Responsible Investment Strategies Research Articles

Lonmin Plc: mining and responsible investment – dangerous liaisons?

Subject area The case presents a responsible investment dilemma case. Swedish institutional responsible investors have to make a choice about their investment in Lonmin, a platinum mining company whose operation are located in South Africa and has been the theatre of workers’ killings. Study level/applicability The case targets MBA students and can be taught in a corporate finance course, a corporate governance course, a business ethics course or on sustainable and responsible investment. Case overview The teaching case follows the journey of Hilde Svensson, the head of equities for a Swedish responsible investor. She has been tasked to visit the site of Lonmin in South Africa which is the theatre of a tragic workers’ unrest that led to the killings of 44 workers in August 2012. She must decide what the best responsible investment strategy is to adopt with Lonmin for the future. Expected learning outcomes The students are expected to learn about what responsible investment entails and the dilemmas that can be faced by responsible investors. The case also gives insight to business students and the complexities of environment, social and governance (ESG) analysis and how to integrate financial and ESG analysis when you are a responsible investor. Supplementary materials Teaching Notes are available for educators only. Please contact your library to gain login details or email support@emeraldinsight.com to request teaching notes. Subject code CCS 1: Accounting and Finance

Wskaźniki finansowe i niefinansowe w raportach strategicznych spółek z Wielkiej Brytanii – analiza z perspektywy oceny spółek przez inwestorów odpowiedzialnych społecznie

Celem artykułu jest zbadanie stopnia zastosowania mierników dokonań prezentowanych w raportach strategicznych spółek wchodzących w skład indeksu FTSE techMARK oraz przeanalizowanie, czy mogą one służyć jako źródło użytecznych informacji do oceny spółek przez inwestorów stosujących strategie inwestowania społecznie odpowiedzialnego. Badaniem w formie analizy treści objętych zostało 60 spółek wchodzących w skład indeksu FTSE techMARK. Wyniki badania dowodzą, że wskaźniki finansowe i niefinansowe zawarte w raporcie strategicznym stanowią cenne źródło informacji dla inwestorów stosujących strategie inwestowania społecznie odpowiedzialnego. Wskaźniki niefinansowe zawarte w raportach strategicznych często mają charakter wskaźników wyprzedzających i mogą ułatwiać sporządzanie prognoz przyszłych zysków i przepływów pieniężnych spółek przez inwestorów. Pomagają one również w tworzeniu i modyfikowaniu portfeli inwestycyjnych przez inwestorów stosujących strategie inwestowania społecznie odpowiedzialnego. Użyteczność raportów strategicznych dla inwestorów społecznie odpowiedzialnych do oceny spółek jest jednocześnie ograniczona przez różny format przedstawianych danych i stosunkowo duże zróżnicowanie wskaźników, co utrudnia ich porównywanie.

Global sustainable and responsible investment activities and strategies of companies

When companies invest their financial resources for gainful purposes, not all of their investment decisions are beneficial to the public welfare. Therefore, companies can invest in the new areas while also participating in the public welfare. This is embodied by the term sustainable and responsible investment (SRI). The aim of the paper is to identify SRI activities and strategies which should be included in the investment decision-making process of companies. The achievement of the aim is pursued by study of relevant documents and websites of the institutions dealing with SRI and SRI activities and strategies. Secondary research was mainly based on the analysis. The main finding is that existing SRI activities and strategies are not scrupulously CSR-oriented. As a result, SRI activities and strategies oriented on CSR areas are to be identified. Â Â Keywords: CSR; SRI; SRI activities and strategies; ESG factors; investors;

Global sustainable and responsible investment activities and strategies of companies

When companies invest their financial resources for gainful purposes, not all of their investment decisions are beneficial to the public welfare. Therefore, companies can invest in the new areas while also participating in the public welfare. This is embodied by the term sustainable and responsible investment (SRI). The aim of the paper is to identify SRI activities and strategies which should be included in the investment decision-making process of companies. The achievement of the aim is pursued by study of relevant documents and websites of the institutions dealing with SRI and SRI activities and strategies. Secondary research was mainly based on the analysis. The main finding is that existing SRI activities and strategies are not scrupulously CSR-oriented. As a result, SRI activities and strategies oriented on CSR areas are to be identified. Keywords: CSR; SRI; SRI activities and strategies; ESG factors; investors;

Development Financial Institutions: Impact Investing Practices in Scandinavian Context

Socially responsible Investing (Impact Investing, Sustainable, Ethical, Green investing) that offers pragmatic and social outcome deliveries have become rapidly adopted financial innovations in Scandinavian countries. Impact investing is considered to be one form of socially a responsible investment strategy in the global arena which considers both financial return and social impact (best intentions, outcomes). This research will evaluate Social Impact Investing (SII) practices with particular attention to the private equity companies NORFUND, which is owned by the Norwegian Ministry of Foreign Affairs. Each of three independent case studies is examined in a comparative analysis based on the following criteria: 1) Economic conditions, 2) investment environment, 3) ease of doing business, 4) performance of the Norwegian Development Cooperation, 5) relevance, 6) constraints and 7) opportunities. Results of the analysis show that success or failure of a given venture is tightly coupled to the political environment and existing infrastructure, both financial and real (roads, power distribution etc…). Suggested improvements based on the analysis include a focus on improving several existing programs.

The risk of social responsibility – is it systematic?

ABSTRACTThis paper empirically investigates the risk characteristics of three environmental, social and corporate governance (ESG) rating concepts commonly used for assessing corporate social performance (CSP). Analogous to financial returns, investors are subject to the risk of changes in the average ESG level of their portfolio which is denoted as ESG risk. This is of special interest to private and institutional investors focused on a socially responsible investment strategy. Moreover, a growing number of financial products, such as mutual funds, include sustainability objectives. With a large data set including the scores of three important ESG rating agencies, the paper further examines the convergence of ESG risk among different rating providers. Applying a regression-based approach, the paper provides evidence that ESG ratings are subject to a non-diversifiable risk component. Investors are therefore not able to fully avoid ESG risk by diversification. Furthermore, the three rating concepts are not convergent with respect to ESG risk.

Benchmarking the Worlds Leading Pension Funds: How Fares the Government Service Insurance System of the Philippines

This practical research looks into the application by the government service insurance System (GSIS) of the Philippines of responsible investment strategies espoused in the delivery of social security benefits by the leading public pension funds in the world. Two of these, namely the ABP (Stichting Pensioenfonds) of The Netherlands and the California public employees’ retirement system (CalPERS) of the USA, are in focus here. This study was undertaken to highlight the performance of the GSIS Pension Fund as a business case and to evaluate the sustainability of the GSIS fund management practices vis-a-vis responsible investment strategies that have been espoused by the leading pension funds of the world.

Impact investment – istota i otoczenie rynku

The purpose of the hereby article is to discuss the essence of impact investment as one of the Socially Responsible Investment strategies and situating her in investment strategies. Moreover, the characteristics of impact investment market environment will be presented. In accordance with the definitions adopted in the subject literature, impact investment represents the form of investment made with the intention to exert influence on measurable changes of social and environmental nature, along with generating financial return, about the results of which the investors (sources of impact capital) should be informed by such investments managers. Impact investment market environment consists of e.g. beneficiaries of social and environmental changes, entities implementing particular tasks within the framework of impact investment, investors, channels of impact capital and forms of finance. Market environment is also made up of e.g. specialized agencies the task of which is both developing and measuring the specific measures of the created changes.

Socially responsible, green, and faith-based investment strategies: Screening activity matters!

Analyzing more than 200 internationally-investing sustainably screened funds, we find that socially responsible, green, and faith-based investments have to be considered as different approaches within the broader field of sustainable investing. While socially responsible and green funds tend to underperform in non-crisis markets, faith-based funds perform similar to the market and their conventional peers during any market state. We provide evidence that the funds’ specific screening activity significantly impacts the financial performance of sustainable investing vehicles in international markets. In particular, social screens lead to the underperformance of socially responsible funds, while energy screens drive the performance of green funds.

Do social and environmental screens influence ethical portfolio performance? Evidence from Europe

This work aims to test whether social and environmental screening processes could determine the financial performance of ethical or Socially Responsible Investment (SRI) strategies in the European context. We compare the risk-adjusted returns and systematic risk levels obtained by the two mainstream SRI equity indexes in Europe with those achieved by their official benchmarks. We find that, although these SRI indexes do not underperform their benchmarks in terms of risk-adjusted returns, they experience higher levels of risk. Additionally, the results show that higher screening intensity results in higher risk for the SRI indexes. Furthermore, the underperformance in terms of risk associated with the SRI indexes is worse in periods when there is a market downturn. This may indicate that SRI indexes are more sensitive to changes in the market cycle, because SRI indexes include companies that are more affected by market fluctuations.

Indicators of responsible investing

Responsible investment has witnessed significant changes in the past decade. It is estimated that about one fifth of assets under management in the US and about half of all assets under management in the EU are done on the basis of one of the seven responsible investment strategies. This paper discusses the prevailing responsible investment strategies and assesses the metrics used to account for responsible investment. It appears that the definition of responsible investing results in much degrees of freedom about reporting its size.

Stakeholder Perspectives on Norwegian Investment Responsibility

The Strategy Council for Norway’s Government Pension Fund Global, supported by the Norwegian Ministry of Finance, hosted the Responsible Investment Conference held in Oslo on 20 June 2013. The conference’s goal was to facilitate dialogue with stakeholders on environmental, social, and governance (ESG) issues to inform the Strategy Council’s forthcoming report on the Fund’s responsible investment strategy. The summit was organised into three sessions, each of which focused on one ESG issue and featured speakers from Norwegian and international organisations. Overall, participants commended the Fund’s achievements to date while proposing a variety of new initiatives and highlighting the challenges faced by the Fund.

A Case Study: Elements of Success in Environmental Entrepreneurship

The volume of capital that is being directed at companies with an Environmental-Social Governance (ESG) best practices approach has grown significantly in the past 15 years. According to the Social Investment Forum Foundation, professionally managed assets following Socially Responsible Investment (SRI) strategies in 2010 included $3.07 trillion in total assets under management. This has grown from approximately $639 billion in 1995.The subset of ESG investing, often dubbed “Impact Investing,” has increasingly become an interest of some foundations and high net worth individuals who seek to accomplish social or environmental programmatic goals alongside market-based returns. This approach looks for businesses that incorporate social or environmental outcomes as a stated objective paired with financial goals. Efforts to pair these environmental and economic goals are often called double bottom line businesses, or “double-E” businesses. Efforts to incorporate environmental, equity (social justice), and economic goals are called triple-bottom line, or “triple-E”, businesses.

Sustainable and responsible investment (SRI) in South Africa: A limited adoption of environmental criteria

ABSTRACTThis paper explores whether Sustainable and Responsible Investment (SRI) products and strategies in South Africa take environmental sustainability into account. It is based on a qualitative, empirical survey of 22 organisations which are signatories to the United Nation's Principle for Responsible Investment or offering an SRI product. By looking at how environmental, social, and governance (ESG) criteria are practically used in investment decision making and share ownership decisions, we found that most SRI products and strategies largely focus on social developmental goals whereas environmental criteria do not yet receive comparable attention from the SRI South African fund management industry.

Alpha's Tale: The Economic Value of CSR

Numerous studies report empirical evidence that trading strategies based on CSR information – often going ‘long’ the CSR ‘leaders’, and ‘short the ‘laggards’ – produced risk-adjusted investment profits (CSR Alpha). The claim of CSR Alpha is often used by SRI proponents and investment managers to convince mainstream investors that they can do well by doing good, potentially offsetting opportunity costs incurred by ethics/values-based screening. Although the thesis is attractive, claiming the presence of CSR Alpha begs an important question: Did the high (low) social responsibility standards of companies cause the strong (weak) stock returns – or – were these returns caused by risk or other underlying – perhaps time-period-specific – factors that happen(ed) to be correlated with CSR performance? SRI proponents would like to claim causality between CSR and returns, but such a causality relationship implies that CSR Alpha was the product of stock market inefficiencies; investors would have misevaluated the importance of CSR performance for future operating cash flows. Our findings suggest that CSR Alpha arose because investors have historically overlooked the full value relevance of CSR information, thus being surprised at the earnings performance of CSR leaders and re-evaluating their assessment of companies‘ prospects upon earnings announcements. Using market-based measures such as earnings announcement surprises, analyst forecast errors and Tobin's q, the paper lends credence to the claim that CSR caused stock returns. However, proposing that recent institutional pressures to incorporate ESG factors have improved investors' attention to and hence treatment of CSR information (eg. UN PRI), I find evidence suggesting that the stock market now more fully reflects the value relevance of CSR information, laying doubt on the view that best-in-class strategies will continue to outperform. These findings shed light on the future viability of responsible investment strategies, implying that focus will move away from security selection and towards new approaches to strategic asset allocation, impact investing, and shareholder engagement. These latter strategies will be increasingly recognized for their potential to generate economic value. As the paper suggests, CSR creates shareholder value. Disputing the anti-thesis of reverse causality that relies on slack resources theory, it brings clarity to a 40 year-old debate that questioned the economic value of CSR. I discuss the implications of CSR's suggested economic role, the capital market's appreciation of this role, and explore how institutions can affect more economically efficient and sustainable behaviour at the level of capital markets and strategic management. Findings yield substantial support for the work of institutional players like the UN PRI for helping improve capital market efficiency and thus affecting more economically efficient and sustainable corporate behaviour. The tale of CSR's Alpha borrows from a rich assortment of over 500 scholarly articles for its foundation. Applied to actual developments in the investment industry, it yields significant findings for academics and practitioners alike in the fields of sustainability, management, capital markets, investment, finance, political science, law, ethics and institutionalism.

Responsible Investment: A Vehicle for Environmentally Sustainable Economic Growth in South Africa

This paper explores whether any investment products or strategies in South Africa take environmental sustainability into account. By looking at how environmental, social, and governance (ESG) criteria are used in investment decision making, we found that most socially responsible investment products and responsible investment strategies largely focus on infrastructure, development, and black economic empowerment.

Environmental Performance: A Global Perspective on Commercial Real Estate

In this report, we summarize the results of the first global survey on environmental practices in listed property companies and private property funds. The survey is intended to increase industry awareness and provide information on current environmental management practices. Without detailed information on the behavior and environmental performance of the global property sector, investments in property funds and companies cannot be assessed on environmental performance, so a responsible investment strategy cannot be implemented. This report provides the institutional property investment market with a unique dynamic environmental benchmark: based on the survey results, we have developed an “Environmental Real Estate Index”, which includes sub-scores on environmental management practices and on the actual implementation of these practices. By using information contained in the index, institutional investors can compare the environmental score of individual property investments with their environmental real estate targets. This benchmarking can serve as a catalyst for environmental engagement in real estate investments.

Renewing People and Places: Institutional Investment Policies That Enhance Social Capital and Improve the Built Environment of Distressed Communities

ABSTRACT:The challenges confronting distressed communities in the United States are complex and multifaceted. Communities large and small have been significantly affected by a myriad of social, environmental, and economic forces, including a continuing decline in manufacturing employment, uncontrolled sprawl, and the transition to a global economy. The traditional choice between a “place-based” theory of redevelopment strategy versus a “people-focused” theory no longer seems feasible or appropriate. This article outlines sustainable development as an alternative strategy that combines a place-based development strategy, a human development focus, and an environmentally mindful approach. It posits that there exists a direct positive relationship between the creation of social capital, the redevelopment of the built environment utilizing sustainable development practices, and community-based organizations in distressed communities. Furthermore, the authors suggest that through community investment—a socially responsible investment strategy—institutions of higher education can facilitate the rebuilding of communities by providing financial capital while gaining a moderate yet secure financial return as well as a substantial social return.

The Ethics of Socially Responsible Investing

Hit em' where it really hurts, in their pocketbook is a phrase which has seen plenty of use in our economically driven age. These truly are times where the great battles are fought and won on an economic landscape. A favorite technique for imposing American political domination upon smaller nations like Cuba and Iraq is the economic sanction. Arguably, the U.S. won the Cold War not because of savvy political maneuvering or military intimidation, but because we had the economic capacity to bankrupt the Soviet Union. The World Trade Organization, ostensibly an economic institution, now faces protest due to its overwhelming political influence. Even American internal politics, at least according to the likes of Ralph Nader, is less a matter of democracy and more a matter of strategic spending.1 With the influence finance carries in almost every facet of modern social life, should it also play a role in our ethical considerations? Or, more appropriately, should our ethical considerations play a role in our financial institutions? These questions, or versions thereof, are the principal motivation behind the significant rise of the socially responsible investment (SRI) strategy in the current market. Put quite simply, socially responsible investing seeks to hit the corporations where it will really hurt, in their pocketbooks. Over the course of the past forty years socially minded

Socially Responsible Investing and Management Style of Mutual Funds in the Euronext Stock Markets

This paper analyses fund management styles on the Euronext stock exchanges. Especially, we investigate how social responsibility is accounted for. We use style analysis to assess fund performance in Belgium, France, and the Netherlands for over 800 investment funds during the 1990s. We find remarkable and significant differences in performance characteristics among these markets. Furthermore, we find that funds that to some extent mirror well known social responsibility indices tend to perform better than funds that bear no relationship with social responsible investment strategies.