As a sovereign wealth fund, the $1 trillion Norwegian Government Pension Fund-Global, which is managed by Norges Bank Investment Management on behalf of the welfare of Norway’s citizens, is supposed to be a flagship for socially responsible investments through its Council of Ethics. However, its investment in Delta Topco, the holding company of Formula 1 world championship that, through Formula One Group, brokered a deal with Russia to host a Formula 1 Grand Prix in 2014, raises the question of whether (...) the Oil Fund should enhance its due diligence processes. Although no evidence of corruption related to the race is introduced, the complex relation between financial logic and the world of sports still raises questions about the ethical solidity of the Oil Fund’s investment. Drawing upon reports of the relationship between political economy and sporting events, this paper therefore analyses, in light of the Oil Fund’s ethical guidelines, the complexities of its investment in Delta Topco. As a result, it is argued that a new set of examination methods by the Council of Ethics may be warranted. (shrink)

Since its inception in 2006, the United Nations-backed Principles for Responsible Investment have grown to over 1300 signatories representing over $45 trillion. This growth is not slowing down. In this paper, we argue that there is a set of attributes which make the PRI salient as a stakeholder and its claim to sign the six PRI important to institutional investors. We use Mitchell et al.’s theoretical framework of stakeholder salience, as extended by Gifford. We use as evidence confidential data from (...) the annual survey of signatories carried out by the PRI in a 5-year period between 2007 and 2011. The findings highlight pragmatic and organizational legitimacy, normative and utilitarian power, and management values as the attributes that contribute most to the salience of the PRI as a stakeholder. (shrink)

Factorial surveys integrate elements of survey research and classical experiments. Using a large number of respondents in a controlled setting, FSs approximate complex and realistic judgment situations through so-called vignettes—that is, carefully designed descriptions of hypothetical people, social situations, or scenarios. Despite being rooted, and predominantly applied, in sociology, FSs are particularly promising for business and society scholars. Given the multiplicity, inherent complexity, and sometimes fuzziness of B&S research objects, conventional research methods inevitably reach their limits. This article, therefore, systematically (...) presents methodological and thematic opportunities for FS studies in B&S research. It is argued that FSs are well suited to dealing with the complex interplay of societal-, organizational-, and individual-level factors in B&S research and to studying the principles underlying human perceptions, attitudes, values, social norms, and behavior. The application of the FS method is illustrated based on a showcase example in the realm of socially responsible investments. As the literature on the conceptualization of FSs is limited, methodological challenges are addressed to guide B&S researchers past the common methodological pitfalls. (shrink)

It is widely claimed that climate change has increased the magnitude and the frequency of natural phenomena such as storms, droughts, and floods with the concomitant costs in terms of damages and victims. This paper using weekly data from global stock market indices in a Fama–French model, examines how and to what extent market agents and investors react to such events. As a yardstick for comparison purposes, the possible market impact of industrial accidents is also incorporated and examined in the (...) empirical investigation. The study uses in a comparative approach the STOXX Global ESG Environmental Leaders index and the STOXX Global index diversified across 1800 top companies. Results reported herein seem to indicate that natural and anthropogenic adversity have no immediate impact on the stock indices, while wildfires have an immediate reduction impact on market risk in the case of the ESG Environmental Leaders index. Moreover, wildfires and industrial accidents appear to cause a significant reduction of systematic risk over the next week following the incident. However, the magnitude of the effect is higher in the case of the ESG Environmental Leaders stock index. Finally, the effect on systematic risk by industrial accidents is temporarily without any lasting imprint. (shrink)

This study explores the underlying drivers of US public pension funds’ tendency to tilt their portfolios towards companies with stronger corporate social responsibility. Studying the equity holdings of large, internally managed US state pension funds, we find evidence that the political leaning of their beneficiaries and political pressures by state politicians affect funds’ investment decisions. State pension funds from states with Democratic-leaning beneficiaries tilt their portfolios more strongly towards companies that perform well on CSR issues, and this tendency is intensified (...) when the state government is dominated by Democratic state politicians. Moreover, we find that funds which tilt their portfolios towards companies with superior CSR scores generate a slightly higher return compared with their counterparts. Overall, our findings indicate that funds align their investment choices with the financial and non-financial interests of their beneficiaries when deciding whether to incorporate CSR into their equity allocations. (shrink)

From a simple idea to unite asset owners in their quest for responsible investment at its launch in April 2006, the United Nations supported Principles for Responsible Investment have grown in just one decade into an initiative with more than 1500 fee-paying signatories. Jointly, the PRI’s signatories hold assets worth more than $80 trillion, making it one of the more prevalent not-for-profit organizations worldwide. Furthermore, the PRI’s ambitious mission to transform the financial system at large into a more sustainable one (...) makes it a worthwhile subject of inquiry from an institutional perspective. We undertake an empirical investigation of the adoption of the PRI by asset owners during five crucial years of the association’s emergence: 2007–2011. Following a tripartite view of institutional theory proposed by Scott, we explore if regulative, normative, and cultural–cognitive factors influence an asset owner’s decision to subscribe to the PRI. Applying both parametric and non-parametric survival analysis, we find that asset owners are indeed significantly affected by normative, cultural–cognitive, and regulative aspects. In particular, public service employee and labor union pension funds from social backgrounds more culturally aligned with values represented by the RI movement with historically more voluntary legislation on environmental, social, and governance issues are most likely to sign the PRI. In contrast, institutional environments with a higher number of pre-existing mandatory ESG regulation decrease the likelihood of signing the PRI. Our results indicate that normative and cultural–cognitive factors were crucial contributors to the PRI’s growth. With respect to the regulative environments, our results imply that some asset owners may use the PRI as a collective industry initiative to substitute for mandatory legislation. Conversely, a high level of historical mandatory legislation may constrain organizational resources that could otherwise be dedicated to voluntary initiatives such as PRI. Our findings are robust to relevant controls and econometric concerns. (shrink)

Despite the increase in the acceptance of responsible investing in general, the global community is still witnessing unprecedented levels of practices that can only be categorized as “unsustainable”. It appears, then, that either the inroads made by the RI community have not kept up with the increase in unsustainable practices, or, that the RI process itself has been ineffective at producing meaningful change. The current study aims to investigate the practices used by pension plan sponsors to determine how they may (...) enable, or interfere with, the adoption of implementation of RI. We adopt Framing Theory, specifically the idea that particular frames find alignment when they resonate with their targets, by either bridging, extending, amplifying or transforming a domain. We extend research to include understudied practices by performing an analysis of 60 public pension funds in Canada. We find evidence of disconnect between the financial frame which dominates practices for compliance and evaluation, and the social frame of RI as a source of change. If the aim of RI is to produce long-term change, then a consideration of whether it aligns with extant practices is critical. We discover a variety of frame alignment tactics already employed in practice. We also find that, even within the dominant financial frame, opportunities for frame extension, amplification and transformation do exist, and examine how these are more possible depending on how the asset management structure is designed. (shrink)

Based on the concept of shareholder primacy, many scholars have argued that it is more important for businesses to earn profits for their shareholders than to provide benefits to society at large. Corporate social responsibility is often regarded as an investment that comes at the expense of shareholders. In contrast, research analyzing the connections between the equity ownership structure of a company and its level of CSR engagement suggests that CSR offers benefits to shareholders that go beyond direct financial returns (...) from investments. This study provides a comprehensive review and systematic assessment of theoretical considerations and approaches regarding different forms of equity ownership and their relationships to CSR, and it discusses the relevant benefits and motivations of shareholders. The perceived value of these CSR benefits varies among different types of shareholders, as they assign unequal values to short-term financial or to rather long-term CSR benefits. Based on a literature sample of 146 publications, this review demonstrates central problems inherent in previous analyses. Given the ambiguous and partially contradictory findings of prior research, this study identifies potential moderating influences that help clarify empirical evidence. A contingency approach is suggested in future research, as this can help resolve the problem of contradictory empirical findings and theoretical arguments. (shrink)

We study behind-the-scenes investor activism promoting environmental, social, and governance improvements by means of a proprietary dataset of a large international, socially responsible activist fund. We examine the activist’s target selection, forms of engagement, impact on ESG performance, drivers of success, and effects on the targets’ operations and value creation. Target firms are typically large and visible, perform well, and have high liquidity and low ESG performance. Engagement induces ESG rating adjustments: firms with poor ex ante ESG ratings experience a (...) ratings increase after complying with the activist’s demands, whereas firms with high ex ante ESG ratings experience a ratings decrease following the revelation of their ESG problems. Activism that is focused on environmental and social issues is more likely to succeed if targets are ESG-sensitive. Successful engagements boost targets’ sales. Risk-adjusted excess stock returns of successful engagements outperform those of unsuccessful engagements by 2.7%. Results are especially strong for firms with low ex ante ESG scores. Specifically, targeted firms in the lowest ex ante ESG quartile outperform matched peers by 7.5% in the year after the end of the engagement. Our results thus suggest that the activism regarding corporate social responsibility generally improves ESG practices and corporate sales and is profitable to the activist. Taken together, we provide direct evidence that ethical investing and strong financial performance, both from the activist’s and the targeted firm’s perspective, can go hand-in-hand together. (shrink)

Using a large sample of 3,040 U.S. firms and 16,606 firm-year observations over the 1991–2010 period, we find strong evidence that firm internationalization is positively related to the firm’s corporate social responsibility rating. This finding persists when we use alternative estimation methods, samples, and proxies for internationalization and when we address endogeneity concerns. We also provide evidence that the positive relation between internationalization and CSR rating holds for a large sample of firms from 44 countries. Finally, we offer novel evidence (...) that firms with extensive foreign subsidiaries in countries with well-functioning political and legal institutions have better CSR ratings. Our findings shed light on the role of internationalization in influencing multinational firms’ CSR activities in the U.S. and around the world. (shrink)