Responsible Investment Research Articles

The Commonalities of Socially Responsible Investment With Islamic Finance: A Bibliometric Analysis

This study aims to evaluate the number of overviews on the commonalities of socially responsible investment (SRI) with Islamic finance by providing critical thinking in terms of the investment screening process. The main critical reviews are obtained from the articles, paperwork, and previous related studies from reputable open access journals such as Emerald, SSRN databases, and other indexed-Scopus on the Web of Science. This study finds that the commonalities of socially responsible investment with Islamic finance has seemingly been characterized as a slow-moving but unstoppable works since global movements aspire to prevent a transgression of Earth's boundaries towards financial risks. Intertemporal choice accounts for how reliable constitutes for transitioning and adapting planetary boundaries in investment decisions. The challenge is to bridge the postulated gap on the commonalities of SRI with Islamic finance leading into social and financial return aspects in order to construct long-term predictions and scenarios embodying the Islamic finance concept through environmental, social and governance (ESG) approach.

A metric for tradable biodiversity credits quantifying impacts on global extinction risk

AbstractThe difficulty in identifying appropriate metrics for the impacts organizations have on biodiversity remains a major barrier to the inclusion of biodiversity considerations in environmentally responsible investment. We derive and analyze a simple metric: the sum of the proportional changes in the global abundances of species caused by an organization, with a regularization to cover the case of species close to extinction. We argue mathematically that this metric quantifies changes in the mean long‐term global survival probability of species. The metric thus supports the objective “to significantly reduce extinction risk” of the 2022 Global Biodiversity Framework and allows organizations to set themselves corresponding science‐based targets. We show that in a perfect market trade in biodiversity credits quantified by our metric would lead to near‐optimal allocation of resources to species conservation. We further show that metric values are quantitatively convertible to several other metrics and indices already in use. Barriers to adoption are therefore low. Used in conjunction with metrics addressing ecosystem services and integrity, potential areas of application include biodiversity related financial disclosures and voluntary or legislated biodiversity credit or no net loss policies.

Financialising affordable housing? For-profit landlords and the marketisation of socially responsible investment in rental housing

Financialising affordable housing? For-profit landlords and the marketisation of socially responsible investment in rental housing

Influence of level of assurance, assurance provider type, and investors’ personality in greenhouse gases reporting for social responsible investment

Influence of level of assurance, assurance provider type, and investors’ personality in greenhouse gases reporting for social responsible investment

Management Students' Perception Towards Investment in Equity Markets

The fascination with the equity market, which is renowned for its ability to generate exponential wealth, has captivated individuals from different generations. However, for those who are new to the financial landscape, the idea of investing can be overwhelming. This is especially true for management students who possess business acumen but have limited experience navigating the complexities of the stock market. As these students prepare to enter the professional world, where making personal financial decisions is crucial, it becomes essential to understand their perceptions of equity market investment. This research project aims to thoroughly explore the attitudes, beliefs, and concerns of management students regarding their participation in the equity market. By carefully examining their financial knowledge, risk tolerance, and motivations for investing, the project seeks to create a detailed understanding of how this important demographic perceives the dynamic and influential financial realm of equity markets. This exploration is vital as it provides valuable insights into potential obstacles and opportunities for stakeholders such as financial institutions, policymakers, and educators. The findings obtained from this study have the potential to guide specific interventions and initiatives in various fields. Armed with these insights, financial institutions can develop investment products and services that are tailored to the specific needs and preferences of management students. Policymakers can also benefit from these findings by using them to design targeted financial literacy programs that aim to empower future business leaders with the necessary knowledge and confidence to navigate the financial landscape responsibly. Additionally, educators can seamlessly incorporate the project's discoveries into their curriculum, ensuring that management students acquire the essential financial literacy skills needed to make informed and responsible investment choices. Ultimately, the goal of this research project is to make a significant contribution towards shaping a generation of financially knowledgeable individuals who can actively participate in and meaningfully contribute to the economic ecosystem. Key Words: · Equity Market · Management Students · Portfolio Decision-making · Financial Literacy · Investment Behavior

Doing good in good times only? Uncertainty as contingency factor of warm-glow investment

Recent studies in investor behavior have put forth a so-called warm-glow theory, suggesting that investors appear to have developed a preference for socially responsible investments. The theory explains why investors appear willing to pay a premium for responsible assets. According to recent reports, however, Covid-19, supply chain uncertainties, and the recent surge in inflation have led to a resurgence of investment in what could be considered non-responsible assets. Investor sentiment thus appears to have changed. Our research question in this paper is whether market uncertainty acts as a contingency variable of warm-glow preferences, such that in times of crisis, investors lose the taste for responsible assets, in favor of the preservation of their consumption and wealth. Exploring a global sample of 882 financial sector firms over two decades, we use panel regressions to link both operating and stock performance to environmental, social, and governance (ESG) ratings. We break down our sample into periods of low and high uncertainty. Our results indicate that uncertainty may moderate investors’ warm-glow preferences, as hypothesized. Thus, our study adds uncertainty as an important contextual contingency to discussions on socially responsible investing: investors may be willing to do good in good times only.

Investor sentiment and sustainable investment: evidence from North African stock markets

This paper examines the connectedness between investor sentiment and returns and volatility on environmental, social, and governance (ESG) indices in Morocco and Egypt. Therefore, we construct a new investor sentiment index and use weekly data from January 2018 to December 2023, along with the time, frequency and quantile connectedness methods. The results show that investor sentiment sometimes influences the returns and volatility of the ESG indices, and sometimes it is influenced by them. This connectedness is stronger during distress events, namely, the COVID-19 outbreak and geopolitical tensions (the Russian-Ukrainian and Israeli-Palestinian conflicts). Furthermore, the spillover effect between sentiment and returns on the ESG indices is mainly due to short-term spillovers, except during the COVID-19 period, when long-term spillovers dominate. However, the spillover effect between sentiment and volatility on the ESG indices is mainly due to long-term spillover, especially during the COVID-19 outbreak and the Russia-Ukraine War, implying the persistence of shock transmission due to high uncertainty. The findings also highlight the impact of market conditions on spillovers. These findings can help socially responsible investors successfully diversify their portfolios and adjust their strategy according to investor sentiment; they also have beneficial implications for policymakers in achieving sustainable development goals.

Do policy uncertainty and ESG sentiment drive ESG commitment of green funds?

In this study, we examine the effect of economic policy uncertainty (EPU) and environmental, social and governance (ESG) sentiment on the motivation of green funds (GFs) to pursue ESG objectives. We use data on US mutual funds that market themselves as having socially responsible investment (SRI) mandates (hereafter green funds) and find that managers increase their ESG practices in the subsequent year when EPU or investor’s attention to ESG issue rise. Interestingly, this pattern remains unchanged during crisis period (Covid-19 pandemic), although the marginal effect is much more lower. Our results show also that higher performance (alphas) decreases the ESG commitment of green funds in the subsequent year. Our findings suggest that policy uncertainty and ESG sentiment affect the motivations of green funds to pursue ESG objectives.

The economic impacts of social activism and corporate social responsibility on food fraud.

The study examines the relationship between the corporate social responsibility (CSR) investments of a food firm, an activist's incentive to target the firm to uncover and deter fraudulent behavior, and the firm's incentive to commit food fraud. Specifically, we develop a game theoretic model to analyze the strategic interaction between a food firm that decides whether to provide a credence food attribute and whether to misrepresent the quality of its product, and an activist who decides whether to monitor the firm and launch a campaign to uncover and remove false/misleading quality claims. We further examine the effect of CSR and the activist's presence on the level of quality the firm provides. We derive the conditions under which an activist will find it optimal to monitor the firm to uncover fraudulent quality claims and the firm will find it optimal to misrepresent its product quality. Analytical results show that the greater the firm's CSR investments, the less likely it is that the activist will find it optimal to monitor the firm, and the more likely it is that the firm will find it optimal to misrepresent its product quality. Results also show that the firm is more likely to misrepresent its product quality when its effectiveness in contesting the activist's campaign is relatively high, and more likely to actually provide a high-quality product when the cost of the credence attribute is relatively low.

Impact of Organizational Culture on The Level of Corporate Social Responsibility Investments: An Exploratory Study

Impact of Organizational Culture on The Level of Corporate Social Responsibility Investments: An Exploratory Study

Does economic policy uncertainty and stock market development affect natural resources: Evidence from United States of America

AbstractThis study investigates the impact of economic policy uncertainty (EPU) and stock market development (SMD) on natural resources in the United States during the period between 1985 and 2021 by keeping the GDP and innovation as control variables. For empirical analysis, the autoregressive distributed lag model (ARDL) and Kernel Regularized Least Squares (KRLS) regression techniques were used to investigate the long‐ and short‐run relationships. To check the robustness of results, this study uses a machine learning approach, i.e., Canonical Cointegrating Regression (CCR). The results of the ARDL bounds test approach suggest the presence of long‐run relationships among the study variables, and these results were confirmed through KRLS and CCR. The long‐run results indicate that economic policy uncertainty and SMD increase natural resource rent. Moreover, GDP and innovation also increase natural resource rent. However, a weak relationship exists between innovation and natural resource rent in the short run. Policymakers need to provide stable and encouraging economic policies to promote sustainable resource management, while stock markets need to facilitate long‐term planning and responsible investment in natural resource industries.

Updating the Informational and Control Practices in the Sustainability Agenda

Abstract Research purpose. The sustainability concept embraces a wide scope of linked practices: green thinking, sustainability informational and management assurance, ESG reporting and scoring, responsible and impact investment, stability measurements, and others. Significantly expanding beneficiary's and stakeholders' circle needs information to build and implement a policy providing ESG values creation and meeting their requirements in relevant sustainable agenda. This is why it is important to create a transparent information landscape and to shape new highlights in management and decision-making. The article is aimed at exploring specific ways to transform information and management practices, primarily accounting, ESG-reporting, analysis, and assurance to create a transparent information environment for sustainability. Design / Methodology / Approach. The study is designed as a qualitative analysis of existing information and related practices to identify gaps in the information needed by stakeholders for decision-making with that practically generated in the current environmental momentum. It involves summarising, categorizing, and interpreting open access sources data, such as unidirectional studies, non-financial reporting and ESG-rankings databases, program documents, frameworks and standards for sustainability and "responsible" reporting, professional audit analytics, and others. Logical and comparative analysis was used for data processing. The study’s theoretical framework is based on accounting theories, particularly the Interpretative paradigm. Findings. The possibilities were assessed following proposed approaches to upgrade the up-to-date system of informational-verifying appraisal practices by the requirements of a proper ESG environment. A holistic system layout was suggested, including information and control practices employed to provide sustainability. The main part of the recommendations refers to accounting and reporting for sustainability. New accounting ESG objects to display in this system were identified. It developed an integrated balance model of total capitals and their sources engaged and ESG -value-creating, taking for the basis traditional balance theory. Given the diversity of corporate non-financial reporting, classification characteristics for ESG reporting were suggested, and two key models of ESG reporting were defined. Recommendations were made in the field of design and methodology for information support of sustainability. Originality / Value / Practical implications. The article is the author's vision of the problems and ways of advancing traditional information practices in the context of global sustainability management requests. Recommendations for the holistic system of sustainability governance, informational support creation, transformation of accounting, ESG-reporting, other linked practices, streamlining, and methodological development of information activities that can be used in the practical field and employed in programmatic, advisory, and regulatory documents that structure the information field of socio-economic life.

Bibliometric Analysis of Trends and Patterns in Sustainable and Responsible Investments (SRI) Research from 2000-2024

This study provides a comprehensive bibliometric analysis of Sustainable and Responsible Investments (SRI) research from 2000 to 2024, utilizing data visualization tools to map the evolution and current state of the field. Through thematic clusterization, temporal trends, author collaboration networks, and potential research topics, the research offers insights into the dynamic nature of SRI. Initial findings show a progression from foundational concepts to more nuanced discussions around impact investing and sustainability indices. The analysis of author collaboration networks highlights key influencers and suggests potential areas for future collaboration. Additionally, the identification of underexplored areas such as ethical investment frameworks and the impact of social investments indicates new directions for research. This paper underscores the importance of SRI in aligning financial investments with global sustainability goals, providing a roadmap for future research and practice in the field.

Deciphering volatility spillovers amidst crises: analyzing the interplay among commodities, equities and socially responsible investments during the COVID-19 shock and financial turbulence

PurposeThis study aims to elucidate the volatility spillovers among commodities, equities and socially responsible investments, underpinning their dynamic correlations during the economic instability wrought by the COVID-19 pandemic and associated financial crises.Design/methodology/approachThis research quantitatively analyzes volatility transmission across various financial assets from January 2005 to October 2020 by employing the Diebold and Yilmaz (2012) spillover index. The methodology incorporates a temporal examination to capture the evolution of volatility dependencies pre and post the emergence of COVID-19.FindingsThe findings indicate substantial volatility spillovers among the assets in question, aligning with the current financialisation of commodity markets and a rise in financial market integration. These spillovers also show variation over time. Notably, the interconnectedness among the assets intensifies during periods of stress. For instance, the total spillover index significantly surpassed 80% toward the end of January 2020, following the onset of the COVID-19 crisis. Furthermore, the results imply that financial markets appear to be segmented.Practical implicationsThe findings afford investors a more comprehensive insight into both the character and scale of the interdependencies across a broad array of financial markets. Indeed, grasping the extent to which financial markets are segmented or integrated during times of stress and stability is crucial for investors. Such understanding is key to more accurately evaluating risks, diversifying investment portfolios and devising more efficient hedging strategies.Originality/valueThis study contributes to financial literature by offering a comprehensive investigation into the spillover effects across a diverse set of asset classes during an unprecedented global health crisis, filling a gap in existing research on market behavior against the backdrop of a pandemic-induced financial crisis.

Contagious greenwashing investment

PurposeThis study explores the contagion of greenwashing strategies among ESG mutual funds. It investigates how the greenwashing behaviors of peer funds within the same family influence a fund’s decision to engage in greenwashing. The research also examines the impact of greenwashing on genuine ESG funds and explores the mechanisms through which greenwashing strategies spread across ESG mutual funds.Design/methodology/approachThis paper employs a two-stage least squares regression model with cross-fund returns standard deviation as an instrumental variable to disentangle the peer effects of greenwashing from family-level characteristics. The analysis incorporates various fund characteristics and introduces four contagion channels through which greenwashing may influence genuine ESG funds.FindingsThe study finds greenwashing behavior in ESG funds is positively influenced by similar practices within their fund family. Larger assets under management and older funds with higher management fees show resilience against greenwashing influences, while team-managed funds are more susceptible. Additionally, socially responsible investors struggle to distinguish between genuine and greenwashing ESG funds, which may contribute to the persistence of greenwashing practices.Originality/valueThis paper contributes to the literature by delineating the mechanisms of greenwashing contagion within ESG mutual funds. It also examines the demand-side incentives for adopting greenwashing strategies, offering insights into the implications for fund flows and investor behavior. This study is among the first to analyze the contagion effects of greenwashing strategies across an extensive network of ESG funds, enriching our understanding of the broader impacts of greenwashing in the context of socially responsible investing.

How ESG performance affects maturity mismatches between investment and financing: Evidence from Chinese A-share listed companies

This study investigates the relationship between environment, society, and governance (ESG) performance and maturity mismatches between investment and financing based on unbalanced panel data from Chinese listed companies. The results suggest that ESG performance significantly reduces the potential for maturity mismatch between corporate investment and financing and that the ESG activities of Chinese enterprises are consistent with the principles of responsible investment. Specifically, society and governance performance significantly reduces maturity mismatch, while environmental performance exerts an insignificant effect. Enterprises with high ESG performance prefer long-term debt financing structures, and they also have increased trade credit and endogenous financing. In addition, investment efficiency and innovative investment are beneficial for ESG performance to promote the long-term transformation of debt maturity structures. Finally, ESG performance is more effective in reducing maturity mismatch caused by environmental policy and COVID-19.

The effect of CSR and corporate ethical behavior on implicit cost of equity: the mediating role of integrated reporting quality

Purpose The purpose of this study is to analyze the effect of corporate social responsibility (CSR) practices and corporate ethical behavior on implicit cost of equity (COE) using integrated reporting quality (IRQ) as a mediating variable in European companies belonging to the environmental, social and governance (ESG) index. Design/methodology/approach The authors use a panel data set of 540 European firms from the ESG index from 2013 to 2022. The data were collected from I/B/E/S and Thomson Reuters ASSET4 database and analyzed using the structural equation model to test hypotheses. Findings In the instance of ESG European firms, the findings indicate that CSR practices and corporate ethical behavior are negatively related to the COE. From the result of the Sobel test, this study indicated that IRQ has only indirect mediation on the relationship between CSR, ethical behavior of the company and implicit COE. Practical implications The findings have some policy and practical implications that may help regulators and managers in improving the COE and helping companies envision their future growth opportunities in a context where responsibility, ethics and disclosure are central to corporate valuation. Using the implicit COE is a better estimate of shareholder requirements in the context of ESG companies. Originality/value This research concentrates on ESG companies since they are more likely to contribute to environmental protection, which attracts responsible investors. Furthermore, the findings may be useful to worldwide managers and investors who use responsible practices as a criterion in their decision-making.

Assessing the Performance of Gulf Cooperation Council Countries in Renewable Energy Responsible Investment through Using Developed Low Carbon Economy Index

Assessing the Performance of Gulf Cooperation Council Countries in Renewable Energy Responsible Investment through Using Developed Low Carbon Economy Index

ESG integration in portfolio selection: A robust preference-based multicriteria approach

We present a framework for multi-objective optimization where the classical mean–variance portfolio model is extended to integrate the environmental, social and governance (ESG) criteria on the same playing field as risk and return and, at the same time, to reflect the investors’ preferences in the optimal portfolio allocation. To obtain the three–dimensional Pareto front, we apply an efficient multi-objective genetic algorithm, which is based on the concept of ɛ-dominance. We next address the issue of how to incorporate investors’ preferences to express the relative importance of each objective through a robust weighting scheme in a multicriteria ranking framework. The new proposal has been applied to real data to find optimal portfolios of socially responsible investment funds, and the main conclusion from the empirical tests is that it is possible to provide the investors with a robust solution in the mean–variance–ESG surface according to their preferences.

The impact of financial analysts’ spirituality on their socially responsible investing decisions: a mediating role of social consciousness

PurposeThis paper aims to contribute to the social aspect of corporate social responsibility literature by examining the influence of financial analysts’ spirituality on their socially responsible investing (SRI) decisions relating to a profitable organization, which is alleged by the media to employ children as laborers in hazardous works in Pakistan. This study also investigates whether analysts’ social consciousness mediates between their spirituality and investing decisions.Design/methodology/approachA scenario-based survey was administered to 124 financial analysts at leading financial institutions in Pakistan. Data were analyzed using regression, analysis of variance and mediation analysis on SPSS 26.FindingsThe findings demonstrate that financial analysts’ spirituality negatively influences their SRI decisions to invest in a profitable organization, which is alleged to employ children in hazardous work that may harm them physically and psychologically. The findings also express that analysts’ social consciousness intervenes in the association between analysts’ spirituality and SRI decisions.Practical implicationsThe findings of this study may interest regulators, multinational firms and researchers in recognizing the importance of individuals’ values for increasing socially responsible investments and addressing social issues such as the exploitation of children.Social implicationsThis study encourages firms to recognize the importance of spiritual and socially conscious corporate conviction while designing strategies and policies. For example, the financial industry may incorporate fundamental personal values such as stewardship, dignity and fairness into its investment plans.Originality/valueThis study provides rigorous insights and contributes to contemporary studies by providing empirical evidence that individuals’ intrinsic values and consciousness drive their judgments.