Increasing the effectiveness of SRI corporate engagement on climate change through a responsive regulation framework

Abstract

Abstract Purpose Socially responsible investment (SRI) engagement currently performs a variety of supportive regulatory functions such as reframing norms, establishing dialogue and providing resources to improve performance, however corporate responses are voluntary. This chapter will examine the potential gains in effectiveness for SRI engagement in a responsive regulatory regime. Approach Global warming is a pressing environmental, social and governance (ESG) issue. By using the example of climate change the effectiveness of SRI engagement actors and the regulatory context can be considered. This chapter builds the conceptual framework for responsive regulation of climate change. Findings SRI engagement may face resistance from corporations due to its voluntary nature and conflict with other goals. Legitimacy and accountability limit the effectiveness of SRI engagement functioning as a voluntary regulatory mechanism. This chapter argues that the effectiveness of SRI engagement on climate change could be enhanced if it served as part of a responsive regulation regime. Practical implications Engagement is used by SRIs for ESG issues. A comprehensive regulatory regime could enhance corporate adaptation to climate change through increasing compliance with SRI engagement. The implication for SRI practitioners is that lobbying for a supportive regulatory regime has a large potential benefit. Social implications Responsive regulatory policy involves both support and sanctions to improve compliance, enhancing policy efficiency and effectiveness. There are potentially large net social benefits from utilising SRI engagement in a regulatory regime. Originality of chapter In seeking to re-articulate voluntary and legal approaches this research addresses a gap in the literature on climate change regulation.