Ethical investment: whose ethics, which investment?

Abstract

Ethical or socially responsible investment (SRI) is one of the most rapidly growing areas of finance. New government regulations mean that all pension funds are obliged to take such considerations into account. However, this phenomenon has received little critical attention from business ethicists, and a clear conceptual framework is lacking. This paper, by a practitioner in the field, attempts to fill this analytical gap. It considers what difference, if any, lies between the terms ‘ethical’, ‘green’, or ‘socially responsible’. It also tackles the difficult question of how any public form of investment can be called ‘ethical’ in an overtly pluralistic society. The paper provides an account of the historical development of ethical investment, and traces the evolution of the varying terms used to describe it. This is followed by a conceptual analysis of these terms, and a description of ethical decision‐making in this context. The paper ends by considering the role of shareholder action within ethical investment, and assesses the utility of the stakeholder model as a theoretical justification.

Ethical requirement and financial interest: a literature review on socially responsible investing

“…Typical terms used are SRI, ethical investing, or value-based investing (Sandberg et al 2009). Ethical investing is the oldest phrase, which is slowly being replaced by SRI (Sparkes 2001). Although the terms are inconsistent in the academic literature, Sandberg et al (2009) find that definitions of SRI are consistent in that it means the ''integration of certain non-financial concerns, such as ethical, social or environmental, into the investment process.''…”

“…Friedman and Miles (2001) provide background information on why the interest in SRI has been increasing in the UK, indicated by the launch of the FTSE4Good index in July 2001, triggered by the publication of new pension regulations in the UK in July 2000 which state that all private sector pension funds must incorporate SRI and voting rights into their overall investment policy. It is important to point out that the pension funds are not forced to invest according to SRI principles, but instead must state the extent to which they consider such principles (Sparkes 2001). Renneboog et al (2008) provide an overview of SRIrelated regulations worldwide.…”

“…This can be done through charitable contributions, involvement in public-private partnerships, or volunteer programs (Lydenberg and Kurtz 1992:209). Sparkes (2001) argues that community development investing should not be seen as a part of SRI, but rather as socially directed investments (SDI). He notes that: ''The essence of SDI is that SDI savers deliberately accept below market returns in order to help others; this is certainly not the intention of SRI.''…”

Keeping Ethical Investment Ethical: Regulatory Issues for Investing for Sustainability

“…This diversity reflects investors' different values regarding the relative importance of social, environmental and economic considerations (Mackenzie, 1998;Sparkes, 2001). Hylton (1992, p. 2) criticises the ''persistent inability on the part of all participants in the debate to develop a simple, coherent definition'' of SRI.…”

The Ethics Inside the Monetary Circuit: How Bank’s Social Responsibility Affects Money Creation

“…The success of an organization no longer derives (or at least not only) from the pursuit of profit objectives, but rather from the respect for social functions (see e.g. Sen, 2002, Sparkes, 2001.…”