| Abstract: | 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. |
