Financial markets: A tool for social responsibility? [Book Review]
David Bourget (Western Ontario)
David Chalmers (ANU, NYU)
Rafael De Clercq
Ezio Di Nucci
Jack Alan Reynolds
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Journal of Business Ethics 52 (1):59-71 (2004)
Objectives of socially responsible investment (SRI) are discussed with reference to the two main mechanisms of the SRI ‘movement’: shareholder advocacy and managed investments. We argue that in their current forms, both mechanisms lack the power to create significant corporate change. Shareholder advocacy has been largely unsuccessful to date. Even if resolutions were successful, shareholder advocacy may still be ineffective if underlying economic opportunities remain. Marketing material and investment prospectuses issued by socially responsible mutual funds (SRI funds) commonly contain the claim that, by affecting corporations' access to capital funding, SRI funds can change corporate practices. This paper makes a contribution by presenting the market share of SRI funds in the regions where they are most developed, being Europe, the U.S. and Australia, to show that this claim is unlikely to eventuate. SRI funds also commonly claim that they will outperform conventional active mutual funds. That the economic performances of both are similar might be explained by their similar portfolio compositions. The paper makes an innovation in the SRI literature by adopting a legitimacy framework to explain the continued presence of SRI funds. To achieve desired social and environmental outcomes, SRI funds are urged to address issues at a more systemic level. A suggested mechanism is the collective lobbying of corporations and, especially, governments.
|Keywords||socially responsible investment ethical investment shareholder activism mutual funds managed funds legitimacy|
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Citations of this work BETA
Rob Bauer, Jeroen Derwall & Rogér Otten (2007). The Ethical Mutual Fund Performance Debate: New Evidence From Canada. [REVIEW] Journal of Business Ethics 70 (2):111 - 124.
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Carmen Juravle & Alan Lewis (2008). Identifying Impediments to Sri in Europe: A Review of the Practitioner and Academic Literature. [REVIEW] Business Ethics 17 (3):285–310.
Riikka Sievänen, Hannu Rita & Bert Scholtens (2013). The Drivers of Responsible Investment: The Case of European Pension Funds. [REVIEW] Journal of Business Ethics 117 (1):137-151.
Stewart Jones, Sandra van der Laan, Geoff Frost & Janice Loftus (2008). The Investment Performance of Socially Responsible Investment Funds in Australia. Journal of Business Ethics 80 (2):181 - 203.
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