Organizing the collective action of institutional investors: Three case studies from the principles for responsible investment initiative

Abstract

Abstract Purpose – This chapter investigates the role of enabling organizations in the processes whereby institutional investors collectively influence corporate managers on Environmental, Social and Governance (ESG) issues. We develop a framework combining stakeholder and collective action theory to explain how institutional investors influence corporations through collective engagement and to specify how enabling organizations influence this process. Methodology/approach – To evaluate our framework, we investigate the role of the organizational platform provided by the United Nations-backed Principles for Responsible Investment (PRI) initiative in supporting institutional investors’ collaborative engagement with corporations on ESG issues. Findings – Our findings clarify how investors enhance their sources of power, legitimacy and urgency and attract managers’ attention through collaborative engagement, and show how they manage these attributes to reshape the legitimacy and urgency of their claims in the eyes of managers. Our results also show how enabling organizations such as the PRI initiative facilitate the emergence of collective action by lowering barriers to entry and providing a mobilizing structure, support collaborative efforts by adding their own legitimacy, normative power and persistence to the collaborative engagement, and create conditions for a lasting dialogue between investors and managers by providing a hybrid organizational space. Social implications – In explaining how to enhance institutional investors’ collective action on ESG issues, this paper shows how we could reorient financial market forces toward sustainability. Originality/value of paper – The paper benefited from a unique access to confidential and internal data from the UN-PRI initiative and provides a new framework.