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Financial markets: a tool for social responsibility?

Record type: Article

Objectives of socially responsible investment (SRI) are discussed with reference to the two main mechanisms of the SRI ‘movement’: shareholder advocacy and managed investments. We argue that in their current forms, both mechanisms lack the power to create significant corporate change. Shareholder advocacy has been largely unsuccessful to date. Even if resolutions were successful, shareholder advocacy may still be ineffective if underlying economic opportunities remain. Marketing material and investment prospectuses issued by socially responsible mutual funds (SRI funds) commonly contain the claim that, by affecting corporations' access to capital funding, SRI funds can change corporate practices. This paper makes a contribution by presenting the market share of SRI funds in the regions where they are most developed, being Europe, the U.S. and Australia, to show that this claim is unlikely to eventuate. SRI funds also commonly claim that they will outperform conventional active mutual funds. That the economic performances of both are similar might be explained by their similar portfolio compositions. The paper makes an innovation in the SRI literature by adopting a legitimacy framework to explain the continued presence of SRI funds. To achieve desired social and environmental outcomes, SRI funds are urged to address issues at a more systemic level. A suggested mechanism is the collective lobbying of corporations and, especially, governments

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Citation

Haigh, Matthew and Hazelton, James (2004) Financial markets: a tool for social responsibility? Journal of Business Ethics, 52, (1), pp. 59-71. (doi:10.1023/B:BUSI.0000033107.22587.0b).

More information

Published date: 2004
Keywords: socially responsible investment, ethical investment, shareholder activism, mutual funds, managed funds, legitimacy

Identifiers

Local EPrints ID: 45602
URI: http://eprints.soton.ac.uk/id/eprint/45602
ISSN: 0167-4544
PURE UUID: ff28ebe2-0a53-477e-8019-6296621055d9

Catalogue record

Date deposited: 13 Apr 2007
Last modified: 17 Jul 2017 15:11

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Contributors

Author: Matthew Haigh
Author: James Hazelton

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