Sustainable Development and the Financial System: Society's Perceptions About Socially Responsible Investing

The debate surrounding the financial needs of investors and the impact on society of investment is considered to be an important research topic due to the growth of socially responsible financial markets. The main objective of this research is to study society's perception about socially responsible investing (SRI) and to identify investor's preferences regarding environmental, social and governance criteria, their real‐life investment needs and the most relevant sustainable financial products. To examine society's perception of SRI, we conducted a field survey among Spanish investors. The results show that SRI is at an early stage and Spanish investors need more exact information regarding social, environmental, and governance criteria in order to invest in socially responsible companies and products. This paper offers some guidelines that could be used by Spanish institutions, managers and investors and by foreign managers when approaching the Spanish market, in order to promote the growth of socially responsible financial products. Copyright © 2012 John Wiley & Sons, Ltd and ERP Environment.     

The role of mutual funds in the sustainable energy sector

The integration of renewable energy criteria in mutual fund investment decisions could channel private resources into the funding of environmentally related projects implemented by firms contributing to sustainable development. This paper examines the performance of European renewable energy funds that invest globally by comparing their risk‐adjusted returns with those achieved by black energy and conventional mutual funds. It uses Carhart's model on a sample of 81 renewable energy funds, 125 black energy funds, and 4,337 conventional mutual funds. The results indicate that 32.1% of renewable mutual funds—most of which adopt energy producers, renewable energy technology, and energy efficiency‐focused criteria—perform significantly better than the S&P Clean Energy market benchmark, this percentage being affected by the different states of the economy. However, none of them are able to beat the fossil fuel energy (S&P Global 1200 Energy Index) or conventional market benchmarks (S&P Global 1200 Index). Furthermore, 37.04% of renewable energy funds significantly underperform the S&P Global 1200 benchmark. Therefore, the investment in renewable energy funds has a financial cost for investors in relation to conventional fund investors.     

Principles for sustainability rating of investment funds

During the last decade, the idea of sustainable investments hit the market. Investors both private and institutional started to supplement financial considerations with social and ecological ones. Meanwhile the supply of mutual funds in the ‘green’ investment sector increased enormously. Currently in Europe about 300 mutual funds are available that are managed according to sustainability and social responsibility. Potential investors face the difficulty of keeping track of the various funds and choosing among them based on a reliable comparative assessment. This paper outlines the basic principles and methods on which such a comparative sustainability rating is based. The method was designed to be analogous to rating of the funds financially. The sustainability rating is based on assessment of the research processes in the fund management as well as investigation of the fund portfolio in terms of composition and sustainability performance. It should support investors in their investment choices by offering them a third party view. Copyright © 2005 John Wiley & Sons, Ltd and ERP Environment.     

社会责任投资与价值投资相悖吗?——基于国际经验的比较

社会责任投资促进了公司绩效评价模式的变革。从美国和亚太地区的经验来看,社会责任投资的整体表现更好;社会责任形象较好公司股票价格表现更佳;强有效的资本市场一方面将推动社会责任形象好的公司股票获得更高估值,另一方面也将促使上市公司在社会责任领域投入更多资源。长远来看,社会责任投资与价值投资并不相悖。社会责任投资在中国的发展之路还属于起步阶段,中国上市公司对企业社会责任持有非常积极的观点,但中国资本市场并没有给企业社会责任积极评价。     

A case study of ethical/green/environmental funds,corporate governance and stakeholder management

This paper investigates how far green, ethical and/or environmental funds are deployed to represent the interests of the individual investors and to what extent the business community is encouraged to adopt ‘greener’ behaviour. Data were collected through a questionnaire and developed in the form of a case study. Twenty green ethical and environmental funds were surveyed in the UK. The main findings are that fund managers claim that their funds are invested on behalf of the investors. They see their fund promoting the ethical/environmental values of the investors. Fund managers further think that they have an influence on companies they invest in and believe in encouraging companies to become better corporate citizens. There is, however, little evidence of funds' action on companies. While green/ethical funds, and more generally the financial community, are potentially powerful instruments of change, they are, however, still very much governed by conventional financial tools and criteria.     

Stakeholder engagement is evolving: Do investors play a main role?

Stakeholder engagement, an essential component of the sustainability reporting strategy, is changing, as is the position of the different stakeholders in this evolving scenario. In this paper, we explore the effect of the pressure that a specific group of stakeholders, investors, exerts on the quality of the sustainability information disclosed. We intend to analyze if there has been a change in the role that investors play in sustainability reporting. By focusing on investors, we are paying attention to one of the less studied groups within the sustainability stakeholders. To this aim, we carry out a content analysis of the sustainability information disclosed by U.S. (shareholder-oriented country) and Spanish (stakeholder-oriented country) listed companies during the years 2013 to 2016. Our findings confirm the key role that investors play in the companies' sustainability strategies, demanding more and better sustainability information. We also find a reduction in the quality of sustainability disclosures in Spanish companies in the last year of our sample, showing a relevant change in this country that has been leading the sustainability rankings until now. The results of this paper are useful to investors and companies, as they reflect the changes on the information they demand, and for regulators, in order to create the adequate legal framework that will improve the quality of reporting. Regulators and financial agents should acknowledge this new scenario to adapt norms and actions accordingly.     

The Effect of Country‐Level Investor Protection on the Voluntary Assurance of Sustainability Reports

Over the last several years, sustainable (or socially responsible) investing has experienced rapid growth around the world reflecting an increasing awareness by investors of social, environmental, ethical, and corporate governance issues. This heightened awareness among investors has resulted in a demand for sustainability reporting and a corresponding increase in demand for assurance of sustainability information to enhance its credibility. Using an investor‐based view, we examine the impact of country‐level investor protection on reporting companies’ voluntary sustainability assurance decisions. We find that both the decision to obtain voluntary sustainability report assurance and the decision to obtain higher quality assurance are more likely for firms domiciled in countries that have weaker investor protection. Our results indicate that managers in low investor protection countries use voluntary sustainability assurance as a substitute monitoring mechanism.     

Investors' carbon risk exposure and their potential for shareholder engagement

This article examines the exposure to and management of carbon risks of different investor types. Considering the dual role as portfolio manager and partial owner, we analyze carbon risk for investors both in terms of exposure to portfolio values and in terms of responsibility as shareholder of carbon-intensive firms. We show that among various investor types, the preference for holding carbon-intensive stocks differs substantially, even when considering traditional investment decision parameters. In particular, it is governments whose portfolio values are most threatened by a carbon risk exposure of 49%, but at the same time, they prefer larger ownership shares in polluting firms. In contrast, individual investors, investment advisors, and mutual funds avoid holding stakes in these firms, while revealing only a moderate exposure of their assets to carbon risk. In view of the Paris Agreement, which includes the consistent steering of financial flows towards a low carbon transformation of the economy, our study provides policymakers with important implications regarding the coverage and effects of respective regulations. By identifying the ownership structures of carbon-intensive firms and respective owners' portfolio compositions, we also offer implications for further research on portfolio decarbonization and shareholders' influence of corporate carbon management.     

Examining the behavior of renewable‐energy fund investors

Mutual fund investors could contribute to sustainable development by encouraging fund managers to channel their savings into the funding of sustainable energy projects adopted by firms. This study examines whether renewable‐energy investors take into account financial and/or nonfinancial factors when making the decision to invest in a specific fund, comparing their investment behavior with that of black‐energy and conventional investors. To this end, we have gathered information about 4,368 mutual funds (76 renewable‐energy funds, 109 black‐energy funds, and 4,183 conventional mutual funds) from January 2007 to December 2017. For this sample, we adopt a panel‐data approach with Petersen's standard errors clustered by fund and year. Our results indicate that renewable‐energy fund investors are less sensitive to past financial performance than are black‐energy and conventional fund investors, indicating that the former derive their utility from nonfinancial attributes whereas black‐energy investors derive their utility from a conditional multiattribute and conventional fund investors derive their utility from financial attributes.     

Do institutional investors drive corporate transparency regarding business contribution to the sustainable development goals?

Institutional investors show increasing interest in how companies align their corporate social responsibility strategies with the sustainable development goals (SDGs) proposed by the United Nations (UN). The information disclosed in this regard is essential to know and monitor business contribution to the 2030 Agenda. In this paper, we analyze the influence that institutional investors have on the adoption of the disclosure strategy established by UN and the Global Reporting Initiative (GRI)—GRI‐SDG Compass. The results obtained for a sample of 989 international companies, which prepare their sustainability reports following the GRI guidelines, show that ownership by foreign investors, pension funds, and “other” investors boosts the relevance of the information disclosed in relation to the 2030 Agenda. On the contrary, government, financial institutions, and cross holdings have no impact on the information systems developed.     

APPRAISAL OF THE SELECTION CRITERIA USED IN GREEN INVESTMENT FUNDS

Investment funds which use environmental criteria in deriving their portfolios are now available. The criteria used to evaluate corporate environmental policy and performance adopted by two of these fund management organizations are examined. The methodology of the Ethical Investment Research Information Service is also discussed, with particular emphasis on the environmental factors used to screen UK equity portfolios. This provides an invaluable guide to the broader subject of ethical investments. There are a number of problems that investors have encountered in evaluating companies on environmental grounds, in particular the reticence of many UK companies to adopt a more progressive approach to environmental issues, which is manifested in the lack of publicly available information on corporate environmental policy and performance. Nevertheless there are a number of initiatives being undertaken to raise awareness of environmental issues among UK companies and investors at large. The Body Shop controversy that arose in 1995 is an interesting example of how the debate has moved on, and examples are given of other companies which have been included in green portfolios. In addition to regulatory pressures, financial institutions, individual investors and other interest groups have a key part to play in influencing corporate environmental policy through their investment decisions.     

Measures for Sustainable Investment Decisions and Business Strategy – A Triple Bottom Line Approach

Traditionally, most investors have only taken economic variables (profitability and risk) into account when making investment decisions. In this paper we propose two measures, the Relative Sustainable Performance Measure (RSPM) and the Measure of Commitment‐failure (MC), that permit sustainable decision making, which takes environmental and social variables into consideration in addition to the economic variables, for both investors and companies themselves. This makes a triple bottom line (TBL) approach to investment decision making possible. We apply our measures to the worldwide chemical sector and validate them. Moreover, we propose a 2D graphical sustainability analysis, which is simple and easy for investors to understand when making investment decisions and can be used if they are concerned about environmental and social matters. It also enables companies to analyse their sustainability performance and adapt their business plans accordingly. Copyright © 2017 John Wiley & Sons, Ltd and ERP Environment     

基于投资者偏好的证券投资基金产品线选择研究

随着开放式基金品种的增加和基金公司规模的壮大,证券投资基金市场的竞争日趋激烈。为了实现经营目标,投资基金公司可以考虑通过合理的产品线设计,提升产品对基金投资者的吸引力。本文借助于产品线理论及设计方法,提出基金产品线选择的概念;通过收集目标投资者的偏好信息,建立一个基于投资者偏好的基金产品线选择模型;利用所建立的模型并结合混合联合分析法,给出基金产品线选择的一个实例。     

Emerging Social-economic Institutions in the Venture Capital Industry:

Nine venture capital organizations which are taking equity positions with socially guided as well as financial goals are investigated. The organizations are presented as new entrants to ihe financial industry , and are placed in the context of community development financial institutions and social investment funds . Four emerging models are identified; socially guided venture capital networks, socially guided private funds, Specialized Small Business Development Corporations and equity Community Development Corporations . Forty nine deals of six of the organizations are analyzed for financial and social outcomes. The paper concludes that the private venture funds have the most promising future, and predicts the emergence of publicly offered venture capital funds that incorporate social goals.     

我国短期融资券募集资金是否存在短融长投——对中国上市公司的实证研究

本文以发行短期融资券的上市公司为样本,用回归分析的方法实证研究了上市公司短期融资券募集资金的使用情况。实证结果显示短期融资券发行额与营运资金增加额呈显著的负相关关系,与长期资产现金支出、以及偿还债务所支付的现金均呈显著的正相关关系。表明上市公司发行短期融资券募集的资金存在短融长投及集中还贷的现象,也就反映了企业利用市场时机进行融资、并用短期资金进行长期投资的行为。这种短融长投的行为可能因为投融资期限不匹配而导致企业财务风险,并给投资者带来一定的兑付风险。     

Fund immunity to the COVID-19 pandemic: Evidence from Chinese equity funds

This paper discusses the connection between public equity fund characteristics and performance reactions to COVID-19 using data over 1300 equity funds across 105 Chinese fund companies. Empirical evidences from over 20 fund characteristics show that the liquidity, diversification and pre-2020 Sharpe ratio, fund management abilities, agency costs can determine the fund immunity to COVID-19. Based on these characteristics mentioned, our empirical results can explain why COVID-19-induced drop in fund performance is milder among open-end funds, active funds, ETFs, and growth funds, and also can explain why funds controlled by private companies or by sino-foreign joint ventures or by companies with more independent directors of financial experiences perform better in the pandemic. Our work also provides some valuable suggestions for investors and regulators confronting an exogenous shock.     

Corporate Incentives to Disclose Carbon Information: Evidence from the CDP Global 500 Report

We investigate how the Global 500 companies respond to the challenge of climate change with regard to their carbon disclosure strategies. This paper is motivated by a growing body of research that examines the role of large companies in carbon disclosure responsibility and practices. We consider the impact of social, financial market, economic, regulatory, and institutional factors on the motivation to voluntarily participate in the 2009 Carbon Disclosure Project. We find that economic pressure is significantly associated with the decision. That is, companies facing direct economic consequence are more likely to disclose. Companies in greenhouse gas (GHG) intensive sectors show the same tendency. In addition, big companies have a higher propensity for disclosing, suggesting that social pressure plays an important role. We also provide possible explanations as to why a large proportion of our sample firms refuse to disclose. Furthermore, our results suggest that the proxies for information needs of investors are not associated with a higher propensity to disclose the amount of their emission footprints. In sum, it appears that the major driving force for climate change disclosure comes from the general public and government rather than from the other major stakeholders such as shareholders and debtholders. Our results are robust after controlling for other influences.     

Sustainable Development and Corporate Financial Performance: A Study Based on the FTSE4Good IBEX Index

The social and environmental aspects of business investment and financing are becoming increasingly important. Most studies on corporate social responsibility (CSR) focus on analysing the relationship between company performance in the financial and social fields. However, the results obtained have not been conclusive, mainly due to the variables used to measure CSR. In order to simplify its measurement, in this work we used an empirical analytical method to determine possible differences between the financial variables of firms considered to be socially responsible and those not considered to be such. The results obtained show that socially responsible corporations obtain higher profits for the same level of systematic risk and show greater sensitivity to market changes, leverage levels and company size. This pioneering study is the first to make use of the first, and at the present time only, Spanish sustainability index, the FTSE4Good IBEX. Copyright © 2013 John Wiley & Sons, Ltd and ERP Environment.     

Corporate Carbon and Financial Performance: The Role of Emission Reductions

This article uses econometric techniques to examine the effect of corporate carbon performance on corporate financial performance. I extend the existing literature in this research field by differentiating between two measurement perspectives: carbon performance expressed as annually reported carbon dioxide (CO₂) emission equivalents and improvements in carbon performance over time. Thereby, the article re‐addresses the research question ‘when and how does it pay to be green?’ in the context of carbon emissions and climate change mitigation. Using a nonlinear modeling technique, the findings indicate that it pays to be green for companies with superior carbon performance but not for companies with inferior carbon performance. The results also show that carbon emission mitigation is linearly and significantly positive related to return on sales (ROS) but negatively related to Tobin's q . These contradictory findings help us to understand why – in spite of growing regulatory pressure – companies have been slow to respond with effective action to tackle climate change beyond marginal efficiency improvements that correspond to ‘low‐hanging fruits’. The empirical analysis is based on an unbalanced sample of 7625 firm‐year observations covering carbon emission data (Scope 1 and Scope 2) for 1640 international firms from 2003 to 2015. Copyright © 2017 John Wiley & Sons, Ltd and ERP Environment     

The environmental and macroeconomic effects of socially responsible investment

We analyze the effects of socially responsible investment and public abatement on environmental quality and the economy in a continuous-time dynamic growth model featuring optimizing households and firms. Environmental quality is modeled as a renewable resource. Consumers can invest in government bonds or firm equity. Since investors feel partly responsible for environmental pollution when holding firm equity, they require a premium on the return to equity. We show that socially responsible investment behavior by households partially offsets the positive effects on environmental quality of public abatement policies.