Implications of social responsibility investment for pension funds in Turkey

Abstract

PurposeThis paper aims to present to capital market regulators (particularly in Turkey) with options for regulating the quickly expanding area of socially responsible investment (SRI).Design/methodology/approachThe paper takes a public economics perspective, focusing on the social risks concomitant with equity investment, and presents options based on an economic analysis of the various regulatory options available to capital market regulators.FindingsThe paper finds that in the long run, the extent of national SRI‐related regulation will probably depend on the extent to which the social, environmental, and other risks targeted by SRI represent social risks (which can be mitigated by regulation as opposed to other policy instruments).Practical implicationsWhile Turkish private pension fund regulators should be mindful of wariness of other OECD member countries to regulate SRI, the particularity of the social risks faced by Turkish financial markets may militate for a unique national approach toward SRI regulation.Originality/valueThis study represents one of the first attempts to address the issue of domestic SRI regulation and to present evidence‐based conclusions in a policy oriented setting.