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28 - Operationalizing socially responsible investment: a nonfinancial fiduciary duty problem
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- By Ralf Barkemeyer, University of Leeds, Frank Figge, Kedge Business School, Marseille, Tobias Hahn, Kedge Business School, Marseille, Andreas G. F. Hoepner, ICMA Centre, Henley Business School, University of Reading, Andrea Liesen, Umeå University, Agnes L. Neher, University of Hohenheim
- Edited by James P. Hawley, St Mary's College, California, Andreas G. F. Hoepner, Keith L. Johnson, University of Wisconsin, Madison, Joakim Sandberg, Edward J. Waitzer, York University, Toronto
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- Book:
- Cambridge Handbook of Institutional Investment and Fiduciary Duty
- Published online:
- 05 April 2014
- Print publication:
- 10 April 2014, pp 364-377
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- Chapter
- Export citation
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Summary
Introduction
The fiduciary duty principle has taken center-stage in the debate concerning the integration of environmental, social and corporate governance (ESG) performance. For decades, it has been widely agreed that “trustees or fiduciaries [are to manage] assets in the best interests of the individual beneficiaries or investors: the ultimate recipients or owners of the funds” (Chapter 1 of this volume). The “best interests” of the beneficiaries or investors have typically been reduced to their financial interests (Langbein and Posner 1980; Sandberg 2011). Addressing this fiduciary duty problem is seen as pivotal for future development of the socially responsible investment (SRI) market in general (e.g., Richardson 2009). As a result, an ever-increasing body of literature has focused on the analysis of the financial implications of incorporating nonfinancial interests into investment decision-making. Over the past three decades, several thousand “does it pay to be green?” or “does it pay to be responsible?” studies have been published with the aim to shed light on this relationship (for excellent – albeit slightly contradictory – overviews see, for example, Margolis and Walsh 2003; Orlitzky et al. 2003; Salzmann et al. 2005). It is generally agreed that the inconclusiveness within this body of literature is a result of the diversity of the underlying measures of financial performance, the methodologies applied, the sample sizes analyzed, the time horizons under investigation, the respective industries analyzed and, most importantly, the operationalization of the environmental or social performance of the companies under investigation (cf. Horváthová 2010; Ullman 1985).