.

Regulation is not merely another form of government red tape. Regulation is pervasive in any western economy and is increasingly a topic of interest in developing economies. Global and national regulation is a powerful influence on business, especially in the financial sector, and is generally perceived by business as a hindrance or, at best, as a necessary evil. As rules change or new rules are made, there is a direct impact on the environment in which a business operates and sometimes on the business itself. As businesses struggle to comply with red tape, many see regulation and compliance as a threat to profitability and as a factor that discourages investment and damages competitiveness. Only crooks and cheats prosper in an unregulated or improperly regulated market and the evidence is that properly regulated industries thrive to the advantage of most, rather than a few. History shows how, if not why, this is so.

Modern society cannot exist without regulation and the international financial markets and associated institutions could not exist without a regulatory framework - we are seeing now how the global financial markets can be placed at risk by the effect of poor regulatory frameworks in one nation alone.