Socially Responsible Investment Research Articles

Start doing the right thing: Indicators for socially responsible start-ups and investors

This paper explores the gap in the literature on social responsibility guidance for start-ups and start-up investors. It begins by evaluating research conducted in two different fields (namely, socially responsible investment (SRI) and responsible research and innovation (RRI)) and how they can guide social responsibility in STEM (Science, Technology, Engineering, Mathematics) start-ups. To do this, we evaluate an industry-standard SRI catalogue of metrics - the Global Impact Investing Network's (GIIN) Impact Reporting and Investment Standards (IRIS+) - and indicators from 12 EC-funded RRI projects. Based on this analysis, we propose a framework of 24 indicators to assess the social responsibility of start-ups and investors. The purpose of our framework is twofold: firstly, to provide clear guidance for start-ups aiming to implement socially responsible behaviours, and secondly, to provide start-up investors with criteria to identify if start-ups are socially responsible. While the indicators are phrased in a prescriptive way for start-ups, they can also be used by investors to identify if start-ups are implementing the indicators in practice.

Corporate social responsibility and external disruptions

We propose that corporate social responsibility (CSR) investment serves as an intangible investment in stakeholder relationships to guard against external disruptions to firms' operations and tangible assets. Using a difference-in-differences setting and a database of factory locations, we show that manufacturing firms with higher CSR ratings are much less affected by major natural disasters in terms of operating performance. We then propose two mechanisms through which CSR engagement shields manufacturing firms against external disruptions: employee motivation and customer loyalty. Empirical evidence suggests that CSR helps manufacturing firms survive major natural disasters by motivating employees, which leads to higher post-disaster productivity, and keeping customers, which leads to more stable post-disaster sales.

Motivating Corporate Social Responsibility Investment and Social Impact through Relative Performance Information

ABSTRACT Firms often struggle to motivate managers’ CSR performance, and little attention has been paid to how performance evaluation can assist in this effort. We address this gap by examining the effects of relative performance information (RPI) on risky CSR investment decisions. Compared to when no RPI is provided, we find that providing RPI based on the size or impact rate of CSR investments improves performance on the ranked dimension, although effects are weaker in more risk-averse managers. We also find that providing both types of RPI separately may lead to similar performance as providing just one type, and that RPI based on a single composite measure that combines performance dimensions leads to the greatest performance along each dimension. Our study contributes to research and practice by identifying how RPI can motivate larger, more impactful CSR investments and by highlighting the role that managers’ risk preferences can play in these decisions. Data Availability: Data are available upon request.

Terrorist Attacks, Corporate Social Responsibility, and Firm Value

Synopsis Research problem According to the World Economic Forum, terrorism is one of the main managerial concerns for companies worldwide. However, there is surprisingly scant research on how terrorist attacks impact managerial decision-making. To fill this gap, we investigate how terrorist attacks influence firms’ socially oriented activities, as measured by their investments in corporate social responsibility (CSR). Motivation or theoretical reasoning In light of the crucial role of CSR in financial markets and the growing apprehension regarding terrorism risk, this study explores whether and to what extent firms’ CSR investments contribute to the resilience to terrorism risk. The motivation for our research question is grounded in the idea that terrorist attacks create a unique set of circumstances that prompt firms to reconsider their socially oriented initiatives. We argue that firms impacted by such events tend to recognize the importance of demonstrating commitment to social responsibility in the aftermath of a crisis. Overall, the theoretical underpinnings of this study revolve around the notion that CSR becomes a strategic response for firms affected by terrorism, through which they address various stakeholder concerns, maintain legitimacy, and strategically manage their public image in the aftermath of a crisis. The test hypotheses We empirically examine two key research questions in this study. First, we examine the effect of terrorist attacks on the CSR investments of publicly traded firms. Second, we examine whether and how the increase in CSR investments of publicly traded firms after terrorist attacks affects firm value. Target population Our study extends the limited research on the impact of terrorism on capital markets, which is an area of great concern to various stakeholders, including shareholders and corporate managers. The findings will also help researchers understand the determinants of CSR and the potential channels through which CSR creates value for shareholders. Adopted methodology Using a multivariate regression model and controlling for all other determinants of corporate CSR investment documented by prior studies, we test the effect of terrorist events on firms’ CSR investment. To reduce the concern that a growing awareness of the importance of CSR may explain the changes in firms’ investment in CSR over time, we use a difference-in-differences research design. Analyses Using a sample of 53 major terrorist attacks occurring in the U.S. between 1994 and 2015, this study examines the causal effect of terrorist attacks on firms’ CSR activities. Findings Our findings indicate that public firms located in close proximity to terrorist attacks (i.e., the impact firms) substantially increase their investment in CSR following those terrorist events, and that the increase in CSR investment is positively associated with firm value. We further observe a strengthened association between increased CSR and firm value when the CSR efforts of the impact firms attract greater media attention. In conclusion, our findings substantiate the hypothesis that firms exposed to higher levels of terrorism risk are more inclined to enhance their CSR investments. This inclination is driven by the dual impact of CSR efforts: not only do they contribute to bolstering stakeholders’ confidence in firms’ future performance, but they are also linked to increased returns in the aftermath of a terrorist attack.

Determinants of Social Responsibility Costs of Listed Manufacturing Firms in Nigeria

The study ascertained the determinants of social responsibility costs of listed manufacturing firms in Nigeria. Specifically, the study determined the relationship between firms' total assets and community development cost; total sales and staff development cost; and total equity and public utility cost respectively of listed manufacturing firms in Nigeria. The population of the study comprised all the 21 listed consumer goods manufacturing firms in Nigeria. Purposive sampling was applied in selecting the 15 consumer goods firms that made up the sample size for the study. Secondary data were collected from the annual reports of the sampled firms over a ten-year accounting period which spanned through 2013 to 2022. The Pooled Ordinary Least Square regression was used in testing the hypotheses. The findings of the study indicated that: there is a significant positive relationship between firms' total assets and community development cost of listed manufacturing firms in Nigeria (p-value = 0.0059); there is a significant positive relationship between firms' total sales and staff development cost of listed manufacturing firms in Nigeria (p-value = 0.0000); there is positive but non-significant relationship between firms' total equity and public utility cost of listed manufacturing firms in Nigeria (p-value = 0.7002). Based on the findings, it was generally recommended in the study that firms should prioritise their investment in social responsibility as their financial metrics progress so as to enhance their reputation and strengthen their relationship with their host communities and stakeholders.

Who is greener, more social and better-governed? Dual ownership by SRI mutual funds stands out

This study sheds new light on ESG performance and financial characteristics of companies that are constituents of portfolios of U.S. socially responsible investing (SRI) funds. We categorize SRI fund participation into three distinct types: debt-only, equity-only, and dual ownership of debt and equity. Companies with dual ownership tend to be held by relatively bigger and more concentrated SRI funds. Our holdings-based analysis reveals that these investee companies deliver superior ESG performance across all dimensions and have larger size, higher degree of financial safety, and higher profitability compared to those in equity-only or debt-only categories.

If the wind blows, adjust your sail: Political ideology, social responsibility, and performance

Drawing on the upper echelons theory and the attention theory, this study investigates the influence of a chief executive officer's political beliefs on the market value generated by corporate social responsibility investments. The empirical analysis on U.S. hotel companies over a 25-year period (1998–2022) reveals that greater misalignment between a chief executive officer's ideology and the national political climate leads to a weaker impact of corporate social responsibility-related activities on the market value. This result is significant because it suggests that chief executive officers' actions are not solely determined by their ideological stance—as the upper echelons theory predicts—but rather by the conflict they experience when the external environment contradicts their ideological beliefs, which is a theoretical extension.

Corporate Social Responsibility, Ownership Structure, and Firm Investment Efficiency: Evidence from the Saudi Stock Market

This study investigates the relationship between corporate social responsibility (CSR), ownership structure, and investment efficiency in the Saudi stock market. Analyzing data from non-financial companies listed on the Saudi Stock Exchange (Tadawul) from 2016 to 2021, the findings revealed that higher CSR disclosures were positively associated with investment efficiency. Additionally, the study found that firms with higher levels of institutional, family, or foreign ownership demonstrated more efficient investment practices. However, the study did not support the moderation effect of ownership structure on the CSR–investment efficiency nexus. These results remain robust across different alternative measures and methods. This research fills a gap in the literature by examining these relationships in an emerging market with unique governance and ownership structures. Specifically, it extends the understanding of the CSR–investment efficiency nexus beyond developed economies to include the developing context of Saudi Arabia. Furthermore, the study highlights the varying effects of different ownership structures on investment efficiency and provides a detailed analysis of how investor types respond to CSR disclosures, revealing differences from established CSR frameworks in developed markets. The study’s results offer new insights for investors, policymakers, and regulators, and open avenues for further research for academics and business professionals.

Impediments of social responsibility investment adoption system: a post-pandemic qualitative analysis

Impediments of social responsibility investment adoption system: a post-pandemic qualitative analysis

Exploring Sustainable Investment: In-Depth Analysis of Socially Responsible Investing (SRI) and ESG Strategies

Theoretical background: In recent years, there has been an increase in social and environmental awareness, which has forced companies to change their approach to investment. Large companies are burdened with responsibility for contemporary, global problems such as the depletion of natural resources, the ongoing process of environmental degradation and inequalities in living standards between poor and rich countries. Therefore, when making investments, companies must evaluate them not only in terms of financial returns, but also in terms of their social, ecological and ethical impact. Two key approaches to this new investment paradigm stand out: socially responsible investment (SRI) and ESG investment (a three-pronged view of environmental, social and corporate governance). They focus on sustainable investments in order to achieve positive results for investors’ portfolios as well as for society and the environment. Purpose of the article: The following article examines both approaches, analysing their relevance, objectives, tools and economic and social impacts. Research methods: For this purpose, specialist journals published between 2001 and 2023 were searched in the Web of Science database. A literature review of socially responsible investment and ESG investment shows that interest in these concepts has increased rapidly in recent years. In addition, reports available on the websites of selected companies were analyzed. Main findings: The scientific impact on the studied concepts also makes it possible to determine future research directions. The literature contains results confirming that companies applying these approaches in their operations, achieve better results.

Managing ESG ratings disagreement in sustainable portfolio selection

In sustainable portfolio selection, investors have a twofold objective: they want to achieve the best compromise between portfolio risk and return, but they also want to take into account the sustainability of their investment, assessed through some Environmental, Social, and Governance (ESG) evaluation criteria. The inclusion of sustainable goals in the portfolio selection process may have an impact on the portfolio financial performance. ESG scores provided by the rating agencies are generally considered good proxies for the sustainability performance of an investment, as well as appropriate measures for Socially Responsible Investments (SRI). In this framework, the lack of alignment between ratings provided by different agencies is a crucial issue that inevitably undermines the robustness and reliability of these evaluation measures. In fact, the ESG rating disagreement may produce conflicting information, implying difficulty for the investors in the ESG evaluation of their portfolios. This may cause underestimation or overestimation of the market opportunities for a sustainable investment.In this paper, we deal with a multi-criteria portfolio selection problem, taking into account risk, return, and ESG criteria. For the ESG evaluation of the securities, we consider more than one agency and propose a new approach to overcome the problem related to the disagreement between the ESG ratings given by different agencies. For our three-criteria portfolio selection problem, we present an optimization model which adopts the so-called k−sum operator to formulate a concise ESG evaluation measure. The natural formulation of the model, in which the portfolio risk is measured by the variance of its returns, leads to a nonlinear program, but we show that it can be reformulated as an equivalent convex quadratic model. We also show that the model can be generalized to include any convex portfolio risk measures. An extensive empirical analysis of the out-of-sample performance of this model is provided on real-world financial data sets. From a theoretical viewpoint, our work extends the use of k−sum methodology to quadratic programming.

Corporate social responsibility and corporate investments: does research and development intensity matter?

Corporate social responsibility and corporate investments: does research and development intensity matter?

Investor characteristics, intention toward socially responsible investment (SRI), and SRI behavior in Chinese stock market: The moderating role of risk propensity

In recent years, Socially Responsible Investment (SRI), which integrates financial returns with social impact, has gained prominence. Commonly referred to as ethical or green investing, this study employs the Theory of Planned Behavior (TPB) to analyze factors that influence SRI behaviors. The TPB model suggests that behavior is primarily influenced by attitudes, subjective norms, perceived behavioral control (PBC), and intention. The study uniquely adapts the TPB model by incorporating financial literacy as a critical factor, a hypothesis substantiated through primary data from Chinese investors. Furthermore, the research highlights risk propensity as a moderating variable, significantly affecting these dynamics and offering essential insights into SRI practices. By utilizing Structural Equation Modeling (SEM) in conjunction with TPB, the study investigates the behavioral patterns of investors in Chinese stock market with a specific focus on the impacts of financial literacy, the moderating role of risk propensity, and the mediating effects of investment intentions on SRI behaviors. The findings reveal that PBC plays the most crucial role in shaping investors' intentions and behaviors toward SRI. Additionally, the results recommend that policymakers and SRI providers consider the social influences on investors' decisions and acknowledge the significant impact of investors' perceived control in forming their SRI intentions and actions.

Determinants of Socially Responsible Investment (SRI) Intention

There has been a recent surge of interest in socially responsible investment, attracting attention from all industries, including investors. Nevertheless, the factors that impact one's attitude and attention towards SRI remain relatively unexplored. Hence, this study aims to identify important factors that shape the attitude and attention of consumers when making investment decisions in the stock market. The data is obtained from investors who are making investments in the Pakistani stock exchange. The data analysis employs the technique of partial least squares structural equation modelling (PLS-SEM). The study findings indicate a substantial relationship between collectivism, knowledge, and SRI bias, and the attitude towards SRI. However, there is no significant association between perceived danger and attitude towards SRI. Attitude exhibits a robust and meaningful correlation with SRI.

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.

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

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

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.