Hard times may make nicer firms good bets

LONDON (Reuters) - Companies' ethical and environmental credentials should be of greater importance to investors, not less, as economic pressures mount, fund and asset managers said.

Good Corporate Social Responsibility (CSR) should not be disregarded as a luxury when times get tough but provides an important source of long-term value, said Rory Sullivan, head of responsible investment at Insight Investment.

"The fallout could be very positive and may push pension funds and asset managers to focus much more on long-term value drivers," said Sullivan.

Insight Investment had 112 billion pounds ($165.8 billion) of assets under management at the end of June this year, the most recent data offered by the group.

Sullivan said while many investors were supportive of enhanced analysis into companies' social, moral, ethical and environmental performance, most were still primarily focused on short-term investment performance.

While it was difficult to prove that good CSR performance would generate significant outperformance over the short to medium term, "it should over longer term as it manages risk," he said.

An environmental disaster or a high staff turnover might be more costly to companies than preventing accidents and keeping workers by treating them well, Sullivan said.

In the electricity sector the best performing companies in the long term could be those which adjust well to climate change. In the mining sector firms which care for their workers and the environment stand a better chance of winning licenses to operate in resource rich countries, he said.

"Issues like climate change and how the mining industry deals with social and environmental issues are going to be there irrespective of the wider macro economic climate," Sullivan said.

David Russell, co-head of responsible investment at the Universities Superannuation Scheme (USS), said some pension funds had already changed the way in which their performance is measured and rewarded with focus on CSR and Environmental, Social and Governance (ESG) issues.

"USS believes that as these issues become increasingly material, fund managers should be taking them into account as a matter of course, without specific mandates," Russell said.

USS is UK's third largest private sector pension fund, according to their website.

(Editing by William Hardy)