Book review: Socially Responsible Finance and Investments
April 9, 2013
The book is structured along several Sections. The first part of the book covers a number of key concepts and important topics that illustrate the multidisciplinary perspectives on “social responsibility”. Lloyd Kurtz (chapter 2) shows how stakeholder theory and the identification of relevant stakeholders are useful in shaping a responsibility agenda of (investment) companies as well as the management of responsible investments. Chapter 2 demonstrates how corporate responsibility is discussed in different academic domains, especially, business ethics, accounting and marketing, and finance.Bejamin Richardson (chapter 5) adds an important legal perspective to the book, through discussions about situations in which responsible investing aligns with fiduciary and other legal duties. The section concludes with a useful chapter by Astrid Juliane Salzmann (chapter 6) on international and cultural factors that can affect social responsibility and ethical behavior.
The subsequent section covers a number of chapters that address societal issues in finance. Included are contributions that show how social and religious factors can influence financial decisions in households (chapter 8 by Luc Renneboog and Christophe Spaenjers), banking approaches that explicitly intend to have positive societal impact (chapter 9by Olaf Weber and Yayan Duan), and sustainable real estate issues and benchmarking initiatives (chapter 12 by Piet Eichholtz and Nils Kok). Also covered are chapters on controversies in the areas of lending and banking and their social costs.
The third section broadly covers corporate engagement, which is broken down into chapters that focus on companies engaging stakeholders, chapters on shareholders engaging companies through shareholder activism, and engagement by NGOs. On the corporate side, a discussion is provided about what constitutes (good) corporate governance and what role the concepts of corporate social responsibility and philanthropy might play in certain models of governance, such as the “agency view” (chapters 16 and 18). Furthermore, the reader learns more concretely how to measure responsibility of the companies toward various stakeholders (chapter 17 by Amir and Eran Rubin).On the investor side, those who are interested in “shareholder activism” as a means of fulfilling responsible investing will be happy to read Del Gercio and Tran (Chapter 19), who discuss extensively the evolution and success of shareholder engagement on social policy issues in the U.S.
Finally, issues in responsible investing are covered in great length in a fourth section of the book. In particular the returns associated with responsible investment — or “screening approaches” — and investment funds are important ingredients. In chapter 23, for instance, Nadja Guenster summarizes elegantly evidence on the performance of stocks that typically fail to pass “negative screens” — such as “sin stocks” — and that of stocks that score high along environmental, social, and governance (ESG) standards. Apart from discussing investment performance, this section concludes with an explanation of investors’ motives to be invested in SRI, as can be witnessed from the money that flows to and away from socially responsible investment funds.
In conclusion, although the book is somewhat biased to U.S. examples, it is suitable for both scholars and investment practitioners who are in an early stage of familiarizing themselves with opportunities and challenges in the area of responsible investing. Because all chapters are in principle stand-alone, there is ample opportunity for teachers and practitioners to compile a selection of articles that are best suited for learning about social responsibility in finance for a specific purpose. Future editions of the book could be improved by expanding the scope of the responsible investing section, to include SRI that is applied to alternative asset classes, such as corporate and sovereign bonds, and real estate securities.
with attribution (and link, if online) to www.tias.edu.
To be cited as: “Book review: Socially Responsible Finance and Investments”, Jeroen Derwall, www.tias.edu, April 2, 2013.
Socially Responsible Finance and Investing: Financial Institutions, Corporations, Investors, and Activists. Editors: H. Kent Baker and John R. Nofsinger, Hardcover; 515 pages; October 2012; Wiley;ISBN: 978-1-1181-0009-7.
This book can be ordered at Wiley or online bookstores.
Assistant Professor, Tilburg Sustainability Center