Identifying impediments to SRI in Europe: a review of the practitioner and academic literature

Abstract

For more than 15 years, the investment community and the academic community have written extensively on socially responsible investment (SRI). Despite the abundance of SRI thought, the adoption of SRI practices among institutional investors is a comparative rarity. This paper endeavours to achieve two goals. First, by integrating the practitioner and academic literature on the topic, the paper attempts to identify the many impediments to SRI in Europe from an institutional investor's perspective. Second, the paper proposes a unitary framework to conceptually organize the impediments to SRI by using insights from different relevant research perspectives: behavioural finance, organizational behaviour, institutional theory, economic sociology, management science and finance. The paper concludes by presenting the main shortcomings within both the academic and the practitioner literature on SRI and by providing conceptual and methodological recommendations for further research.

An exploratory investigation of barriers and enablers affecting investment in renewable companies and technologies in the UK

“…1 Illustrative examples for the most common themes are provided below-with more examples shown in appendix A. The issue of fiduciary duty and SRI investment has been explored [35,36] especially in relation to the United Nations Environment Programme's Finance Initiative (UNEP FI), commonly known as the Freshfields Report. It supports that fiduciary duty is often cited as the reason why environmental and SRI issues are not taken into account in investment decisions.…”

The effectiveness of socially responsible investment: a review

“…Research analysts in Europe have been reluctant to integrate relevant SRI data in their reports (Juravle and Lewis 2008), because their professional background makes them ill-prepared for SRI issues, much SRI Information is qualitative and not quantitative, and SRI information is not structured in a standardised way. The frequent existence of two investment teams, one SRI team and one regular investment team, impedes the integration of different data and prevents frequent use of SRI data in final investment decisions (Guyatt 2005).…”

“…As discussed earlier in this article, financial returns do not necessarily have to suffer from SRI. However, Juravle and Lewis (2008) claim that institutional investors try to conform to mainstream investments because making unconventional investments and then obtaining lower financial returns would bear the risk of damaging their reputation and imposing liability. Therefore, institutional investors tend to follow existing practices in which financial gains are the sole rational, rather than follow SRI practices that are not currently mainstream.…”

“…Guyatt (2005), Juravle and Lewis (2008) and Wen (2009) state that the AngloAmerican corporate governance model focuses on shareholder value that favours shortterm economic value and, therefore, disfavours SRI with a focus on long-term value. This focus on short-term value is an impediment for the success of SRI.…”

The Attitudes of Managers and Stakeholders towards Corporate Social and Environmental Disclosure

“…Although some interviewees admitted that the materiality of environmental disclosure may increase, if clients regard it important, they doubt at the same time the likelihood that this will happen. Second, Financial analysts are motivated mainly to focus on short term performance and not to go further, since they are paid for their evaluation of such performance ( Davis, Lukomnik & Pitt-Watson, 2006;Juravle & Lewis, 2008;Campbell and Slack, 2011 , 2003 , p. 536). Third, providing environmental information in narrative format makes it difficult to be used in the process of analysing and evaluating companies' performance.…”