Investor reactions to socially responsible investment

Abstract

Purpose – The purpose of this paper is to analyze investor reactions to ethical screening by pension plan managers. Design/methodology/approach – The author presents a sample consisting of data corresponding to 573 pension plans in relation to such aspects as financial performance, inception date, asset size, number of participants, custodial and management fees, and whether their managers adopt ethical screening or give part of their profits to social projects. On this data the author implements the fixed effects panel data model proposed by Vogelsang (2012). Findings – The results obtained indicate that investors/consumers prefer traditional or solidarity pension plans to ethical pension plans. Furthermore, the findings show that ethical investors/consumers are more (less) sensitive to positive (negative) lagged returns than caring and traditional consumers, causing traditional consumers to contribute to pension plans that they already own. Research limitations/implications – The author does not know what types of environmental, social and corporate governance criteria have been adopted by ethical pension plan managers and the weight given to each of these criteria for selecting the stock of the firms in their portfolios that could influence in the investors’ behaviour. Practical implications – The results obtained in the current paper show that investors invest less money in ethical pension plans than in traditional and solidarity pension plans; this could be due to the lack of information for their part. To solve this, management companies could increase the transparency about their corporate social responsibility (CSR) investments to encourage investors to invest in ethical products so these lead to raising CSR standards in companies, and therefore, sustainable development. Social implications – The Spanish socially responsible investment retail market is still at an early phase of development, and regulators should promote it in order to encourage firms to adopt business activities that take into account societal concerns. Originality/value – This paper provides new evidence in a field little analysed. This paper contributes to the existing literature by focusing on examining the behaviour of pension funds investors whose investment time horizon is in the long-term while previous literature focus on analysing behaviour of mutual fund investors whose investment time horizon is in the short/medium term what could cause different investors’ behaviour.

A systematic literature review of socially responsible investment and environmental social governance metrics

“…Noticeable trends include increasing attention on individual values and beliefs as drivers of SRI investor behavior (Bauer & Smeets, ; Diouf, Hebb, & Touré, ; Dumas & Louche, ; Durand, Koh, & Tan, ; Glac, ; Sandbu, ). Studies on the return sensitivity of SRI investors reveal that they are less concerned about negative performance (Martí‐Ballester, ; Peifer, ), even if they expect a certain level of financial return (Paetzold & Busch, ; Pérez‐Gladish, Benson, & Faff, ), and different groups of investors expect different returns (Berry & Junkus, ).…”

Environmental, Social and Governance (ESG) and Investment Decision in Bangladesh

“…Empirical research is encouraged on ESG issues in emerging economies, as the dedication of the shareholders to these issues is intrinsic to sustainable development [32,33], and can be conducted by different market players [1]. Although there have been studies of the utilitarian benefits to investors, there is a need for studies on the societal concerns of investors [30], and the individual weightings given to preferences for ESG criteria [34]. Individual weightings could be established by using quantitative methods to generalize the impacts of these dimensions on finance, investment, and sustainability [10].…”

Examining the behavior of renewable‐energy fund investors

“…However, the behavior of renewable energy‐focused investors could differ from that of conventional investors because of their distinct investment‐objective functions that satisfy investors of the two groups, having distinct time‐investment horizons. Whereas conventional investors derive their utility primarily from financial attributes of mutual funds in the short‐term investment horizon (Martí‐Ballester, 2015a; Benson & Humphrey, 2008), renewable‐energy investors may display an additive utility function that separates nonfinancial attributes from financial attributes. This additive utility function attaches more importance to energy attributes related to the implementation of good environmental practices in the long‐term investment horizon, likely because it makes investors happier, in a similar way to renewable‐energy or environmentally concerned consumers (Gerpott & Mahmudova, 2010; Venugopal & Shukla, 2019; Becchetti, Pelloni, & Rossetti, 2008; Cullis, Lewis, & Winnett, 1992; Rikhardsson and Holm, 2008; Polemis & Spais, 2020).…”