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.     

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.     

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.     

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.     

Institutional Pillars and Corruption at the Societal Level

This article studies the effects of social institutions on organizational corruption at the societal level by focusing on the possible interactions between the institutional pillars that have been identified in past research. Based on these three institutional aspects or pillars, this article tests the interactive effects of social institutions among societies throughout the world. The results suggest that the three institutional pillars have significant interactive effects on organizational corruption at the societal level. A discussion of the implications of the research findings for researchers and practitioners is given.     

Socially Responsible Investment and Fiduciary Duty: Putting the Freshfields Report into Perspective

A critical issue for the future growth and impact of socially responsible investment (SRI) is whether institutional investors are legally permitted to engage in it – in particular whether it is compatible with the fiduciary duties of trustees. An ambitious report from the United Nations Environment Programme’s Finance Initiative (UNEP FI), commonly referred to as the ‘Freshfields report’, has recently given rise to considerable optimism on this issue among proponents of SRI. The present article puts the arguments of the Freshfields report into some further both empirical and critical perspective, however, and suggests that its findings do not call for very much optimism. The general argument is that while the understanding of fiduciary duty outlined by the Freshfields report seems to allow institutional investors to at least sometimes take some social or environmental considerations into account, the support it gives for SRI is notably contingent and, furthermore, it rules out exactly the kind of SRI which proponents of social responsibility and environmental sustainability should hold in highest regard – proactive cases and socially effective investment strategies. If SRI is to become an important force for corporate social responsibility through its adoption by institutional investors, then, it is suggested that legal reform is needed.     

A Puzzle in SRI: The Investor and the Judge

As Socially Responsible Investment (SRI) enters the mainstream of professional and institutional investment practice, some perplexities arise. Some SRI market participants are well schooled in finance but are hesitative as to how to apply non-financial criteria in the management of portfolios. Governments too are giving SRI more attention and, in some countries, are discussion whether and how to regulate the SRI market. Advocacy groups are targeting SRI projects through media campaigns using political discourse. Many of the pertinent questions that come with these perplexities are of the philosophical or ethical type and concern legitimisation, demarcation of responsibilities, interpretation of norms and policy formulation. The inclusion of non-financial criteria into investment decision-making leads to a ‹puzzle in SRI’ for which this article offers a solution. The puzzle arises when the day-to-day implementation of an SRI-policy coincides with the process of administering justice. Three questions make up that puzzle: (1) what should an␣investor do when allegations arise about a corporation, (2) what should an investor do when a corporation is brought before a court, (3) what should an investor do when a corporation is found guilty by a court. This article argues, by distinguishing between the rationality of the investor and that of the judge, that allegations, court cases or court verdicts should not be reasons to disinvest from a corporation. This article offers examples from investor practice and points out in which way allegations, court cases and court verdicts make sense for investor behaviour.     

Information Asymmetry and Socially Responsible Investment

Selecting, applying and reporting on investment screens for socially responsible investing (SRI) presents challenges for companies, investors and fund managers. This article seeks to clarify the nature of these challenges in developing an understanding of the foundations of ethical investment screens. At a conceptual level this work argues that there is a common element to the ethical foundations of SRI, even with very different apparent motivations and investment restrictions. Establishing this commonality assists in explaining the information asymmetry problem inherent in SRI. A market-facilitated solution illustrates how these insights might foster the development of socially responsible investment.     

Varieties of CSR: Institutions and Socially Responsible Behaviour

A central concern within contemporary socio-economics has been on the relationship between national institutional configurations and societal outcomes. In this paper, we assess the relationship between legal origin and a range of correlated indicators of social responsibility, focusing on socially responsible investing and voluntary charitable giving. We found that in Common Law contexts, lower levels of social responsibility than in Civil Law contexts, other than in the area of charitable giving, where the converse was the case. We explore the reasons for this distinction, and for the different patterns encountered in post-socialist Central and Eastern Europe. Based on the findings, we identify directions for future research.     

Think Global, Invest Responsible: Why the Private Equity Industry Goes Green

The growth of socially responsible investment (SRI) on public financial markets has drawn considerable academic attention over the last decade. Discarding from the previous literature, this article sets up to analyze the Private Equity channel, which is shown to have the potentiality to foster sustainable practices in unlisted companies. The fast integration of the environmental, social and governance issues by mainstream Private Equity investors is unveiled and appears to have benefited from the maturation of SRI on public financial markets and the impetus of large conventional actors. Hypotheses on the characteristics and drivers of this movement are proposed and tested on a unique database covering the French Private Equity industry in 2011. Empirical findings support that Private Equity socially responsible investing is characterized by investor engagement and strategically driven by a need for new value creation sources, increased risk management and differentiation. In particular, results show that independent funds, which need to attract investors, are more likely than captive funds to develop socially responsible practices. Evolution of the movement and future research paths are proposed.     

机构投资者实地调研与投资-股价敏感性——基于管理层学习效应视角

文章利用2013-2018年深圳证券交易所上市公司的数据,实证检验了机构投资者实地调研对投资-股价敏感性的影响。研究发现,机构投资者实地调研提高了公司投资-股价敏感性,在股价信息含量越高时,机构投资者实地调研对公司投资-股价敏感性的影响越显著,表明投资者实地调研通过信息反馈效应中的"挤入渠道"增强了管理层向市场的学习行为,机构投资者实地调研对投资-股价敏感性的影响在管理层持股的上市公司中更为显著。研究结果表明,机构投资者实地调研可以帮助上市公司管理层获取更多决策有用信息,提升资源配置效率,对于完善机构投资者调研制度、提升我国资本市场信息效率具有一定的实践价值。     

Socially Responsible Investing: An Investor Perspective

Given the growing importance of Socially Responsible Investing (SRI), it is surprising that there is no consensus of what the term SRI means to an investor. Further, most studies of this question rely solely on the views of investors who already invest in SRI funds. Our study surveys a unique pool of approximately 5,000 investors that contains both investors who have used SRI criteria in investment decisions and those who have not, and involves a broad array of criteria associated with SR investing. Our findings offer new insight into the SRI debate. For both sets of investors, environmental and sustainability issues dominate as the major category associated with SR investing. We find strong agreement in the ranking of the relative importance of various SRI factors despite differences between these two groups in their opinion of their overall importance. We also find that investors prefer to consider the SRI question in more holistic terms rather than using the exclusionary format favored by most SRI funds. Investors seem to prefer to reward firms who display overall positive social behavior rather than to exclude firms on the basis of certain products or practices. These findings can help providers of SR investment vehicles to improve the SRI products that they offer to the general investor, thus both encouraging the initial adoption of SR criteria by investors and increasing overall investment in SR choices.     

Makeshift markets and grassroots reponsibilization

ABSTRACT

Prior research has yielded insights into how market actors generate permanent, institutionalized structures. Investigate the emergence of a temporary marketplace, characterized by flexible socio-material constellations. We draw on ethnographic data collected within a refugee aid initiative, which assembled during the in 2015–2016, and was a response to the failure of institutional structures. We map out a process through which individuals are collectively moved to respond form social networks, and engage in market-making practices. We identify this process as the emergence of a “makeshift” market, and argue that it is a complementary form of institutional work, constituted by a grassroots process of responsibilization. We contribute to the literature on responsibilization and market dynamics by discussing (1) the emergence and decline of temporary and complementary marketplace structures and (2) mapping out a responsibilization process driven by moral outrage at the experiential level.     

Financial return or social responsibility? An investigation into the stakeholder focus of institutional investors

Since the financial crisis, regulators have put emphasis on encouraging institutional investors to take their governance responsibilities more seriously. In the UK, the Stewardship Code was introduced to enhance the engagement of institutional investors with shareholdings in UK listed companies. In the literature, institutional investors have been predominantly conceptualised as owners, although a number of authors have rejected this view, arguing that traders would be more appropriate. The UK Stewardship Code adds a third view: the institutional investor as steward. The literature generally considers the stewardship concept to be the ownership role combined with wider stakeholder responsibilities. By focussing primarily on this new stakeholder element, this study examines empirically the new stewardship concept by undertaking a content analysis of the published Stewardship Statements of 81 asset managers. The results find support for both the ownership and stewardship role but also highlight significant variations in practices that point toward different competitive strategies.     

Sustainable consumption and the financial sector: analysing the markets for responsible investment in Hong Kong and Japan

The origins of the modern socially responsible investment (SRI) movement can be traced to the turbulent period in the 1960s when powerful social undercurrents including environmentalism and anti‐war activism fuelled a rise, in a radical change, in the way society viewed faith, values and commerce. Today, nearly 1 out of every US$9 under professional management in the US is currently invested using social investment strategies while the European green and ethical investment market is estimated to be €1 trillion or as much as 10–15% of the total funds under management. While some preliminary figures and analyses exist for countries outside these two regions, SRI has been, to date, largely explored within the context of North America and Europe. This is unfortunate as the sustainability of SRI as a consumer market is going to depend, to a great extent, to what happens outside of North America and Europe, and most notably in the rapidly developing Asian economies. In this article, I will explore the development of SRI as a mainstream financial consumer instrument in industrialized (Japan) and emerging (Hong Kong/China) economies of the Asia Pacific region. To fully analyse the SRI market development in Hong Kong and Japan, I will examine the following three issues and questions: first, how does the sustainable consumption framework offer a useful lens from which to explore SRI, and why is the Asia Pacific market and policy context so important for the broader issue of sustainable consumption? Second, what precisely is SRI and how did it develop into an important global financial investment vehicle? Third, how did the SRI market develop in the case of Hong Kong and Japan? I will then conclude the article with some analysis on the important lessons SRI market development in Hong Kong and Japan hold for market sustainability of the financial sector and sustainable consumption.     

公众意愿是国家审计体制变迁的重要推动力

本文以制度变迁中的博弈理论为基础,对印度国家审计体制的演变过程进行了分析,确定了相应的假设,指出了渐进式体制变迁的主要特征,建立了有限理性下的体制变迁模型,分析了交叉换位与制度变迁的协调性,阐述了战略分布、变迁成本与博弈均衡,总结了国家审计体制变迁的规律和启示,认为公众行为(需求)在成功的渐进式变迁中发挥着不可替代的推动作用,在制度变迁方案设计中,公众可以直接或间接影响博弈参与者战略选择的三个主要变量,即改革的预期制度收益、传统体制下的既得利益和实际的制度变迁成本,在一定时期、一定程度上发挥制度变迁的引导作用。     

Transfer of corporate governance practices into weak emerging market environments by foreign institutional investors

We advance the practice transfer theorising of corporate governance (CG) by developing a framework that uncovers how foreign institutional investors (FIIs) improve on CG practices of firms in weak institutional environments. Using hand-collected data for 85 listed Nigerian firms covering the 2011–2016 period, we show that FIIs bypass the weak regulatory environment in emerging markets by transferring good CG standards to host countries. Furthermore, FIIs’ ability to enhance the CG quality of firms in such environments is moderated by their home country’s legal system, with FIIs from countries with strong legal enforcement having an enhanced ability to improve CG practices of firms in weak institutional environments. However, cultural differences between the FIIs’ home and host countries negatively moderate this relationship. Our results are robust to the choice of estimation technique and various sources of endogeneity.     

机构投资者类型对股市波动的影响

本文以2007-2010年我国资本市场的整个波动周期为考察期间,在考虑了变量内生性的问题的基础上,采用2SLS方法实证分析了机构整体持股对于股价波动的影响。研究发现:机构整体持股对股市波动的影响因不同的市场状态而具有非对称性,并可以用市场状态假说进行解释;在对于机构分类的实证研究中发现,在控制内生性情况下,同一类别的机构投资者对股市波动的影响是随着市场的变化而变化;同时,即使在相同的市场环境下,不同的投资者对市场波动的影响也不相同。因此,需要辨证认识各类机构投资者的作用,针对不同机构投资者的特征及不同的市场状态采取不同措施以稳定市场。     

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.     

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.