Chapter 3: Incentives, Alternatives, and Financial Performance of SRI
3. Incentives, alternatives, and financial performance of SRI INTRODUCTION There are different incentives for investors to engage in SRI. They do so not only for financial rewards but also non-financial returns that fulfill their own aspirations, moral obligations and values. The non-financial incentives have been described as the ‘feel good’ or ‘do well while doing good’ motivation of SRI. Although it sounds ideal to garner profits while doing some good in the world, is there a cost to SRI? It seems easier to convince investors who are socially concerned that there is no cost to SRI. Many of them are willing to accept a lower return on investment for ‘feeling good.’ Fiduciaries (for example, financial advisors and pension fund managers) who work for socially responsible investors, however, are not as easily convinced. They are confronted with the dilemma of trying to achieve the best risk–return trade-off and at the same time to honor clients’ requests for incorporating ESG factors. Should they incorporate ESG if there is a cost to SRI? However, from the fiduciaries’ vantage point, they have not necessarily been convinced that it is good for everybody. As part of the fiduciary duty, they look for hard evidence to support a rational economic decision. However, they have found no overwhelming and compelling evidence to invest in SRI. Financial performance results of SRI at best have been mixed. The literature suggests that SRI best-in-class strategies may at times outperform the market but this has not been consistent. Other SRI...
You are not authenticated to view the full text of this chapter or article.
Elgaronline requires a subscription or purchase to access the full text of books or journals. Please login through your library system or with your personal username and password on the homepage.
Non-subscribers can freely search the site, view abstracts/ extracts and download selected front matter and introductory chapters for personal use.
Your library may not have purchased all subject areas. If you are authenticated and think you should have access to this title, please contact your librarian.