Social Issues and Socially Responsible Investment Behavior: A Preliminary Empirical Investigation

Abstract

An important dimension of the ongoing trend toward greater corporate social responsibility is the emergence of individual and institutional investors who invest in companies that support social objectives. While a small number of studies have examined the criteria used by institutions, no studies have looked at individual investors. Using a mail survey of 4,000 investors in two mutual funds that incorporate social screens in their investment decisions, this study finds that compared with other investors, socially responsible investors are younger and better educated. Respondents most frequently identify environmental and labor relations issues when asked what defines socially responsible corporate behavior. Although the respondents value socially responsible behavior in companies they invest in, they are unwilling to sacrifice financial returns to achieve it.

Which proportion of SR investments is enough? A survey-based approach

“…With respect to the most important issues in terms of SRI, as shown in Table 4, environmental aspects such as economizing in the sense of the economical use of resources and the reduction of pollution and waste are most frequently chosen. This is in line with the survey results of Rosen et al (1991) who asked participants about the essential factors to determine SR corporate behavior. Similarly, Berry and Junkus (2013) show that both SR investors and non-SR investors consider environmental issues to be most important.…”

“…The generally accepted view is that welleducated and less wealthy women or young adults are concerned about SR issues in the investment decision to a higher degree. Several studies such as Beal and Goyen (1998), Rosen et al (1991), Tippet and Leung (2001), Beal et al (2005), Schueth (2003), Haigh (2008), Nilsson (2008), Nilsson (2009), Junkus and Berry (2010), Cheah et al (2011) and Pérez-Gladish et al (2012) confirm this point of view. On the contrary, McLachlan and Gardner (2004) and Williams (2007) find little evidence that ethical investors differ in demographics compared to their conventional counterparts.…”

“…While Haigh (2008) and Pérez-Gladish et al (2012) show that social aspects are most important to investors, Rosen et al (1991) and Berry and Junkus (2013) find that environmental considerations are the main indicators for both SR and non-SR investors in order to identify SR corporate behavior. Following these studies we asked the participants to indicate three of the most important factors referring to social, environmental, ethical and corporate governance issues to determine corporate social responsibility.…”

“…Beyond that, Dorfleitner and Utz (2014) report a large interest in high financial returns among SR investors. In fact, some studies indicate that SR investors are not willing to waive a considerable amount of financial return in favor for non-financial benefits (Rosen et al 1991;Sandberg and Nilsson 2011). Nilsson (2008) concludes that the subjective perception of financial return and risk are the core decision-making determinants in any investment choice.…”

“…SR investments are not only chosen on the basis of financial considerations but also due to personal values and ethics. While several studies attempt to explain by socio-demographic characteristics why some investors care more about non-financial issues in their asset allocation decision (e.g., Rosen et al 1991;Haigh 2008;Berry and Junkus 2013), to our knowledge, no study examines the determinants of the desired percentage to be invested socially responsibly. To this end, we conduct a global online survey in English, German and French among private investors.…”