Socially Responsible Investment in a Global Environment

Socially Responsible Investment in a Global Environment

Hung-Gay Fung, Sheryl A. Law and Jot Lau

Socially responsible investment (SRI) is becoming increasingly popular and can be potentially rewarding to all parties concerned. This book discusses the opportunities, challenges, and practices of SRI in a global financial environment in a consistent and integrated framework of risk management. It also covers a wide variety of environmental, social, and corporate governance (ESG) issues related to various participants, such as values-based retail, institutional investors, corporations, banks, supranational agencies, and non-governmental organizations.

Chapter 9: Outlook and Conclusion

Hung-Gay Fung, Sheryl A. Law and Jot Lau

Subjects: business and management, corporate governance, corporate social responsibility, economics and finance, corporate governance, financial economics and regulation, law - academic, corporate law and governance, international investment law


INTRODUCTION Socially responsible investing has become an important consideration in the global financial industry. Retail and institutional investors are demanding proactive integration of environmental, social, and corporate governance factors into the investment process. Several approaches are used to select stocks for SRI portfolios, including negative screens, positive screens, best-in-class, engagement, advocacy, activism, and integrated methods. In previous chapters, we outlined the variations of ESG objectives for corporations, investors, institutional investors and regulators, and discussed how each group confronted and incorporated these issues into their investment decision-making process. The dynamics between these participants makes balancing the competitive forces difficult, and calls for skill and insight in investment management. There is an increasing amount of literature and empirical evidence guiding us on the incorporation of the ESG considerations in the decisionmaking process. It is apparent that opportunities arise when due diligence is performed and ESG challenges are clearly understood. SRI has expanded to include the broader concept of sustainability, that is, environmental, social, and economic survival over the long term horizon. Prospective SRI investors recognize that in addition to the traditional risks, there are additional risk dimensions to consider that can severely impact portfolio financial performance and profitability over the long-term horizon. In this concluding chapter, we discuss the forces driving the future direction of socially responsible investing. The driving forces include the future role of financial discipline in SRI, SRI development stages, legal jurisdictions and orientation around the world, and the volatility and unpredictability of SRI fund performance. We also present...

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