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The "Ethics" of Ethical Investing
Abstract
There appears to be an implicit assumption by those connected with the ethical investment movement (e.g., ethical investment firms, individual investors, social investment organizations, academia, and the media), that ethical investment is in fact ethical. This paper will attempt to challenge the notion that the ethical mutual fund industry, as currently taking place, is acting in an ethical manner. Ethical issues such as the transparency of the funds and advertising are discussed. Ethical mutual fund screens such as tobacco, alcohol, gambling, and the military are preliminarily examined to better determine whether they can actually be defined as "ethical" screens as opposed to merely social, political, or religious screens. A code of ethics for ethical investment is constructed by which ethical mutual fund firms can be audited for ethical compliance.
... It is difficult to address the evolution of the concept of SRI without considering the influence of Christianity in this development in terms of economic analysis or social impact (Schwartz, 2003;Heilbroner, 1993;Kinder & Domini, 1997;Mackenzie, 1998). Nevertheless, it is more appropriate to focus the analysis in recent times, especially from the 80's, as it was then when the concept was formalized (Schwartz, 2003) due to the investor concerns about environment, labour, oppressive regimes, security of the products manufactured…; to the growing importance of business ethics and corporate responsibility movement; to the creation of indexes that only incorporated sustainability investments considered as ethical; or to the creation and activity of national investment companies. ...
... It is difficult to address the evolution of the concept of SRI without considering the influence of Christianity in this development in terms of economic analysis or social impact (Schwartz, 2003;Heilbroner, 1993;Kinder & Domini, 1997;Mackenzie, 1998). Nevertheless, it is more appropriate to focus the analysis in recent times, especially from the 80's, as it was then when the concept was formalized (Schwartz, 2003) due to the investor concerns about environment, labour, oppressive regimes, security of the products manufactured…; to the growing importance of business ethics and corporate responsibility movement; to the creation of indexes that only incorporated sustainability investments considered as ethical; or to the creation and activity of national investment companies. ...
Despite the recent flurry of scientific interest in the Dark Triad – narcissism, psychopathy, and Machiavellianism – the research has been mostly descriptive in nature. Relatively ignored by researchers, darker personality variables may prove valuable in understanding counterproductive work behaviors. In the present study, we attempt to integrate the Dark Triad personality traits into organizational life by correlating them with the level of counterproductive work behavior and with work locus of control. Although those three facets have different origins, the personalities described as dark personalities share a number of features. In different degrees, all of them entail a socially malevolent character with behavior tendencies toward self-promotion, emotional coldness, duplicity, and aggressiveness. A narcissistic person is described in terms of a high vanity, constantly seeking for attention and admiration, with a sense of superiority or authority. Most often he or she manifests
manipulative and exhibitionist behaviors. Machiavellianism is a tendency to be cynical, pragmatic, emotionally detached in interpersonal relations but, at the same time a good organizer and having long-term strategically thinking. Psychopathy presents as cardinal features: impulsiveness, emotional detachment, manipulative antisocial behavior. The recently published meta-analysis by O'Boyle, Forsyth, Banks and McDaniel (2011),
showed that counterproductive behavior in the workplace is associated with all three facets of the dark triad. In the current study 122 participants (36 males and 86 females) were invited to fill in the following measures: Work Locus of Control Scale (Spector, 1988), MACH IV (Christie & Geis, 1970), Narcissistic Personality Inventory (Raskin & Hall, 1979), Self-Report Psychopathy scale – version III (Paulhus, Neumann, & Hare, in press) and
Counterproductive Work Behavior Checklist (Spector & Fox, 2002). Results did not showed positive correlations between Machiavellianism and counterproductive work behaviour, or between narcissism and counterproductive work behaviour. Nevertheless, one strong positive correlation was found between psychopathy and counterproductive work behaviour (r= .438, p<.01), mirroring Patrick’s results (2007, as cited in Paulhus and Williams, 2002). Regarding the work locus of control, it was identified a positive significant correlation with
Machiavellianism (r= .204, p<.05), meaning that the higher the score on work locus of control – internal, the higher the tendency to act in a machiavellic way.
... It is difficult to address the evolution of the concept of SRI without considering the influence of Christianity in this development in terms of economic analysis or social impact (Schwartz, 2003;Heilbroner, 1993;Kinder & Domini, 1997;Mackenzie, 1998). Nevertheless, it is more appropriate to focus the analysis in recent times, especially from the 80's, as it was then when the concept was formalized (Schwartz, 2003) due to the investor concerns about environment, labour, oppressive regimes, security of the products manufactured…; to the growing importance of business ethics and corporate responsibility movement; to the creation of indexes that only incorporated sustainability investments considered as ethical; or to the creation and activity of national investment companies. ...
... It is difficult to address the evolution of the concept of SRI without considering the influence of Christianity in this development in terms of economic analysis or social impact (Schwartz, 2003;Heilbroner, 1993;Kinder & Domini, 1997;Mackenzie, 1998). Nevertheless, it is more appropriate to focus the analysis in recent times, especially from the 80's, as it was then when the concept was formalized (Schwartz, 2003) due to the investor concerns about environment, labour, oppressive regimes, security of the products manufactured…; to the growing importance of business ethics and corporate responsibility movement; to the creation of indexes that only incorporated sustainability investments considered as ethical; or to the creation and activity of national investment companies. ...
When thinking about Corporate Social Responsibility (CSR) approach in the business field it is not usual to refer it to Private Equity (PE). Despite this specialized business could be taken as tester for the development, impact and integration of sustainability into the CEO Agenda of the companies, the grey and dark zones surrounding it and the low degree of knowledge to the public in general left it to a backstage position. In addition, the economic importance of the money flows managed by the companies in the Investment sector is noticing the regulators to consider their importance and increase the restrictions and information requirements to all the stakeholders in the market. Prior to the regulators interest in becoming an active stakeholder in the relation of public finances with private equity, the pure players itself have started to prepare regulations and codes of conduct that are becoming really important to understand the flows of investment as well as sourcing the analysis of the returns of the investments in the economic and non-economic environment. This paper is aimed at analysing the importance of SRI and CSR in the PE field of business, highlight best practices of the main players, learn from the implementations carried out and, eventually, set the basics for an integrated model that could satisfy General Partners and Limited Partners requirements in the quest for capabilities in the wide and non-regulated environment surrounding us. This paper will highlight topics to be covered by research in progress.
... Investment with ethics refers to using ethical and social principles in selecting and managing one's investment portfolio (Schwartz, 2003). Ethics is a set of guidelines that establishes appropriate and inappropriate behavior, which helps people decide when to expose problems and what moral standards to use in specific circumstances (Chong & Anderson, 2008). ...
Purpose – Managing finances and making the right financial decisions are challenging for everyone worldwide, and wrong decisions by individuals may lead the whole economic system in the wrong direction. This paper aims to investigate behavioral aspects of individuals regarding their financial decision-making. Also, it examines the moderating role of generations on behavioral aspects affecting financial decision-making, taking into account Generation Z and Millennials. Design/methodology/approach – Kathmandu valley, the capital city of Nepal, was selected as the study area for this research. Since this study aims to analyze the financial behavior of only two generations, individuals who fall under either of these generation groups and are actively involved in financial decision-making constitute the study population. The convenience sampling technique was used within each generation group to collect data. Four hundred and thirty-eight (438) usable data were collected through a structured questionnaire and analyzed using descriptive statistics, Pearson's correlation, and hierarchical regression. Findings and Conclusion – Supporting planned behavior theory and the generation cohort theory, the findings from this analysis demonstrated a significant positive effect of digital literacy, financial literacy, financial attitude, and risk tolerance on financial behavior. At the same time, the findings of this paper also stated that ethics has a significant impact on financial behavior, which supports the cognitive and emotional biases explained by behavioral theory. Furthermore, Generation Z and Millennials significantly differ in financial literacy, attitude, and ethics, shaping their financial behavior. However, this study could not find generation moderating the effect of risk tolerance and digital literacy on financial behavior. Originality/Value - The findings of this paper contributed to the existing body of literature by validating behavioral finance and the theory of planned behavior, helping scholars gain more insights regarding the influence of financial constructs and ethics on financial behavior. Furthermore, the conclusions of this paper also validate the generation cohort theory, showing similar behavior in people of similar age or age groups. This study also explored behavioral differences between Generation Z and Millennials in Nepal, which was still to be explored.
... The lack of standard definitions used for screening, measures, or requirements has been defined as one of the main barriers to SRI investing. Therefore, it is hard to measure if SRI-labeled funds are genuine, transparent, and are, in fact, ethical, which is not always the case (Schwartz, 2003). ...
... Screening revolves around the selection or exclusion of companies from a portfolio based on social or environmental criteria. This process encompasses both negative and positive screening approaches, where companies are either included or excluded [19][20][21] . Optimal abnormal returns materialized when investors embraced a best-in-class screening methodology, integrating multiple socially responsible screens concurrently, and adhering exclusively to stocks with exceptionally high socially responsible ratings [22,23] . ...
Socially Responsible Investment (SRI) is an emerging investment avenue in India, encompassing various Environmental, Social, and Governance (ESG) mutual funds within the financial markets. This study adopts both an exploratory and empirical approach, aiming to provide historical insights into the landscape of SRI within India's financial markets. The study's objectives include elucidating the concept of SRI, assessing the performance of selected ESG funds in India, and examining the opportunities and challenges within this domain. To evaluate the effectiveness of Environmental, Social, and Governance (ESG) funds, the study employs various risk-adjusted performance measures. Notably, the ICICI Prudential ESG Fund in the Direct Plan-Growth (FDPG) option demonstrates superior overall performance compared to other selected ESG fund schemes in India. Conversely, the Aditya Birla Sun Life ESG FDPG option ranks as the least performer when contrasted with other schemes within the Direct Plan-Growth category.
... The origins of responsible investment date back to the anti-slavery campaign launched by the Quakers in the 1700s (Viviers & Eccles, 2012). In 1928, investment funds responding specifically to the needs of certain religious communities were developed in the United States (Schwartz, 2003;Viviers & Eccles, 2012). These funds employed a screening approach that consisted in applying exclusion criteria when selecting investments. ...
Following in the footsteps of the celebrated California Public Employees’ Retirement System (CalPERS), more and more institutional investors are developing policies governing their proxy voting rights at annual general meetings to clearly express shareholders’ interest in environmental, social, and corporate governance issues. They are also increasingly numerous in promoting responsible investment practices through these policies. The object of this study is to examine the extent to which votes cast by the Fonds Desjardins, a major Canadian institutional investor, at the annual general meetings of firms in which it invests comply with its proxy voting rights policy and its public commitment to the social responsibility of these firms. The analyses were based on the votes recorded on the Fonds Desjardins website from July 1, 2018, to June 30, 2019. Of the 168 votes analysed, 35 did not comply with the Fonds’ policy, reflecting a non-compliance rate of 20.8%. The analyses show that votes on environmental issues are the most diverged from the institution’s policy during the period under study. Overall, the results indicate that the votes cast by the Fonds Desjardins at annual general meetings do not always correspond to the Fonds’ proxy voting rights policy. These findings raise questions about the real motivation behind such policies. Are they a genuine or a symbolic tool?
... It further undertakes the thematic review to elaborate the major themes prevalently identified in this subject and mapping the themes to establish linkage (Braun & Clarke, 2006). The brief summary of the entire execution plan of this study is represented in Figure 1 which adheres according to the Scientific Procedures and Rationales for Systematic Literature Reviews (SPAR-4-SLR) protocol, which consists Moskowitz (1972), Sparkes (2001), Renneboog et al. (2008), Irvine (1987), Cowton (1999), Schwartz (2003), Sparkes andCowton (2004) 1990s Green finance Green finance highlights the environmental dimension of financial strategies focused on promoting positive impacts on society (2019) Governments, NGOs, consulting groups, etc. ...
The sustainable finance study is considered as an important study under the 2030 agenda for achieving sustainable development goals. It is assumed to include an investment decision-making process by directing capital towards sustainable investment and monitoring climate change under its core agendas. The study on sustainable finance is much diversified. There is no definition of sustainable finance which is applicable universally. The governments, financial institutions and several international organizations have considered framing a definition according to their approach and applicability. This article reviews the study conducted on the topic ‘sustainable finance’ to answer the question related to the meaning of sustainable finance and the areas covered under it. The study aims to explore the vast database of Scopus and Web of Science for the specified duration of 2002–22. The study tries to close the gap present in a diversification and interpretation of sustainable finance meaning, and it further draws the attention of the people concerned globally towards this less explored subject under the sustainability goal. There is abundant research undertaken in the various areas related to sustainability but very little in sustainable finance. The subject is majorly understood under the corporate governance spectrum despite having its relation with many other factors and also its individual impact on the industry growth, thus demanding a thorough review of the topic.
... SRI developed from being merely a religious phenomenon towards investments increasingly concerned about environmental, geopolitical, and democratic issues (Schwartz, 2003). Nevertheless, religiosity seems to remain as one of the important characteristics of SRI investors (Hoepner et al., 2011;Kurtz and Di Bartolomeo, 2005). ...
The readiness to sacrifice profit while making socially responsible investments among millennials, as future investors and managers, was examined. Specifically, a multi-level perspective on willingness to pay for socially responsible investment was assumed to understand how nationality, personal values and investment knowledge affect millennials' readiness to sacrifice profit to achieve sustainability goals. Using survey data of 521 business students from Italy, Poland and Ukraine, it is showed that a considerable share of millennials prefer social and environmental performance of investment over financial return and that their nationality is the most powerful factor in explaining willingness to pay for socially responsible investment along with their sensitivity to environmental issues that takes the leading role among all personal values motivating investors to accept lower rates of return. The results can be relevant for financial institutions aiming at developing socially responsible investment products. Policy implications of the results are insights into nationality-related tensions while Europe-wide regulation of socially responsible investment could enter into force.
... We excluded 1530 studies that did not report such performance measures. Islamic investment is often closely related to SRI (Renneboog et al., 2008) because ESG-based investment principles also originated from core religious values (Kiymaz, 2012;Schwartz, 2003). We included Islamic investment studies in our sample if either Islamic investment had been categorized as SRI by the authors of the respective study or Islamic investment was compared with SRI. 5 These exclusion criteria left us with 153 studies and 1047 observations of SRI performance. ...
In this article, we use a meta‐analysis to examine the performance of socially responsible investing (SRI). We find that, on average, SRI neither outperforms nor underperforms the market portfolio. However, in line with modern portfolio theory, we find that global SRI portfolios outperform regional subportfolios. Moreover, high‐quality publications, publications in finance journals and authors who publish more frequently on SRI are all less likely to report SRI outperformance. In particular, we find that including more factors in a capital market model reduces the likelihood that a study will find SRI outperformance.
... Schueth (2003) sigue su rastro desde mediados del siglo XVIII con los Quakers en Estados Unidos que prescindían de inversiones en empresas relacionadas con la guerra o la esclavitud. Al inicio del siglo pasado, estas inversiones iban dirigidas principalmente a grupos religiosos (Schwartz, 2003) y a partir de los años 70, se abrieron paso y ganaron terreno en entornos más seglares (Viviers & Eccles, 2012). Desde entonces, el mercado de las ISR ha crecido exponencialmente y se ha diversificado tanto en productos que se ofrecen, como en estrategias y en el público al que se dirigen. ...
Los datos proporcionados por organismos tanto nacionales como internacionales revelan el interés creciente que los inversores particulares manifiestan hacia los fondos de inversiones sostenibles y responsables (ISR). Si bien desean rentabilidades positivas, dichos inversores esperan de esos fondos una inversión en activos que cumplen criterios ambientales, sociales y de gobierno corporativo (ASG). Estos criterios imponen una clara limitación en las estrategias que los gestores de fondos ISR pueden aplicar. ¿El doble objetivo financiero y ético implica un comportamiento diferencial de los gestores de fondos ISR? El propósito principal de este artículo es proporcionar una visión económica y psicológica de los ISR. Analizaremos desde la revisión bibliográfica si existen diferencias de rentabilidad entre fondos convencionales y fondos ISR e investigaremos la relación entre rentabilidad y flujo de dinero y la existencia del efecto disposición en ISR, con el fin de ofrecer a los gestores y a los inversores una visión global para sus tomas de decisiones financieras. Recibido: 06 julio 2022Aceptado: 21 julio 2022
... We excluded 1530 studies that did not report such performance measures. Islamic investment is often closely related to SRI (Renneboog et al., 2008) because ESG-based investment principles also originated from core religious values (Kiymaz, 2012;Schwartz, 2003). We included Islamic investment studies in our sample if either Islamic investment had been categorized as SRI by the authors of the respective study or Islamic investment was compared with SRI. 5 These exclusion criteria left us with 153 studies and 1047 observations of SRI performance. ...
... It reveals the tone from the top through the Board and management team. A terminology represents a series of concepts such as socially responsible investment (Statman, 2008;Abramson & Chung, 2000), ethical investment (Mackenzie & Lewis, 1999;Schwartz, 2003), social investment (Cox et al., 2007), responsible investment (Dembinski et al., 2003;Thamotheram & Wildsmith, 2007;Viviers et al., 2009), and sustainable investment (Koellner et al., 2007;Weber, 2005) to illustrate corporate sustainability in management literature. ...
Corporate sustainability practices have become a proxy for a better management culture and good governance. As a result, environmental, social, and governance (ESG) disclosures are considered significant factors in the value creation procedures of the organisations. However, definitive guidelines on ESG reporting are still missing. Motivated by this research gap, the present study explores the types of industry-specific and firm-specific characteristics that motivate organisations to report on their ESG activities by utilizing a sample of top 100 Indian Standard and Poor's Bombay stock exchange, (S&P BSE) firms for the period 2015-2019. Based on the multivariate-regression analysis, the findings of this examination indicate that the size of the firm, cross border listing, and the industry play a crucial role in defining a firm reporting on ESG parameters. However, the current study did not find any evidence to support that a firm's book to market Value (BTMV), leverage, growth, age, Returns on the Capital Employed (ROCE), and ownership affect the ESG disclosures. But the Indian firms started emphasising the process of replacing their profit-maximising goals with sustainable ESG goals.
... Overall, the documents produced by the genre-set portray the bank's view, as a character in the story, of the products, including marketing information, rather than neutral documents presenting factual information. The ethical nature of certain banking and finance practices, such as outlined above, have been called into question (Louche et al., 2012;Richardson, 2009;Roulet, 2015;Schwartz, 2003) and of the claims made in marketing materials (Richards et al., 2020). Financial communication materials are typically designed with a purpose in mind, to inform, instruct, promote, and/or meet regulatory/legal requirements. ...
Genre theory allows us to examine texts that are written for a specific purpose. A non-fictional genre is similar to other genres such as those for films and novels, and genre theory: (i) categorises the elements of the genre; and (ii) sets up conventions and expectations for readers (Bhatia, 1997). The four elements of a genre are the characters, the setting, the plot and the story. The banking financial product literature is a particular genre of non-fictional written communication, providing descriptions of complex financial products that can affect people’s lives for many years come.
We extracted excerpts from the banking financial product literature which were used to interview 100 older banking customers. We found that all four elements of the genre, the characters, the setting, the plot and the story, failed its audience. To remedy this situation we contribute to practice by designing a template that can be used by writers of the genre. We also suggest using metaphors and synonyms, and argue that readers of the genre should be asked to provide feedback on drafts as part of a quality assurance process. Only then will the genre meet its readers’ expectations and sound financial decisions will be made for a better financial future for us all.
... See, for instance,Schwartz (2003) and the considerable body of work citing that paper, or, more recently,Widyawati (2020).Content courtesy of Springer Nature, terms of use apply. Rights reserved. ...
To commemorate 40 years since the founding of the Journal of Business Ethics, the editors in chief of the journal have invited the editors to provide commentaries on the future of business ethics. This essay comprises a selection of commentaries aimed at creating dialogue around the theme Business versus Ethics? (inspired by the title of the commentary by Jeffrey Harrison). The authors of these commentaries seek to transcend the age-old separation fallacy (Freeman in Bus Ethics Q 4(4):409–421, 1994) that juxtaposes business and ethics/society, posing a forced choice or trade off. Providing a contemporary take on the classical question “if it’s legal is it ethical?”, David Hess explores the role of the law in promoting or hindering stakeholder-oriented purpose and governance structure. Jeffrey Harrison encourages scholars to move beyond the presupposition that businesses are either strategic or ethical and explore important questions at the intersection of strategy and ethics. The proposition that business models might be inherently ethical or inherently unethical in their design is developed by Sheila Killian, who examines business systems, their morality, and who they serve. However, the conundrum that entrepreneurs are either lauded for their self-belief and risk-taking, or loathed for their self-belief and risk-taking, is discussed by M. Tina Dacin and Julia Roloff using the metaphor of taboos and totems. These commentaries seek to explore positions that advocate multiplicity and tensions in which business ethics is not either/or but both.
... There are many of these tangential concepts. For example, socially responsible investing (SRI), environmental, social and governance (ESG) investing, and ethical investing are usually applied to public equity investments (Juravle & Lewis, 2008;Schwartz, 2003; van Duuren et al., 2016), whereas green or cleantech investing (Bürer & Wüstenhagen, 2009;Mallett & Michelson, 2010) tends to focus more on private equity and project finance [see for example also the contribution by Meng et al. (2022) in this special issue]. Among philanthropic foundations the terms mission-related and program-related investment [see for example Andersen and Tekula (2022) in this special issue] are used to distinguish between impact investments made out of the endowment and grant budget respectively (Brest, 2016). ...
This introduction to the special issue on impact investing applies the attractive nuisance notion to impact investing. Social sector actors ‘trespassing’ on the playing field of conventional investment markets may not appreciate the risks. We apply the framework of essentially contested concepts to foster fruitful diverse research in this emerging research field. We advance six dimensions (intentionality, additionality, contribution, materiality, measurability and attribution), which we propose allow to describe different sub-clusters of how the term is used in research and practice. For each dimension we identify risks and opportunities stemming from the contested nature and highlight an ambitious research agenda for how future business ethics scholars can help address and foster impact investing. We conclude by illustrating how the papers in this special issue address these challenges.
... As the industry has matured, emphasis on impact measurement has also prompted best practices to emerge in an attempt to transparently and efficiently demonstrate impact. To this end, impact investing demonstrates ethical investing obligations, which are based on procedural moral standards or principles such as transparency, integrity, accountability, and non-deceptiveness (Schwartz, 2003). However, the professionalization of the sector has to a large extent failed to incorporate impact measurement and the use of non-financial incentives as a mechanism to compensate fund managers, which we explore in the next section through the lens of principal-agent tensions. ...
Investors with standard monetary preferences will give a fund manager incentives to increase firm profits, which can be achieved through a share in profits via carried interest. When investors have social preferences, it is not clear which incentives the manager should receive. We explore this puzzle by applying an agency theory perspective to impact investing, a practice where investors seek both financial returns and a measurable social or environmental impact. Using an inductive, qualitative approach, we identify and describe the ethical tensions and challenges faced by fund managers to structure and implement impact-based variable compensation schemes. Our results indicate that economic incentives tied to non-financial objectives are useful to alleviate goal incongruity between principals and agents during fund creation but have the potential to lead to perverse effects during the fund lifecycle, where managers may exploit subjective non-financial metrics to maximize personal wealth. We introduce the concept of impact fidelity, a conceptual equivalent of fiduciary duty, to ensure that investment decisions reflect the asset owner’s impact preferences.
... The issue of screening is extensively discussed in SRI literature (see for exampleBarnett & Salomon (2006), VonWallis & Klein (2015), andTrinks & Scholtens (2017)). In this context, some authors likeSchwartz (2003) argue that for most "questionable" industries, negative as well as positive effects can be found.Content courtesy of Springer Nature, terms of use apply. Rights reserved. ...
In recent decades, academia has addressed a wide range of research topics in the field of ethical decision-making. Besides a great amount of research on ethical consumption, also the domain of ethical investments increasingly moves in the focus of scholars. While in this area most research focuses on whether socially or environmentally sustainable businesses outperform traditional investments financially or investigates the character traits as well as other socio-demographic factors of ethical investors, the impact of sustainable corporate conduct on the investment intentions of private investors still requires further research. Hence, we conducted two studies to shed more light on this highly relevant topic. After discussing the current state of research, in our first empirical study, we explore whether besides the traditional triad of risk, return, and liquidity, also sustainability exerts a significant impact on the willingness to invest. As hypothesized, we find that sustainability shows a clear and decisive impact in addition to the traditional factors. In a consecutive study, we investigate deeper into the sustainability-willingness to invest link. Here, our results show that improved sustainability might not pay off in terms of investment attractiveness, however and conversely, it certainly harms to conduct business in a non-sustainable manner, which cannot even be compensated by an increased return.
... On moral principles they excluded producers of alcohol or tobacco, entities dealing with gambling or pornography, producers of weapons and equipment, producers of contraceptives or entities providing abortion services (Cowton 1999;Louche et al., 2012). Over time the number of funds that considered non-economic factors in their investment decisions grew and at the same time, the range of selection criteria applied by them expanded -in addition to ethical criteria they took into account the impact of the enterprise on the natural environment, its attitude to local communities, especially in developing countries, labour relations, corruption prevention etc. (Schwartz, 2003). Generally, these criteria are currently divided into three groups: environmental, social and governance-ESG (Boasson et al., 2006;de Graaf & Slager, 2009). ...
La crise fnancière a accru la popularité de l’investissement éthique. Ceci est visible dans l’augmentation du nombre des fonds d’investisse-ment européens ouverts (ISR) et dans l’augmentation de la valeur des actifs gérés. Néanmoins ce segment particulier des fonds d’investissement se développe de façon irrégulière, et sa position varie en fonction des pays. Des différences particulièrement grandes apparaissent entre les pays euro-péens avec des marchés fnanciers matures et les pays postcommunistes considérés comme des marchés émergents. À partir d’une analyse comparative, cet article confrme l’hypothèse d’une grande asymétrie dans les niveaux de développement des fonds ISR en faveur des pays non post-communistes. Cette asymétrie n’est pas uniquement due à un niveau de développement général des marchés plus élevé dans ces pays, mais aussi aux conditions institutionnelles plus favorables dans beaucoup d’entre eux.
... Consequently, the corporate houses are shifting from profits maximizing goals to sustainable ESG goals (Zhao et al., 2018;Kumar et al., 2020 andArmstrong, 2020). The word like Socially Responsible Investment (e.g., Statman, 2008;Abramson & Chung, 2000), Ethical Investment (e.g., Mackenzie & Lewis, 1999;Schwartz, 2003), Social Investment (e.g., Cox et al, 2003), Responsible Investment (e.g., Dembinsk et al., 2003;Thamotheram & Wildsmith, 2007;Viviers et al., 2009), and Sustainable Investment (e.g., Weber, 2005;Koellner et al., 2007;Nilipour, et al., 2020) are also being interchangeably used for corporate sustainability in literature. ...
We tried to explore the connection between ESG disclosures and CFP in the Indian context. For this purpose, the CFP is measured by ROCE and ROA. The ESG overall disclosure and factor scores are obtained from Bloomberg Terminals. The final dataset includes 77 companies for the sample period of 2015-2019. Eight different OLS multivariate regression analyses are performed. The first two is for overall ESG disclosure score, and then six different regressions are for each of E, S, and G factors with control variables such as company size, leverage, BTMV, age, growth, ownership and industry. The findings of this examination confirmed our hypothesis that better ESG disclosures practices positively and significantly affect CFP. Regression results found that there is a positive relationship between the ESG disclosure scores and CFP as well as the individual ESG factor scores except for social disclosures. The better ESG disclosures help the companies to improve their CFP and create a good image, credibility, and promote corporate ethical practices. Moreover, in all eight regression models organizations' leverage and growth was found statistically positively and significantly linkage with CFP. However, this paper did not find any evidence to support that sample firms’ size, BTMV, age, industry, and ownership affect CFP. This study provides managers and other stakeholders with important implications of corporate sustainability in the best interests of the long-term survival of an enterprise.
... Table 2 indicates the traditional and value-added performance indicators selected for the FAHP-TOPSIS algorithm. The lack of information disclosure, transparency and a specific socially reliable indicator that represents the multifaceted nature of SRI seeks the requirement of a unified general code of ethics for SRI (Koellner et al., 2005;Schwartz, 2003). A methodology that overcame the dichotomous measurement issue of social responsibility in SRI still exists. ...
Purpose – To determine and benchmark the performance of socially responsible companies (SRCs) in India based on the financial, value-added, and combined performance indicators by addressing the grassroots-level climate change problems.
Design/methodology/approach – The present study has used the traditional financial, value-added, and combined performance indicators to evaluate and rank the performance of 14 socially responsible companies (SRCs) under the BSE-Greenex sustainability index. The TOPSIS and fuzzy-AHP algorithms are used to calculate performance scores and assign indicators weights for 2015 to 2019. Further, we applied the Altman Z score methodology to understand the SRCs propensity towards bankruptcy behaviour. The parametric t-test is also performed on the outcomes of TOPSIS scores under different categories of indicators to check for statistical significance.
Findings – The performance scores of the TOPSIS algorithm indicate that the financial indicators of SRCs govern the firm performance significantly over the value-added indicators. Further, parametric t-test results validate the outcomes of performance scores by exhibiting no significant difference between the traditional financial and value-added indicators at a 5% significance level. However, few SRCs overall performance rankings were significantly improved after including value-added indicators. Moreover, the Altman Z score results also reveal that most of the SRCs under the study were found to be stable and showcase consistent performance and absent from bankruptcy behaviour.
Practical implications – (i) To facilitate a clear understanding of investors and portfolio managers in selecting appropriate companies under socially responsible investing; (ii) This study would give portfolio diversification insights to domestic and international investors and further advocate the necessity of investing in better performing sustainable companies to safeguard their investments against the future uncertainty.
Originality/value – In the context of ambiguous inferences on the performance of socially responsible investing (SRI), no prior study has been conducted to assess the performance of socially responsible companies (SRCs) in the Indian version of sustainability index BSE-Greenex.
... This practice, called greenwashing, consists of communicating unsubstantiated or misleading information about a financial product to give it the appearance of a socially responsible mutual fund (Lyon and Maxwell 2011;Lyon and Montgomery 2015). This practice has been described in the recent literature (Berrone et al. 2017;Marquis et al. 2016), but it is not new (Schwartz 2003). ...
In this paper, we study the asymmetric information between asset managers and investors in the socially responsible investment (SRI) market. Specifically, we investigate the lack of transparency of the extra-financial information communicated by asset managers. Using a unique international panel dataset of approximately 1500 equity mutual funds, we provide empirical evidence that some asset managers portray themselves as socially responsible yet do not make tangible investment decisions. Furthermore, our results indicate that the financial performance of mutual funds is not related to asset managers’ signals but should be evaluated relatively using extra-financial ratings. In summary, our findings advocate for a unified regulation framework that constrains asset managers’ communication.
... Irvine (1987), Cowton (1999), Schwartz (2003), and Sparkes and Cowton (2004) 1990s ...
Sustainable finance and investment (SFI) is key to fostering sustainable global development. Research in this field has focused on specific topics, such as the financial performance of sustainable investments and companies committed to sustainability. The SFI literature is excessively fragmented, rendering it difficult to identify what constitutes the field and what differentiates it from traditional finance and investment. Based on a systematic literature review of 166 articles, we map and integrate the main elements of the SFI field and identify the most relevant avenues for further research. In this process, we provide a definition of SFI; identify the main players in the field; and describe their profiles, strategies, and outcomes. We also propose a framework for understanding the SFI field and a research agenda. This agenda organizes the main SFI research questions and suggests suitable approaches to address them. We conclude that SFI players have worked together to promote positive social and environmental impacts through their financial and investment activities. However, the under‐theorization of the SFI concept, the traditional short‐term nature of financial logic, and the lack of evidence on the SFI impacts on society and the environment are the greatest challenges facing the field.
... While the salience of moral values tends to foster cooperation within groups, it can aggravate conflicts between self-identified groups that have (or believe themselves to have) diverging moral values (Greene, 2014). Moreover, it has been suggested that moral evaluations of investments are not necessarily based on proper ethical reasoning, but are often rather opinionated (Schwartz, 2003;Anderson, 1996). This is supported by literature in behavioral ethics that documents the biases that influence our moral judgments more generally (Bazerman and Tenbrunsel, 2011). ...
Society increasingly demands ethical motives from investors. Like other judgments, however, the moral evaluation of investments can be influenced by stereotypes. We investigate whether subjects’ evaluation of investments as immoral violates the commonly accepted principle of moral impartiality—the view that moral evaluations of actions must not depend on the actor’s arbitrary personal characteristics. Recently, the media discussed such a violation when criticizing an internal remark of a German financial regulator (BaFin), which stated that most short sellers of Wirecard stocks came from Israel was “striking”. Through a between-subjects experiment, we find that young German MTurkers with generally centrist political attitudes display behavior consistent with an anti-Semitic stereotype: They are much more likely to evaluate the very same investment as immoral if it is made by an investor with a name perceived as Jewish. The triggering of this stereotype should prompt us to consider the moral evaluation of investors with caution.
... However, gambling has long been characterized as a controversial business. From the government's perspective, there may be considerable benefits to endorse or legalize gaming, such as the generation of significant amounts of revenues in terms of taxation, investment and employment (Miller & Michelson, 2012;Schwartz, 2003). Despite the positive financial impacts from gaming operations, gaming itself "can potentially result in adverse social and economic consequences" (Hancock et al., 2008;Miller & Michelson, 2012), such as problem gambling, bankruptcy, family disputes and crimes. ...
This paper explores the social values that are created through corporate social responsibility (CSR) disclosure in the gaming tourism industry, and how the industry players use CSR disclosure as a communication channel with their stakeholders. This research applies the content analysis method and collects data from annual reports, sustainability/social reports and corporate websites of all gaming operators in Macao from 2011 to 2017. The results are tied to the Macao government’s report on the gaming tourism industry and the CSR reporting guidelines promulgated by the industry’s regulatory bodies. Further analysis is conducted based on public statistical data to quantify the social value co-created by the industry players with their stakeholders. The findings show that sustainability of enterprises in the gaming tourism industry is created through the participation of various stakeholder groups, such as consumers/customers, government, community, suppliers and employees. This is one of the first studies on value co-creation via CSR disclosure based on companies in the gaming tourism industry, especially in a region under the “one country, two systems” regime. Furthermore, this study pioneers in exploring how companies use CSR reporting to enhance their image and restore social values from their gaming operations which represent a typical controversial sector integrated with tourism.
... Despite an undeniable positive development of ethical or sustainable investment (SI) 1 in the last decades, the use of non-financial, sustainability criteria to assess investment opportunities has not yet completely entered the mainstream of financial markets (Eurosif, 2016). Several reasons have been brought forward explaining its persisting niche existence: On the one hand, the financial performance (see Revelli & Viviani, 2015 for a meta-analysis) and the impact (e.g., Schepers & Sethi, 2003) of SI have been doubted frequently, and on the other hand, it even has been questioned whether SI or ethical investment is ethical at all (Hellsten & Mallin, 2006;Schwartz, 2003;Sparkes, 2001). These doubts and questions are partly due to the great heterogeneity of SI (Sandberg, Juravle, Hedesström, & Hamilton, 2009) since it hampers the comparability of different SI products as well as between sustainable and financial driven investments. ...
This empirical study explores the financialization of social sustainability driven by sustainability accounting and reporting initiatives (SARIs). Since no globally accepted definition of what social sustainability encompasses exists, the paper asks how social sustainability is translated into the financial market language by SARIs as they provide standards for disclosing corporate non-financial performance and promote their concepts of social sustainability. The paper uses a two-step qualitative content analysis. First, it operationalizes social sustainability based on the empirical data of six sustainability rating agencies. Second, this operationalization is compared with the concepts created by three SARIs. The paper shows significant differences between the concepts of the SARIs and the rating agencies. While the rating agencies altogether interpret social sustainability with 83 distinct aspects, the SARIs, although differently created, use significant reduced concepts where 20% of these aspects are absent. The result of this financialization process could be a simplified and financially determined concept of social sustainability within die socially discourse. The research is limited to social sustainability and its financialization by SARIs. Individual indicators and their way or intensity to capture aspects of social sustainability were not part of the research interest. Further research should investigate the economic and the ecological pillars of sustainability as well as the usage of such financialized concepts within the society and especially by corporations. The paper unfolds the arbitrariness of operationalizing a qualitative phenomenon like social sustainability through the financial system. It discloses the need for looking at the mechanisms behind such processes and at the interests of the actors behind the frameworks. The paper reveals the financialization process driven by SARIs and demonstrates its simplifying effects on the concept of social sustainability. Furthermore, the paper shows that SARIs as metrics for non-financial aspects are troubled with a lack of transparency and a lack of convergence.
... However, the disclosure by funds about their interpretations of the guidelines that are used in practice is opaque and arguably prevents investors from making informed investment decisions. Notably, the scarcity of Pure Halal (PH) listed company stocks twenty years ago led to some Shariah scholars allowing investments in stocks with small haram elements; this has become enshrined in AAOIFI as the code of practice for Islamic funds, possibly misleading investors today (see Schwartz 2003). For example, Islamic funds using AAOIFI will include investee companies with interest-bearing debts of around 30% in their financial structure; a third of the total funds under management could thus be haram. ...
In contrast to the conventional fund management industry with a profit-oriented logic based on risk and return, ethical and faith-based funds should follow the religious principles of their investment-style philosophy. Islamic funds should obey the theological teachings of the primary sources of Islam, the Quran and Sunnah, as stakeholders expect these religious teachings to influence the investment decisions of fund managers. In practice, Islamic fund managers use Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI)’s screening criteria, based on secondary sources of Islam, which allow investments that are only partially halal (allowable) to be included in their portfolios. This study finds that a more religious logic in screening practices, although impairing diversification, does not necessarily harm performance. Thus, Islamic investment funds, and the wider ethical fund management industry, should, and could, adopt stricter screening criteria that match their investment mandates and bring more ethical business practices to the industry.
... The confluence of these approaches has drawn the attention of individual as well as institutional investors. The two different ethically based strategies (Islamic and responsible investment) share many similarities that are more significant than their differences (Benson et al., 2006;Schwartz, 2003;Wilson, 1997). For instance, responsible finance focuses on sustainability by ensuring environmental, social and ethical investments while Islamic finance deals with avoiding businesses with significant involvement with riba (interest) and requires a link between financial transactions and an underlying real economy activity. ...
The aim of the study is to explore whether Responsible finance investment and Islamic finance investment with apparent similarity despite some difference yield any diversification benefit for the investors across various investment horizons belonging to both platforms. Relevantly, we adopt advanced econometric estimation, MGARCH-DCC, and Wavelet for the daily return data covering from 01-January-1997 to 22-May-2017. The literature lacks study in the Responsible and Shariah field applying this kind of relevant and less erroneous methodologies. Our findings intuitively indicate that Responsible finance investment can contribute as a hedging asset class to the Islamic finance investors or vice versa. Moreover, the return is higher in the short term rather than long term investment horizons, diversification also exist for both categories of investors during the financial crisis since the time varying correlation is low at that time.
This study investigates the connection between Environmental, Social, Governance, and Controversies (ESGC) scores and financial performance in the energy sector across 27 countries and 521 firms from 2000 to 2021 through algorithms and machine learning techniques. The research employs advanced machine learning methods such as clustering analysis (k-means, DBSCAN, Hierarchical Clustering, and Affinity Propagation), violin plots, co-occurrence analysis, and regression techniques to ex-amine the effects of sustainable practices on corporate financial outcomes using a dataset with 640 variables. The study highlights sector-specific and geographical differences in the effectiveness of ESGC practices and demonstrates a positive asso-ciation between high ESGC scores and better financial indicators, such as profitabil-ity, earnings quality, liquidity ratios, and leverage. By presenting a strong case for incorporating ESGC scores into investment strategies, policy formulation, and cor-porate governance, the study suggests that responsible and ethical practices lead to enhanced operational efficiencies and better risk-adjusted returns. The findings, an-alyzed using machine learning techniques, indicate that companies with strong ESG practices have higher earnings quality and profitability, showing that sustainable practices benefit not only the environment and society but also the financial base line.
Environmental, Social, and Governance (ESG) ratings have become critical tools for investors seeking to align their portfolios with ethical and sustainable practices. However, the rapid growth and consolidation of the ESG ratings industry raise significant ethical and governance concerns. This paper explores whether ESG ratings are ethical, focusing on the commercial pressures that may undermine their integrity and the potential for these ratings to function as a form of surveillance, driven by agendas contrary to governance objectives.
The increasing influence of ESG ratings on decision-making within organizations cannot be overstated. As investors prioritize sustainability, ESG ratings are increasingly used to guide investments, yet the consolidation of the ESG rating industry, as noted by Avetisyan and Hockerts (2017), has led to what they describe as "institutional retrogression." Under commercial pressures, the industry may compromise ethical standards, resulting in conformity and a lack of diversity in ratings. DiMaggio and Powell's (1983) theory of institutional isomorphism further highlights how coercive forces within the industry contribute to this conformity, raising questions about whether these ratings are genuinely aligned with ethical governance or merely serve as tools for enforcing corporate surveillance.
This paper will critically examine how ESG ratings, while purporting to support ethical governance, can sometimes subvert it by prioritizing commercial interests over genuine sustainability. The potential for ESG ratings to be used as instruments of control, rather than for promoting transparency and accountability, reflects the darker side of governance. This raises important questions about whose interests ESG ratings truly serve and whether they contribute to or detract from sound decision-making.
To address these ethical and governance challenges, this paper adopts the ethical framework proposed by Viviers et al. (2008). This framework provides a structured analysis of whether responsible investing, as informed by ESG ratings, upholds ethical principles or merely reinforces existing power structures. The need for transparency in ESG rating methodologies is crucial, not only to avoid a "tick box" approach to governance but also to ensure that these ratings foster adaptive and responsive governance structures capable of resisting commercial biases.
The paper will empirically test whether the weightings assigned to various ESG issues conform to societal norms or if they reflect the biases of rating agencies. By utilizing McLachlan and Gardner's (2004) concept of moral intensity, this analysis will explore the alignment between public concerns, as indicated by media coverage, and the priorities set by ESG ratings. This testing will help determine whether ESG ratings support ethical governance or if they merely perpetuate market-driven agendas.
Data from S&P Trucost, a leading provider of environmental data, will be used to examine potential discrepancies between the data's ethical implications and how it is weighted in ESG ratings. The lack of transparency in these methodologies raises concerns about the quality of governance that ESG ratings promote, particularly if they obscure conflicts of interest and ethical compromises within rating agencies.
Several challenges in assessing the ethicality of ESG ratings will be discussed, including the potential for governance to be co-opted by commercial interests, leading to surveillance-like functions rather than promoting accountability. The consolidation of the ESG rating industry further exacerbates these issues by reducing competition and diversity in ratings, making it harder for organizations to adopt adaptive and responsive governance structures that truly reflect ethical considerations.
To counter these challenges, the paper proposes recommendations, including improvements to ESG ratings and behavioural nudges. Enhancing transparency in rating methodologies is key to ensuring that ESG ratings genuinely promote ethical governance rather than just serving as tools for commercial surveillance. Behavioural nudges, as suggested by Pilaj (2017), can encourage rating agencies and investors to prioritize ethical decision-making, aligning their practices with societal values rather than merely reinforcing market trends. Future research will explore the biases in ESG ratings further and develop frameworks that prioritize ethical governance over market conformity. By doing so, we can move toward governance structures that are both transparent and adaptive, capable of resisting the darker tendencies of commercialized ESG ratings.
Purpose
In pursuit of objectives, under the European Green Deal, to channel capital flows to sustainable activities, the EU Taxonomy offers clarity, labelling real economic activities as “sustainable”, based on technical screening criteria. This study of disclosure experiences aims to explore the role of co-evolutionary relationships in the Taxonomy’s effectiveness.
Design/methodology/approach
Co-evolution theory implies a dynamic interplay among sustainable finance stakeholders (SFSs), through adjustment to, impact on and operationalisation of the Taxonomy. Corporate disclosure experiences, including those of financial institutions and related SFS experiences, may reveal co-evolutionary processes. With significant Undertakings for Collective Investment in Transferable Securities (UCITS) and Alternative Investment Funds (AIFs), Irish SFSs provide contextual insight. Semi-structured interviews with a purposive sample of Irish SFSs capture inaugural corporate Taxonomy disclosure experiences.
Findings
A thematic analysis reveals six co-evolutionary processes that facilitate Taxonomy implementation in pursuit of policy objectives: [1] cross-functional reporting; [2] iterative pre-empting and addressing compliance issues; [3] regulation as a catalyst for co-evolution; [4] advanced capacity building; [5] stakeholder adaptation and [6] graduated use of ESG data. Implications for sustainability policy development and management are significant.
Practical implications
Whilst limited to just one EU jurisdiction, given limited prior empirical evidence for sustainable finance regulations from co-evolutionary perspectives, this study highlights a catalytic, yet precautionary role for co-evolution in their transformation effectiveness. As such, they must take account of their potential to stimulate co-evolution and to nurture it in pursuit of their policy objectives.
Social implications
The findings of this study add to a small, but growing body of academic literature on the Taxonomy Regulation, which suggests that a co-evolutionary lens is important for gaining a comprehensive understanding of its early-stage dynamics. From an implementation perspective, the qualitative data reveals actionable implications for regulators and policymakers, such as building capacity, better anticipation of outcomes and investment in data infrastructure.
Originality/value
Unlike existing analyses of disclosures, this study offers a co-evolutionary lens on Taxonomy contributions to sustainable development through qualitative accounts.
Large, listed companies are under increasing pressure to respond to critical issues such as climate change, modern slavery, and the protection of First Nations' heritage. Much of this pressure is exerted by civil society actors through corporate governance mechanisms, including leveraging shareholder rights to lobby firms. At the heart of this process sit largely understudied actors, proxy advisors, who advise large institutional investors on whether to support civil society's claim‐making on companies. The proxy advising industry is an influential duopoly that advises almost all institutional investors globally. This article advances our understanding of how norms are formed to become established market practices. It maps the relational power structures that govern ethical investment and reveals the capacity of proxy advisors to contribute to the cascading of ethical investment norms. In doing so, we argue that markets are not solely guided by exogenous forces but are reflective of the web of social relations between actors. We conclude that despite historically being seen as neutral experts in their role in advising institutional investors, proxy advisors should be viewed as political actors with significant influence over the outcome of social movement campaigns.
Purpose
This paper aims to conduct a systematic literature review of Socially Conscious Investment (SCI) articles published in premier journals. Its objective is to shed light on the publication trend, leading authors, journals, countries and themes in contemporary SCI research. The article also provides a conceptual model of SCI to enhance understanding of the knowledge structure and the future research direction.
Design/methodology/approach
A systematic review followed the PRISMA guidelines and encompasses 264 full-text articles indexed in A* and A category journals listed in ABDC is reviewed. The literature synthesis adopts the theories, contexts, characteristics and methodology (TCCM) framework.
Findings
The article has identified the research trends related to author impact, journal impact, article impact and the outcomes derived from the TCCM framework. Additionally, it highlights three key themes: Performance of SCI, Behavioural issues and SCI development literature.
Originality/value
The insight on various aspects of SCI was explored for a comprehensive understanding. The authors also developed a conceptual model for socially conscious investment.
Currently, developing green finance and serving a green economy has become a global consensus. The European Union's (EU) sustainable finance has an early origin, rich development experience, and a relatively complete framework system. The EU Action Plan: Financing Sustainable Development provides strong guidance to promote sustainable finance, and this initiative stimulates interbank market regulators to act quickly to achieve the goal of sustainable development. Additionally, Through the plan, European standards for green finance business have been unified, which has dramatically improved the efficiency of green finance in the interbank market and helped to facilitate effective convergence among financial institutions. The EU's sustainable financial system has an extremely excellent hierarchy, clear guidelines, a solid foundation, and profound influence, and it provides important guidance and reference for the development of green finance in China.
Environmental, social, and governance (ESG) investing is synonymous with sustainable investment for socially responsible investors. Unfortunately, the diversity of ESG investing remains unattended amidst the growth in ESG literature, as the academic literature focuses dominantly on measuring performance. An understanding of a wide range of subjects entailing ESG is required before future research on ESG investing is performed. To overcome the challenge, this systematic literature review uses bibliometric mapping to reveal four significant research themes within the ESG investing literature: investor behavior and motivations for ESG investing; cost and risk mitigation in ESG investing; portfolio screening and ESG investing; and ESG performance. The review critically examines each theme and broadens the research agenda for future studies. In addition to the significant themes, this paper also discusses theoretical and recent research trends in the ESG investing literature. The review identifies clashes and crossovers between these themes to appropriately interpret one theme using another and emphasizes the heterogeneity in ESG investing. Lastly, discussion over concerns and criticisms of ESG investing highlights greenwashing as a major cause of concern for investors.
Purpose
This study aims to provide a precise understanding of how corporate sustainability information is used in socially responsible investing (SRI). The study is motivated by the lack of a recognised body of knowledge on this issue. This study, therefore, collates and reviews relevant studies (67 studies) to provide guidance to investors interested in SRI and identify a research agenda for academics desiring to contribute to this area.
Design/methodology/approach
This study conducts a systemic literature review employing recognised key words and searching the Web of Science. HistCite is utilised to ensure important cited studies are not missed from the collection. The review was conducted from two perspectives: (1) sources of sustainability information and (2) how the information is used in SRI.
Findings
The review identifies five major sources of sustainability information, including corporate reports, ESG ratings, industry affiliation, news and private communication with firms. These sources of information play different roles in the cross section of SRI strategies (i.e. negative and positive screening, active ownership and integration). This study provides guidance on how to use this information in SRI and provides recommendations for future research on how analysts interact with the information, how different informational characteristics impact implementation, ways to improve data quality, improvements to analysis methods and where data use needs to be extended into new strategies.
Originality/value
This review contributes to the SRI literature by inventorying studies of an important, yet omitted aspect, namely, sustainability information. This work also enriches the literature on corporate sustainability information by investigating how this information can be used for a specific purpose, namely, SRI. Given the increasing interest in SRI, this review will provide much-needed guidance for a range of practitioners, including investors and regulators.
Sustainability reporting is an essential feature for firms looking for business opportunities. We investigated whether and how environmental, social and governance performance disclosures impact the cost of equity capital, individually and in aggregate. Data for 89 Indian firms listed on exchange during 2017–2020 is considered for the study. Fixed-effect panel regression is applied to data for examining the relationship between ESG and the cost of equity capital. Results of the study show that ESG performance disclosure negatively impacts cost of equity capital, providing the firm with capital at a lower cost. ESG disclosures create long-term value for investors and reduce information asymmetry, thereby building investors’ confidence.
Typified by the United Nations' net-zero emission initiatives, the need for corporate bodies, including financial institutions, to fulfill their social contracts has become ever critical. Many studies have analyzed the expanding literature on environmental, social and governance (ESG) from various perspectives, but only a handful of this work directly informs the decision-making of practitioners like institutional investors. We address the mismatch by conducting a review of the literature that can benefit both academia and industry. Before commencing the review, we consulted experts in the industry by contacting institutional investors from Australia and Japan with Asset Under Management of as much as US$500 billion, along with others in the finance industry. These practitioners voiced limited interest in understanding the motivations of ESG-conscious investors, an area that many academic studies have examined. The most common of the practitioners' requests relates to how portfolios that are financially viable can be constructed to incorporate investors' ESG-related preferences. We conduct a systematic literature that is based on this feedback and find that, even in an ESG-themed investment vehicle, the investor's individual ESG preferences may not align well with the fund's objective and degree of conviction. We discuss the resulting challenges and opportunities investors face when integrating ESG into their investment practices, thus providing a guide for investors who wish to re-think their ESG strategies and beliefs. Finally, the paper draws attention to alternative ESG data and the need for studies on dynamic materiality-mapping.
Purpose – To determine and benchmark the performance of socially responsible companies (SRCs) in India based on the financial, value-added, and combined performance indicators by addressing the grassroots-level climate change problems.
Design/methodology/approach – The present study has used the traditional financial, value-added, and combined performance indicators to evaluate and rank the performance of 14 socially responsible companies (SRCs) under the BSE-Greenex sustainability index. The TOPSIS and fuzzy-AHP algorithms are used to calculate performance scores and assign indicators weights for 2015 to 2019. Further, we applied the Altman Z score methodology to understand the SRCs propensity towards bankruptcy behaviour. The parametric t-test is also performed on the outcomes of TOPSIS scores under different categories of indicators to check for statistical significance.
Findings – The performance scores of the TOPSIS algorithm indicate that the financial indicators of SRCs govern the firm performance significantly over the value-added indicators. Further, parametric t-test results validate the outcomes of performance scores by exhibiting no significant difference between the traditional financial and value-added indicators at a 5% significance level. However, few SRCs overall performance rankings were significantly improved after including value-added indicators. Moreover, the Altman Z score results also reveal that most of the SRCs under the study were found to be stable and showcase consistent performance and absent from bankruptcy behaviour.
Practical implications – (i) To facilitate a clear understanding of investors and portfolio managers in selecting appropriate companies under socially responsible investing; (ii) This study would give portfolio diversification insights to domestic and international investors and further advocate the necessity of investing in better performing sustainable companies to safeguard their investments against the future uncertainty.
Originality/value – In the context of ambiguous inferences on the performance of socially responsible investing (SRI), no prior study has been conducted to assess the performance of socially responsible companies (SRCs) in the Indian version of sustainability index BSE-Greenex.
The current climate change is significantly caused by anthropogenic greenhouse gases, particularly CO2 released by burning of fossil fuels. Climate change is predicted to disrupt production systems and supply chains of businesses, potentially affecting their financial performance. ESG investing, the consideration of environmental, social and governance factors by asset managers will likely play a crucial role in combating climate change. To attract ESG funds, companies will have to reduce their carbon footprint, among other actions. When companies reduce scope emissions, they help achieve a goal of the Paris Agreement of limiting average global temperature increase to below 2°C above pre-industrial level. The aim is to identify factors that are likely to increase uptake of ESG investing. The increase in number of ESG investors and their assets, higher financial performance of ESG-linked investments, and increasing regulatory and investor initiatives are likely to increase the impact of ESG investing in reducing greenhouse gas emissions. In addition, investors are becoming more environmentally conscious when making investment decisions. Although some challenges persist, including inconsistency in terminology, huge amount of data to analyze and heterogenous rating standards, ESG investing is likely to play an important role in influencing entities to reduce their carbon footprint.
This chapter provides an overview of ethical funds, including the history, asset screening strategies, markets of ethical funds, and motives to invest in ethical funds. It identifies seven ethical fund styles that follow different asset screening strategies and tailor to specific moral and social beliefs of investors. These are ethically balanced fund, negative ethical fund, sustainability-themed fund, environmentally themed investing fund, social-themed fund, ESG integration (Plus) fund and responsible ownership fund. This chapter reviews literature relating to various aspects of ethical funds. Mixed evidence is gathered regarding the comparative performance between ethical and conventional funds. The performance of ethical funds also varies across different styles. However, empirical evidence on risk exposure of ethical funds is scant. Therefore, this chapter calls for further research relating to the risk exposure of ethical funds to enrich our understanding and enlighten investors of this important aspect of investment.
The study analyses the real-life results from the DJSI World selection process and investigates whether companies are treated differently because of sectoral or geographical diversification needs of the index; furthermore, the question whether its methodology penalises ESG-related irresponsible corporate activities is investigated. The last is an important issue, as it is not unusual to find constituents of sustainable indices implicated in corporate scandals. This is a striking fact, contradicting the ethical and sustainable imperative such companies are supposed to comply with. The authors scrutinise data from a data panel containing 2872 firms between 2011 and 2016 and estimate a variety of logit models. The empirical evidence indicates that ESG-related controversies affect the probability to be included in the DJSI World. Surprisingly, whilst controversy-implicated companies which are already index members were penalised, the likelihood of selection for those companies which have not been selected for the index yet, remained unchanged.
Purpose
This paper aims to emphasize the importance and current deficits of non-financial impact (NFI) assessment of socially responsible investment (SRI) with reference to the action plan of the European Commission (EC) for a greener and cleaner economy.
Design/methodology/approach
The importance and current deficits of NFI assessment are evaluated theoretically and condensed to an equilibrated socially responsible investment (ESRI) perspective, based on a narrative literature review of highly ranked academic journals.
Findings
Due to a deficient exploration of NFI in theory and practice, the role of SRI funds for sustainability transition has not yet been adequately discussed. This has enabled a situation where a constantly rising market share of SRI has not led to similar sustainability achievements. This strongly contrasts with investors’ expectations, the self-portrayal of the sector and the goals of the EC’s action plan. As a solution, the developed ESRI perspective elevates NFI as a second cornerstone for theory and practice. ESRI, contrary to the EC, sets a primer on the role of SRI fund management for achieving sustainability goals.
Originality/value
This study reveals how SRI theory and practice neglect the importance of NFI. The presented ESRI perspective enables scholars to examine SRI practices more holistically through a new theoretical lens. One special focus is on the role of SRI fund management as a transmission mechanism to push portfolio companies’ business practices toward more sustainable behavior.
Since the reform movement of the Muslim World from the midnineteenth century, many Islamic Financial institutions have been established. Subsequently, in 2001 the first Islamic banking policy was issued by the State bank of Pakistan and thereafter, Pakistan has faced many commercial, accountability and regulatory challenges in transforming the economy into an Islamic Economy. In this study, we find out whether the development of the Islamic Economy has fostered moral values in investors. This study, hence, aims to discuss the foundamental issues in moral values behind an investment decision while taking in account some personal factors influencing investment decisions. Data has been collected with the help of a questionnaire, where its reliability is confirmed by Cronbach Alpha, followed by correlation and multiple Regression tests. The results show a significant role of certain moral factors in investment decisions.
An acquisition of a company involved in socially undesirable activities can have important value implications. On the one hand, stocks in sin industries can be undervalued, and positive wealth effects might be created through risk sharing and a halo effect. On the other hand, acquiring sin stocks could increase litigation risk and the chance of product boycotts, and could hurt relations with employees and other stakeholders. Moreover, many investors avoid investments in sin stocks by applying negative screening. This article empirically establishes that shareholders of acquirer firms on average discount sin acquisitions. The negative wealth effects are stronger in countries with a greater focus on corporate social responsibility and for deals that are more likely to receive public attention. The article concludes that the costs of “sin” are considerable.
Many of today's ads work by arousing the viewer's emotions. Although emotion-arousing ads are widely used and are commonly thought to be effective, their careless use produces a side-effect: the psychoactive ad. A psychoactive ad is any emotion-arousing ad that can cause a meaningful, well-defined group of viewers to feel extremely anxious, to feel hostile toward others, or to feel a loss of self-esteem. We argue that, because some ill-conceived psychoactive ads can cause harm, ethical issues must arise during their production. Current pretesting methods cannot identify the potentially psychoactive ads; therefore, we offer some tentative guidelines for reducing the number of viewers harmed by psychoactive ads.
The key issue of ethical applications of fear appeals, which has been generally avoided in marketing literature, is reviewed. The authors develop an evaluation framework, the ethical effects-reasoning matrix (ERM), using multiple interest groups (stakeholders) and multiple ethical reasoning perspectives. The framework is intended to aid in isolating and identifying conflicts that may arise when fear appeals are considered from a variety of ethical perspectives involving many interested publics. An example is provided to indicate application of the framework as well as conflict resolution techniques.
The research was inspired by comments from the press and concerned academics who suggested that computer use could convert 'normal' people into antisocial, machine-code junkies. Contrary to such opinions, the computer-dependent individuals who took part in the study were intelligent, interesting, hospitable, but misunderstood people, who from experience had learned to mistrust humans. Instead from an early age, they had turned to the safe and predictable world of the inanimate, and by exploring their environments had become true scientists and philosophers. Their responses were far from neurotic, instead they were logical coping strategies which allowed them to make sense of the world within which they lived. They were pursuing an interest which not only provided intellectual challenge and excitement in infinite variety, but for most also enabled them to turn a fascinating hobby into a successful means of earning a living; an ideal to which most would aspire.
Although ethical investment is a growing phenonenon which attracts a signficant amount of media interest, relatively little has been written about the internal operations of ethical investment funds. Using a variety of sources, including interviews with a fund manager and participant observation at meetings of the fund’s ethical advisory committee, this paper examines the decision making of one ethical unit trust operating in the United Kingdom. In particular, it describes the development of the ethical criteria and the ways in which their implementation was monitored. Several significant parallels between publicly stated ethical investment criteria and corporate codes of ethics are then discusssed.
Controversy continues concerning the harmfulness of video game use by children. The author encountered clearly pathological preoccupation with video games in a preadolescent. The child had stolen, forged checks, and skipped school to continue using video games. He and his mother were physically abused by his father. Placement of the child in a residential treatment center with marital and family therapy resulted in resolution of the patient’s pathological use of video games. © 1990 by the American Academy of Child and Adolescent Psychiatry.
Social Awareness Pays Off in the Long Run
- Skorecki
- Alex
New Year's Feast: Social Mutual Fund Review for 2000
- P Mcveigh
- Jan
The Toronto Star. Harrah's CasinosHarrah's Survey of Casino EntertainmentRed Wine May Help Your Heart – But Doctors Say Exercise is Better', The Jerusalem Post
- Rob Ferguson
- Siegel
- Judy
Ferguson, Rob: 3 February 2000, 'Rival Disputes Mackenzie's Use of 'Ethical', The Toronto Star. Harrah's Casinos: March 1995, 'Harrah's Survey of Casino Entertainment'. Siegel, Judy: 24 January 2001, 'Red Wine May Help Your Heart – But Doctors Say Exercise is Better', The Jerusalem Post, [http://silk.nih.gov/silk/niaaa1/ database/fasrsk01.txt]. Skorecki, Alex: 28 Feb. 2001, 'Social Awareness Pays Off in the Long Run', Financial Times, p. 27. Smith, Sandy: 9 Nov. 2000, Pennsylvania Current, p. 3. Social Investment Forum: 2000, London, England [http://www.uksif.org]. Social Investment Organization: 2000, Toronto, Ontario [http://www.web.net/~sit/]. The Social Investment Organization: 'The Best of the TSE 300', The Financial Post, pp. 30–36.
Socially Responsible Funds Flex MuscleEthical Summa Above Average', The Globe and Mail
- Wells
- Maureen
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