UN Principles for Responsible Investment Signatories and the Anti-Apartheid SRI Movement: A Thought Experiment

There appears to be a growing disquiet amongst academics surrounding the ascendancy of ‘responsible’ investment that is egoist or self-interested in character – ‘business case’ responsible investment. This ascendancy has in no small measure been associated with the uptake of United Nations Principles for Responsible Investment (PRI) as a de facto standard for mainstream responsible investment. This article contributes to this disquiet. It does this by examining how egoist ‘responsible’ investors (as endorsed by the PRI) might have behaved had they been around in the 1970s, 1980s and early 1990s during days of the anti-apartheid socially responsible investment (SRI) movement. Armed with near perfect (hindsight grade) enhanced analytics, it is clear that the signals that such egoist ‘responsible’ investors would have sent to company management in terms of the apartheid issue would have been highly muddled and therefore ineffective. The net conclusion is that there is nothing inherently or inevitably ‘responsible’ about egoist investment and that the aversion to behaving ethically amongst institutional investors must be challenged and not swept under a carpet of rhetoric.     

The Maturing of Socially Responsible Investment: A Review of the Developing Link with Corporate Social Responsibility

This paper reviews the development of socially responsible investment (SRI) over recent years and highlights the prospects for an increasingly strong connection with the practice of corporate social responsibility. The paper argues that not only has SRI grown significantly, it has also matured. In particular, it has become an investment philosophy adopted by a growing proportion of large investment institutions. This shift in SRI from margin to mainstream and the position in which institutional investors find themselves is leading to a new form of SRI shareholder pressure. Although this bears some resemblance to lobbying campaigns which might take advantage of shareholder rights, we seek to distinguish it as an important phenomenon in its own right — one to which corporate executives are likely to be paying increasing attention in the years to come. We further argue that this approach potentially meets some of the earlier ethical criticisms of certain forms of SRI but, ironically, probably owes its existence to those pioneering approaches. We conclude with some suggestions for further research to inform discussion of the issues highlighted in the paper.     

Attitudes towards corporate social responsibility and perceived importance of social responsibility information characteristics in a decision context

This study addressed the questions of perceived importance of social responsibility information (SRI) characteristics in a decision context, as well as the attitudes of institutional investors toward social responsibility involvement. The results showed that SRI presently disclosed in company annual reports did not have any significant impact on institutional investors' decisions. However, if SRI were presented in quantified, financial form, and were focused on product improvement and fair business practices, such information would be perceived as more important for investment decisions. Attitudes toward corporate social responsibility also suggested that institutional investors were not totally opposed to company involvement in social activities. Hai Yap Teoh is associate professor in the Department of Accountancy, The University of Wollongong, New South Wales, Australia. He has published extensively in local and international journals including Accounting, Organizations and Society and The International Journal of Accounting Education and Research. His major areas of research interest include corporate social responsibility and reporting.Godwin Shiu is teaching fellow in the Department of Accountancy, The University of Wollongong, New South Wales, Australia. He is also doing a master's degree in accountancy.     

SMEs and CSR Theory: Evidence and Implications from an Italian Perspective

This paper reviews the development of socially responsible investment (SRI) in the Spanish financial market. The year, 1997 saw the appearance in Spain of the first SRI mutual fund, but it was not until late 1999, that major Spanish fund managers offered SRI mutual funds on the retail market. The development of SRI in the Spanish financial market has not experienced the high levels of development seen in other European countries, such as France or Italy, where interest in SRI began during the same period. This paper presents an analysis of the impact of SRI mutual funds managed by Spanish fund managers comparing the evolution of managed assets and number of investors. We also analyse the investment strategies adopted by these funds, which mainly use negative screening criteria and the participation of non-governmental organisations as institutional investors. An analysis of the take up of socially responsible investment in the Spanish financial market shows majors deficits in this process. This is due to Spanish investors having limited sensitivity to social issues and knowledge of SRI, and a lack of development of SRI investment strategies, such as engagement or shareholder activism by fund managers. Furthermore, the take-up of SRI mutual funds in the Spanish financial market coincided with a fall in the stock market at the beginning of the 21st Century. We conclude with an analysis of the relationship between SRI and Corporate Social Responsibility (CSR).Josep M. Lozano is currently Professor in the Department of Social Sciences at ESADE, Universidad Ramon Llul-URL and Director of the school’s Institute for the Individual, Corporations and Society (IPES). Co-founder of ética, Economía y Dirección (Spanish branch of the European Business Ethics Network), member of the international Editorial Board of ‚Ethical Perspectives’ and member of the Business Ethics inter-faculty group of the Community of European Management Schools (CEMS). He has been a highly-commended runner-up in the European division of the Beyond Grey Pinstripes Faculty Pioneer Award. Author of Ethics and Organizations. Understanding Business Ethics as a Learning Process. Dordrecht: Kluwer, 2000.Laura Albareda is a Researcher at the Institute for the Individual, Corporations and Society (IPES), ESADE, Universidad Ramon Llull-URL. She is manager of the Observatory on Ethical, Ecological and Social Investment funds in Spain, an annual IPES publication on Socially Responsible Investment in Spain. Fields of research and academic interest are Corporate Social Responsibility, Business Ethics, Global Governance, Governments and Public Policies on CSR and Socially Responsible Investment.M. Rosario Balaguer is a Lecturer in the Department of Finance and Accounting at Universitat Jaume I. Research areas focus on finance-based analysis of Corporate Social Responsibility and Socially Responsible Investment, covering issues such as profitability, risk and performance. She has taken part in several national and international conferences and published a number of articles in this field.     

The Investment Performance of Socially Responsible Investment Funds in Australia

Interest in the notion of the possible financial sacrifice suffered by socially responsible investment (SRI) fund investors for considering ethical, social and environmental issues in their investment decisions has spawned considerable academic interest in the performance of SRI funds. Both the Australian and international research literature have yielded largely mixed results. However, several of these studies are hampered by methodological problems which can obscure the significance of reported results, such as the use of small sample sizes, inconsistencies in the time frames selected to analyse performance and different modelling frameworks used to estimate investment returns. This study attempts to redress some of these issues by investigating the returns performance of 89 ethical funds in Australia over the period 1986–2005. Using a multi-factor CAPM model [Fama, E. F., and K. R. French (1996) J. Finance 51(1), 55] (which controls for factors such as size, book-to-market value and momentum) we find that ethical funds significantly under-perform the market in Australia, particularly in the most recent 5 years of our sample period (2000–2005). Risk adjusted returns (using Jensen’s alpha) indicate that average annual underperformance is around 1.52% in the 2000–2005 period for our sample and .88% over the whole sample period. Our results contrast with many previous studies (both Australian and international), which have not found statistically significant differences in the performance of ethical funds relative to market benchmarks and/or a matched sample of conventional funds. Stewart Jones is a Professor of Accounting with the University of Sydney, appointed in 2001. His research interests embrace credit risk modelling, capital markets research, standard setting and accounting theory. Sandra van der Laan is a lecturer in the Discipline of Accounting at the University of Sydney. Her research focuses on accounting as a social discourse and accounting as a mechanism to discharge a broad range of corporate accountabilities. Geoff Frost is an Associate Professor of Accounting at the University of Sydney. His research interests include corporate social responsibility and ethical investment. Janice Loftus is a senior lecturer in accounting at the University of Sydney. Her current research interests include financial accounting and corporate social responsibility reporting.     

Socially Responsible Institutional Investment in Private Equity

This article studies institutional investor allocations to the socially responsible asset class. We propose two elements influence socially responsible institutional investment in private equity: internal organizational structure, and internationalization. We study socially responsible investments from Dutch institutional investments into private equity funds, and compare socially responsible investment across different asset classes and different types of institutional investors (banks, insurance companies, and pension funds). The data indicate socially responsible investment in private equity is 40–50% more common when the decision to implement such an investment plan is centralised with a single chief investment officer. Socially responsible investment in private equity is also more common among institutional investors with a greater international investment focus, and less common among fund-of-fund private equity investments.     

The Heterogeneity of Socially Responsible Investment

Many writers have commented on the heterogeneity of the socially responsible investment (SRI) movement. However, few have actually tried to understand and explain it, and even fewer have discussed whether the opposite – standardisation – is possible and desirable. In this article, we take a broader perspective on the issue of the heterogeneity of SRI. We distinguish between four levels on which heterogeneity can be found: the terminological, definitional, strategic and practical. Whilst there is much talk about the definitional ambiguities of SRI, we suggest that there is actually some agreement on the definitional level. There are at least three explanations which we suggest can account for the heterogeneity on the other levels: cultural and ideological differences between different regions, differences in values, norms and ideology between various SRI stakeholders, and the market setting of SRI. Discussing the implications of the three explanations for the SRI market, we suggest that there is reason to be sceptical about the possibilities of standardisation if not standardisation is imposed top-down. Whether this kind of standardisation is desirable or not, we argue, depends on what the motives for it would be. To the extent that standardisation may facilitate the mainstreaming of SRI, it could be a good thing – but we entertain doubts about whether mainstreaming really requires standardisation.     

An Empirical Examination of Institutional Investor Preferences for Corporate Social Performance

This study investigates the pattern of institutional shareholding in the U.K. and its relationship with socially responsible behavior by companies within a sample of over 500 UK companies. We estimate a set of ownership models that distinguish between long- and short-term investors and their largest components and which incorporate both aggregated and disaggregated measures of corporate social performance (CSP). The results suggest that long-term institutional investment is positively related to CSP providing further support for earlier studies by Johnson and Greening (1999, Academy of Management Journal 42, 564–576) and Graves and Waddock (1994, Academy of Management Journal 37, 1034–1046). Disaggregation of CSP into its constituent components suggests that the pattern of institutional investment is also related to the form which CSP takes. Investigation of the impact of investment screens on the selection of stocks suggests that long-term institutional investors select primarily through exclusion, rejecting those firms which have the worst CSP.     

Socially Responsible Investing in the United States

Socially responsible investing (SRI) has emerged in recent years as a dynamic and quickly growing segment of the U.S. financial services industry involving over $2 trillion in professionally managed assets. Its conceptual origins can be found in the early history of civilization, with it's modern roots in the 1960s. This paper provides an overview of the breadth and depth of the concept and practice of socially and environmentally responsible investing, describes the investment strategies that together define SRI as currently practiced in the U.S., offers several observations about some of the factors fueling its dramatic growth, and presents data showing that investors who choose to invest in a socially and environmentally responsible manner can do so without giving up investment returns. SRI has matured to a point where virtually any investment need can be met through portfolio design that integrates an investor's personal values, institutional mission, and/or social priorities.The socially responsible investment industry in the UnitedStates is a young phenomenon. Even referring to it as an "industry" ten years ago may have been a bit of a stretch. While it has grown dramatically in recent years, it is an area of work, of study and of practical application that continues to evolve in many significant ways.One intriguing example of the ongoing development of the field can be found in the analysis of the language used to describe it. The terms social investing, socially responsible investing, ethical investing, socially aware investing, socially conscious investing, green investing, values-based investing, and mission-based or mission-related investing all refer to the same general process and are often used interchangeably.     

The Missing Dynamic: Corporations, Individuals and Contracts

In this article we discuss whether it pays to invest ethically. Our aim is to examine corporate social responsibility from philosophical, moral and practical points of views. We focus on two main issues related to ethical investments. Firstly we discuss the moral dilemma of how capitalism has changed its shape in today’s world and from ‘blaming the business’ there is a general attempt to use the markets to promote ethics values and corporate social responsibility. Secondly, we analyze the growth of ethical investment funds in the UK today, and their performance, and highlight some of the institutional investors involved in the management of ethical funds. We discuss whether ethical investments really succeed in reducing the conflict between profit-making and social responsibility as they promise or whether they use commercial rhetoric and market mechanism to merely sell us our own perceived values back. We conclude that the paper has a key contribution in setting the scene for future research in an area that is evolving and of fundamental importance to companies, investors and various stakeholder groups.     

Why Wine is not Glue? The Unresolved Problem of Negative Screening in Socially Responsible Investing

The purpose of socially responsible investing (SRI) is to: (1) allow investors to reflect their personal values and ethics in their choices, and (2) encourage companies to improve their ethical, social, and environmental performance. In order to achieve these ends, the means SRI fund managers employ include the use of negative screening, or the exclusion of companies involved in “sinful” industries. We argue that there are problems with this methodology, both at a theoretical and at a practical level. As a consequence, current SRI offerings cannot accurately reflect the values and ethical beliefs they propose to represent. Moreover, the use of a␣priori criteria is potentially misleading, as we show by discussing examples of glue and wine making. Applying this flawed approach SRI funds fail to influence the direction of the firms they deem most in need of re-directing. Rather than engaging in the simple a␣priori assumption that some industries are “saints” while others are “sinners” (Freeman, 2007) we suggest a new framework upon which the SRI screening methodology could be grounded. Embracing the philosophical tradition of American pragmatism, we suggest that SRI methodology could be improved by engaging in an analysis based on (1) the actual impacts of the company’s products and services, (2) the company’s relationships with its specific, real stakeholders, and (3) the contingent environment (social, economic, political, legal, and cultural) in which the business operates.     

Morals or Economics? Institutional Investor Preferences for Corporate Social Responsibility

This article presents the results of a study that analysed whether social responsibility had any bearing on the decision making of institutional investors. Being that institutional investors prefer socially aligned organizations, this study explored to what extent the corporate actions and/or social/environmental investments influenced their decisions. Our results suggest that there are specific variables that affect the perceived value of the organization, leading to decisions to not only invest, but whether to hold or sell the shares, and therefore having a consequential impact on the capital market’s valuation.     

Investment with a Conscience: Examining the Impact of Pro-Social Attitudes and Perceived Financial Performance on Socially Responsible Investment Behavior

This article addresses the growing industry of retail socially responsible investment (SRI) profiled mutual funds. Very few previous studies have examined the final consumer of SRI profiled mutual funds. Therefore, the purpose of this study was to, in an exploratory manner, examine the impact of a number of pro-social, financial performance, and socio-demographic variables on SRI behavior in order to explain why investors choose to invest different proportions of their investment portfolio in SRI profiled funds. An ordinal logistic regression analysis on 528 private investors revealed that two of the three pro-social variables had a positive impact on how much the consumer invested in SRI profiled funds. Moreover, there was proof of a non-altruistic motive for investing in SRI as consumers who perceive that financial return of SRI is equal or better than “regular” mutual funds, invested a greater proportion of their portfolio in SRI profiled mutual funds. Furthermore, the results showed that women and better-educated investors were more likely to invest a greater proportion of their investment portfolio in SRI. Overall, the findings indicate that both financial perceptions and pro-social attitudes are connected to consumer investment in SRI.     

Saving for Retirement Without Harming Others

This article discusses moral issues raised by defined contribution retirement plans, specifically 401(k) plans in the United States. The primary aim is to defend the claim that the federal government ought to require 401(k) plans to include a range of socially responsible investment (SRI) options. The analysis begins with the minimal assumption that corporations engage in behavior that imposes morally impermissible harms on others with sufficient regularity to warrant attention. After motivating this assumption, I argue that individual investors typically share in the responsibility for the harms imposed by corporations in which they invest, and that they therefore have a moral obligation to incorporate considerations of social responsibility into their investment decisions, when possible, to avoid being complicit in morally impermissible corporate behavior. I further argue that individuals are subject to substantial institutional and structural pressures that create a powerful incentive to invest in 401(k) plans, even though such plans typically lack any SRI options. To eliminate this pressure to commit indirect harm in the process of saving for retirement, I recommend that the federal government requires 401(k) plans to incorporate a range of SRI options, and I defend this proposal from several possible objections.     

On the corporate social responsibility perceptions of equity analysts

The importance of communicating corporate social responsibility (CSR) not only to socially responsible investors but also to the mainstream of the financial community is gaining importance in a more competitive capital market environment. This article looks at how equity analysts at the German stock exchange in Frankfurt – individuals who are not particularly involved in socially responsible investment (SRI) research – perceive economic, legal, ethical and philanthropic responsibility strategies. The evidence obtained in our interviews suggests that responsibility issues are increasingly becoming part of mainstream investment analysis. However, for them to play a larger part in the future, investor relations personnel must frame responsibility strategies in a way that is more consistent with the financial community's perspective. In particular, the impact of CSR measures on strategic development, competitive anticipation and creating trust with stakeholders are key in leveraging CSR in financial communications.     

Social Issues and Socially Responsible Investment Behavior: A Preliminary Empirical Investigation

An important dimension of the ongoing trend toward greater corporate social responsibility is the emergence of individual and institutional investors who invest in companies that support social objectives. While a small number of studies have examined the criteria used by institutions, no studies have looked at individual investors. Using a mail survey of 4,000 investors in two mutual funds that incorporate social screens in their investment decisions, this study finds that compared with other investors, socially responsible investors are younger and better educated. Respondents most frequently identify environmental and labor relations issues when asked what defines socially responsible corporate behavior. Although the respondents value socially responsible behavior in companies they invest in, they are unwilling to sacrifice financial returns to achieve it.     

A History of Scandinavian Socially Responsible Investing

This article contributes to the literature on national varieties of socially responsible investment (SRI) by demonstrating how Scandinavian SRI developed from the 60s and onwards. Combining findings on Scandinavian SRI with insights from previous research and institutional theory, the article accounts for the role of changes in societal values and norms, the mechanisms by which SRI practices spread, and how investors adopt and transform practices to suit their surrounding institutional contexts. Especially, the article draws attention to how different categories of investors act as institutional entrepreneurs during specific historical periods, and how these roles come to shift as institutional rule systems of varying societal levels change. Thus, the insights gained are useful in the future research agenda concerned with advancing knowledge on idiosyncrasies and commonalities of national SRI manifestations, and to understand the reasons underlying such characteristics.     

Institutional investor activism on socially responsible investment: effects and expectations

Concentrated attention on institutional investors' activism has been perceived in the last few decades and further intensified in the post-Enron era. A new area of particular significance that has emerged is institutional investors' growing awareness and practice of socially responsible investment (SRI). This article starts by reviewing the importance of institutional investor activism and the historical implication of SRI. Significantly, various elements that give rise to the growth of SRI in the modern business world are considered in detail. It is recognized that, although current empirical evidence suggests ambiguous effects of SRI, the positive impact of institutional investors' activism on SRI is likely to have been undermined due to the underdevelopment of evaluation systems, and SRI should stand out as a good investment option for its joint financial and societal concerns. Nevertheless, obstructions still exist in the exercise of investor activism and the pursuit of SRI strategy, which implies that, at least in the near future, SRI strategy will remain as a minor investment trend for institutional investors in Anglo-American countries. Additional regulatory methods and awarding schemes are, therefore, expected to motivate institutional investors' activism on SRI, and subsequently to promote global sustainability.     

Identifying impediments to SRI in Europe: a review of the practitioner and academic literature

For more than 15 years, the investment community and the academic community have written extensively on socially responsible investment (SRI). Despite the abundance of SRI thought, the adoption of SRI practices among institutional investors is a comparative rarity. This paper endeavours to achieve two goals. First, by integrating the practitioner and academic literature on the topic, the paper attempts to identify the many impediments to SRI in Europe from an institutional investor's perspective. Second, the paper proposes a unitary framework to conceptually organize the impediments to SRI by using insights from different relevant research perspectives: behavioural finance, organizational behaviour, institutional theory, economic sociology, management science and finance. The paper concludes by presenting the main shortcomings within both the academic and the practitioner literature on SRI and by providing conceptual and methodological recommendations for further research.     

How do Leading Retail MNCs Leverage CSR Globally? Insights from Brazil

In this article, we shed light on the debate about the financial performance of socially responsible investment (SRI) mutual funds by separately analyzing the contributions of before-fee performance and fees to SRI funds’ performance, and by investigating the role played by fund management companies in the determination of those variables. We apply the matching estimator methodology to obtain our results and find that in the period 1997–2005, US SRI funds had better before- and after-fee performance than conventional funds with similar characteristics. The differences, however, are driven exclusively by SRI funds run by management companies specialized in SRI. While these funds significantly outperform similar conventional funds, funds run by companies not specialized in SRI underperform their matched conventional funds. We find no significant differences in fees between SRI and conventional funds except in one case: SRI funds are cheaper than conventional funds run by the same management company.