Skip to main content
SpringerLink
Log in

Institutional Investments and Responsible Investing

  • Chapter
  • First Online:
Financing Sustainable Development

Part of the book series: Palgrave Studies in Impact Finance ((SIF))

  • 1613 Accesses

Abstract

This chapter is designed to provide insights on the pertinence of responsible investing in both developed and developing economies in light of the international deliberations on sustainability and sustainable development. Responsible investing presents a strong business case for institutional investors to merge ethics with profitability. However, to develop a strong business case, it is imperative to dive deeply into the various forms of responsible investing, and the recent trends, drivers and barriers associated with it. Institutional investors pertain to various environmental, social and corporate governance (ESG) evaluation methodologies, subject to the type of financial instruments and availability of ESG data. These assessments help investors to undertake informed decisions and lead to ESG integration in several asset classes such as listed equity, fixed income, hedge funds and private equity. Although the extent of integration varies considerably across geographical domains and asset classes, there is an increasing recognition of better returns from ESG diversified portfolios. Several asset management companies (AMCs) are adhering to varied ESG integration approaches in developed economies. These approaches clearly cater to different application, research and management levels to be categorized as fundamentalist, believer, cautionary, discretion, statistician and transition-focused. Despite the rising signatories to the United Nations Principles for Responsible Investment (UNPRI), there are several deterrents which affect the growth of responsible investing. The reflective and exploratory approach undertaken in this chapter is likely to benefit students, academicians and professionals working in the domain.

This is a preview of subscription content, log in via an institution to check access.

Access this chapter

Log in via an institution
Chapter
USD 29.95
Price excludes VAT (USA)
  • Available as PDF
  • Read on any device
  • Instant download
  • Own it forever
eBook
USD 129.00
Price excludes VAT (USA)
  • Available as EPUB and PDF
  • Read on any device
  • Instant download
  • Own it forever
Softcover Book
USD 169.00
Price excludes VAT (USA)
  • Compact, lightweight edition
  • Dispatched in 3 to 5 business days
  • Free shipping worldwide - see info
Hardcover Book
USD 169.99
Price excludes VAT (USA)
  • Durable hardcover edition
  • Dispatched in 3 to 5 business days
  • Free shipping worldwide - see info

Tax calculation will be finalised at checkout

Purchases are for personal use only

Institutional subscriptions

Notes

  1. 1.

    The percentages provided in parentheses are absolute considering the fact that a single asset owner resorts to multiple approaches.

  2. 2.

    Bond issuers that derive greater than 95% of revenues from climate-aligned assets and green business lines.

  3. 3.

    Labelled green bonds are certified by an external agency and are clearly designated for the purpose of green investing.

  4. 4.

    Bond issuers where 75–95% of revenues are derived from climate-aligned assets and green business lines.

  5. 5.

    Municipal bond issuers from the US. These are dedicated authorities, agencies, departments and similar divisions with more than 95% of their revenue derived from climate-aligned water, transport, waste, land use and renewable energy operations.

  6. 6.

    Applicable for the Indian case.

References

  • AIMA and Cayman Alternative Investment Summit. (2018). From Niche to Mainstream: Responsible Investment and Hedge Funds. Retrieved from https://www.aima.org/educate/aima-research/from-niche-to-mainstream-esg.html.

  • Allianz GI Global Solutions. (2015). ESG in Equities. Retrieved from www.allianzgi.com.

  • Aragon, G. O., & Ferson, W. E. (2006). Portfolio Performance Evaluation. Foundations and Trends in Finance, 2(2), 83–190.

    Article  Google Scholar 

  • Barth, M. E., Beaver, W. H., & Landsman, W. R. (2001). The Relevance of the Value Relevance Literature for Financial Accounting Standard Setting: Another View. Journal of Accounting and Economics, 31, 77–104.

    Article  Google Scholar 

  • Bauer, R., Koedijk, K., & Otten, R. (2005). International Evidence on Ethical Mutual Fund Performance and Investment Style. Journal of Banking and Finance, 29(7), 1751–1767.

    Article  Google Scholar 

  • Black, F., Jense, M., & Scholes, M. (1972). The Capital Assets Pricing Model: Some Empirical Results. In Studies in the Theory of Capital Market. London: Prager Publishers.

    Google Scholar 

  • Boaventura, J. M. G., Silva, R. S., & Bandeira-de-Mello, R. (2012). Corporate Financial Performance and Corporate Social Performance: Methodological Development and the Theoretical Contribution of Empirical Studies. Revista Contabilidade & Financas, 23(60), 232–245.

    Article  Google Scholar 

  • Brundtland Commission. (1987). Report of the World Commission on Environment and Development: Our Common Future. Retrieved from www.un-documents.net.

  • Cakici, N., & Tan, S. (2014). Size, Value, and Momentum in Developed Country Equity Returns: Macroeconomic and Liquidity Exposures. Journal of International Money & Finance, 44, 179–209.

    Article  Google Scholar 

  • Carles, P. G., Sainz, J., Otamendi, J., & Doncel, L. M. (2009). Different Risk-Adjusted Fund Performance Measures: A Comparison. Economics, 54, 1–33. Retrieved from www.scs-europe.net.

  • Derwall, J., Guenster, N., & Koedijk, K. (2005). The Eco-efficiency Premium Puzzle. Financial Analysts Journal, 61(2), 51–62.

    Article  Google Scholar 

  • Dimson, E., Karakas, O., & Li, X. (2012). Active Ownership, 1–48. Retrieved from www.hbs.edu.

  • Edmans, A. (2011). Does the Stock Market Fully Value Intangibles? Employee Satisfaction and Equity Prices. Journal of Financial Economics, 101, 621–640.

    Article  Google Scholar 

  • Ericsson, J., & Karlsson, S. (2004). Choosing Factors in a Multifactor Asset Pricing Model: A Bayesian Approach. SSE/EFI Working Paper Series in Economics and Finance, 524. Retrieved from www.swopec.hhs.se.

  • Gompers, P. A., Ishii, J. L., & Metrick, A. (2003). Corporate Governance and Equity Prices. Wharton Working Paper Series, 1–68. Retrieved from www.fic.wharton.upenn.edu.

  • Hassel, L. G., & Semenova, N. (2013). The Added Value of Environmental, Social and Governance Performance and Sustainable and Responsible Investment on Company and Portfolio Levels – What Can We Learn from Research? In CSR and Beyond – A Nordic Perspective. Oslo, Norway: Cappelen Damm Akademisk.

    Google Scholar 

  • Ioannou, I., & Serafeim, G. (2015). The Impact of Corporate Social Responsibility on Investment Recommendations: Analysts’ Perceptions and Shifting Institutional Logics. Strategic Management Journal, 36(7), 1053–1081.

    Article  Google Scholar 

  • Karagiorgos, T. (2010). CSR and Financial Performance: An Empirical Analysis on Greek Companies. European Research Studies, 13(2), 86–108.

    Google Scholar 

  • Mercer. (2009). Shedding Light on Responsible Investment: Approaches, Returns and Impacts. Retrieved from http://www.sustainablefinance.ch/upload/cms/user/Shedding_light_on_responsible_investment_free_version.pdf.

  • Morgan Stanley. (2018). Sustainable Signals: Asset Owners Embrace Sustainability. Retrieved from https://www.morganstanley.com/assets/pdfs/sustainable-signals-asset-owners-2018-survey.pdf.

  • Nham, P. T., Tran, H. C., & Nguyen, T. H. (2004). Impact of Firms Environmental Performance on Its Financial Performance: Empirical Evidence from Vietnam’s Small and Medium Manufacturing Firms. JSPS Asian CORE Program, Nagoya University and VNU University of Economics and Business, 1–17.

    Google Scholar 

  • Orlitzky, M., Schmidt, M. L., & Rynes, S. L. (2003). Corporate Social and Financial Performance: A Meta-Analysis. Organization Studies, 24(3), 403–441.

    Article  Google Scholar 

  • Perold, A. F. (2004). Capital Asset Pricing Model. Journal of Economic Perspectives, 18(3), 3–24.

    Article  Google Scholar 

  • Phillips, H., & North Investment Management. (2007). Does Socially Responsible Investing Hurt Investment Returns? Retrieved from https://www.financite.be/sites/default/files/references/files/2177.pdf.

  • Rathner, S. (2011). The Performance of SRI Funds: A Meta-analysis, 1–13. Retrieved from www.uni-salzburg.at.

  • Rathner, S. (2013). The Relative Performance of SRI Funds: New Evidence from Austria. Working Papers in Economics and Finance. University of Salzburg, 1–28. Retrieved from www.uni-salzburg.at.

  • Renneboog, L., Horst, J., & Zhang, C. (2007). Socially Responsible Investments: Methodology, Risk Exposure and Performance. ECGI Working Paper, 1–51.

    Google Scholar 

  • RobecoSam. (2018). ESG Engagement Report. Retrieved from https://www.robeco.com/en/insights/2018/08/robeco-private-equity-publishes-2018-esg-engagement-report.html.

  • Roll, R. (1977). A Critique of the Asset Pricing Theory’s Tests Part I: On Past and Potential Testability of the Theory. Journal of Financial Economics, 4(2), 129–176.

    Article  Google Scholar 

  • Semenova, N., & Hassel, L. G. (2008). Industry Risk Moderates the Relation Between Environmental and Financial Performance. Sustainable Investment Research Platform Working Papers, 1–28.

    Google Scholar 

  • Semenova, N., Hassel, L. G., & Nilsson, H. (2010). The Value Relevance of Environmental and Social Performance: Evidence from Swedish SIX 300 Companies. SIRP Working Paper, 1–20.

    Google Scholar 

  • Sinha, R., & Datta, M. (2014). Problems and Prospect of Developing a Proper Mechanism for Measuring Impact of ESG factors on Business Finance: Developments in India and Other Countries. Indian Accounting Review (IAR), 18(2), 54–75.

    Google Scholar 

  • Statman, M. (2000). Socially Responsible Mutual Funds. Association for Investment Management and Research, 56(3), 30–39.

    Google Scholar 

  • Sustainalytics and IRRC Institute. (2017). How Investors Integrate ESG: A Typology of Approaches. Retrieved from https://irrcinstitute.org/wp-content/uploads/2017/04/FinalIRRCiReport_HowInvestorsIntegrateESG.ATypologyofApproaches.pdf.

  • Technical Expert Group on Sustainable Finance. (2019). Report on Climate Related Disclosures. Retrieved from https://ec.europa.eu/info/sites/info/files/business_economy_euro/banking_and_finance/documents/190110-sustainable-finance-teg-report-climate-related-disclosures_en.pdf.

  • Tirole, J. (2001). Corporate Governance. Econometrics, 69(1), 1–35.

    Article  Google Scholar 

  • UNPRI. (2014). Integrating ESG in Private Equity. Retrieved from https://www.unpri.org/download?ac=252.

  • UNPRI. (2016). A Practical Guide to ESG Integration for Equity Investing. Retrieved from https://www.unpri.org/listed-equity/a-practical-guide-to-esg-integration-for-equity-investing/10.article.

  • Vishwanathan, P., & Heugens, P. (2008). Assessing the ‘Mechanisms Turn’ in Corporate Social and Financial Performance Studies: A Meta Analysis, 1–57. Retrieved from www.portal.uc3m.es.

  • World Bank. (2015). What Are Green Bonds? Retrieved from http://documents.worldbank.org/curated/en/400251468187810398/What-are-green-bonds.

  • Yang, F. J., Lin, C. W., & Chang, Y. N. (2010). The Linkage Between Corporate Social Responsibility and Corporate Social Performance. African Journal of Business Management, 4(4), 406–413.

    Google Scholar 

Download references

Acknowledgement

This book chapter is funded out of a research project implemented by the National Science Center Poland under the grant OPUS13 no UMO-2017/25/B/HS4/02172.

Author information

Authors and Affiliations

  1. Department of Business and Sustainability, TERI School of Advanced Studies, New Delhi, India

    Ria Sinha & Manipadma Datta

Authors
  1. Ria Sinha
    View author publications

    You can also search for this author in PubMed Google Scholar

  2. Manipadma Datta
    View author publications

    You can also search for this author in PubMed Google Scholar

Editor information

Editors and Affiliations

  1. Faculty of Economics and Management, University of Szczecin, Szczecin, Poland

    Magdalena Ziolo

  2. Davis Center for Russian and Eurasian Studies, Harvard University, Cambridge, MA, USA

    Bruno S. Sergi

Appendix

Appendix

Table 6.4 Studies exploring the relationship between responsible investing and financial performance
Full size table

Rights and permissions

Reprints and permissions

Copyright information

© 2019 The Author(s)

About this chapter

Check for updates. Verify currency and authenticity via CrossMark

Cite this chapter

Sinha, R., Datta, M. (2019). Institutional Investments and Responsible Investing. In: Ziolo, M., Sergi, B.S. (eds) Financing Sustainable Development. Palgrave Studies in Impact Finance. Palgrave Macmillan, Cham. https://doi.org/10.1007/978-3-030-16522-2_6

Download citation

  • DOI: https://doi.org/10.1007/978-3-030-16522-2_6

  • Published:

  • Publisher Name: Palgrave Macmillan, Cham

  • Print ISBN: 978-3-030-16521-5

  • Online ISBN: 978-3-030-16522-2

  • eBook Packages: Economics and FinanceEconomics and Finance (R0)

Publish with us

Policies and ethics

Search

Navigation