Abstract
In this work, we present an overview of the historical development of socially responsible investing (SRI). We will argue that such a financial activity has been boosting in recent decades from a niche, mainly as a religious-led exclusionary practice, towards a mainstream strategy of risk analysis for institutional and retail investors. We also discuss the advances and possible drawbacks that regulatory activity and harmonization process on such industry have achieved at international level in recent years, with a special focus on the European Union. The study shows that the lack of a globally accepted taxonomy on what constitutes sustainable activities, of regulatory clarity and of high-quality data allowing for comparisons across industries and regions, together with practical and behavioural complexities are major critical issues that discourage SRI industry at the global level.
Highlights
We present an overview of the historical development of socially responsible investing (SRI1) and evaluate the progress that regulatory activity and harmonization process concerning such financial industry have achieved at international level in recent years, with a special focus on the European Union
In recent years the European Union has undertaken several steps to increase the availability of green funds and boost SRI, which we summarize in the subsection
Despite the structural difficulties of the economic science in taking ethical factors properly into account, the socially responsible investment industry has been flourishing in the last decades, based, on one hand, on the increased demand from retail investors for more responsible behaviour of financial and business sectors and, on the other hand, on the evidence that ESG factors are a material risk for financial investors
Summary
We present an overview of the historical development of socially responsible investing (SRI1) and evaluate the progress that regulatory activity and harmonization process concerning such financial industry have achieved at international level in recent years, with a special focus on the European Union. These initiatives have produced an ongoing debate between private sector organizations and the European policymakers on what approach (either legislative or market-led, mandatory or voluntary), degree and type of disclosure is needed for institutional investors on ESG factors.
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